By the end of 2025, more than 35 jurisdictions worldwide had initiated the process of adopting or adapting these standards, including Brazil, Bolivia, Chile, Mexico, Australia, Canada, Japan, and Malaysia. Their objective is to establish a global baseline for sustainability-related financial information, enabling entities to provide consistent, comparable, and decision-useful information to investors and other stakeholders.

This development represents a significant shift in accounting practice, as sustainability considerations move beyond voluntary reporting and become directly integrated with financial information, risk management, and the assessment of organisations’ economic performance.

Although the adoption of IFRS S1 and IFRS S2 is currently voluntary, they are being introduced as a professional reference framework with a gradual implementation approach. This allows entities to progress according to their level of preparedness, while marking a first step toward a more transparent, comparable, and integrated reporting model that reflects economic, environmental, and social realities.

IFRS S1 – Sustainability

IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, requires the disclosure of material information about sustainability-related risks and opportunities, aligned with financial statements in terms of both the reporting period and publication timeline.

Each organisation must identify the material information to be disclosed across four pillars: governance, strategy, risk management, and metrics and targets. The IFRS definition of materiality applies: information is material if its omission, misstatement, or obscuring could reasonably be expected to influence investors’ decisions.

Regarding governance, the objective is to provide qualitative information that enables investors to understand the corporate governance structure for managing sustainability matters.

Entities are required to disclose qualitative information to explain their strategy for addressing sustainability-related risks and opportunities in the short, medium, and long term.

Risk management disclosures must include qualitative information describing the processes used to identify, assess, prioritise, and monitor the entity’s risk profile.

Through metrics and targets, entities will report on performance, including quantitative assessments of progress toward established objectives.

IFRS S2 – Climate

IFRS S2, Climate-related Disclosures, is applied in conjunction with IFRS S1 and requires the identification of climate-related risks, including transition plans, carbon emissions (scopes 1, 2, and 3), and climate resilience.

With respect to transition plans, organisations must disclose their greenhouse gas emissions targets, and explain how they intend to use offsetting mechanisms to achieve net-zero emissions in the future.

Scope 1 emissions are direct emissions from fuel combustion; scope 2 emissions are indirect emissions generated from purchased and consumed electricity; and scope 3 emissions arise from the value chain and are not under the direct control of the organisation.

Entities must begin addressing these matters in order to achieve net-zero emissions, including through the use of offsetting mechanisms.

Entities must also disclose information on climate resilience, explaining how the company is prepared for different climate scenarios. This specific requirement allows for greater proportionality and flexibility. For entities that lack the resources to perform quantitative assessments, qualitative disclosures are permitted.

IFRS S1 and IFRS S2: joint implementation

IFRS S1 focuses on the disclosure of all sustainability-related risks and opportunities that may impact the organisation. If an entity determines that climate change is one of those risks or opportunities, it must apply IFRS S2.

Where are we heading?

Companies, together with their accounting and financial advisors, will need to assess the implementation of systems that enable the measurement and reporting of environmental, social, and governance (ESG) metrics, as well as climate-related risks. This may involve adapting internal processes, collecting new types of information, and defining specific indicators.

For organisations seeking to attract investors, access financing on more favourable terms, or respond to increasing transparency requirements – both locally and internationally – these standards provide a formal and globally recognised framework for sustainability reporting. From a strategic perspective, their adoption may become a competitive advantage, particularly for exporting companies, entities with international operations, or those seeking access to funds that incorporate sustainability into their decision-making processes.

Valentina Marascio is a leader in operational innovation and sustainability in Carle y Andrioli, and has her accounting qualifications from the University of the Republic. She also holds a postgraduate degree in organisational information systems and management of information technology companies.

member firms

Carle & Andrioli Auditores y Consultores

contacts

Dario Andrioli

Natalia Silva Isasmendi

publications

International sustainability and climate standards