The IFRS Foundation and the European Financial Reporting Advisory Group (EFRAG) announced today the publication of the ESRS-ISSB standards interoperability guidance, a new document aimed at illustrating the high level of alignment between the sustainability reporting standards recently issued by IFRS’ International Sustainability Standards Board’s (ISSB) and the European Sustainability Reporting Standards (ESRS).

The guidance also includes support for companies looking to comply with both sets of sustainability reporting standards. Each of the standards are expected to form the basis of mandatory sustainability reporting requirements for tens of thousands of companies over the next few years, with many potentially required, or choosing, to comply with both.

The ISSB was launched in November 2021 at the COP26 climate conference, with the goal to develop IFRS Sustainability Disclosure Standards. The IFRS released the inaugural general sustainability (IFRS S1) and climate (IFRS S2) reporting standards in June 2023, and in July, IOSCO, the leading international policy forum and standards setter for securities regulators called on regulators to incorporate the standards into their sustainability reporting regulatory frameworks.

The ESRS, developed by EFRAG, and officially adopted by the European Commission in 2023, set out the rules and requirements for companies to report on sustainability-related impacts, opportunities and risks under the EU’s Corporate Sustainable Reporting Directive (CSRD). The CSRD, which began applying to some companies as of the beginning of 2024, will significantly expand the number of companies required to provide sustainability disclosures to over 50,000 from around 12,000 currently, and introduce more detailed reporting requirements on company impacts on the environment, human rights and social standards and sustainability-related risk.

Over time, the CSRD will also apply to many large non-EU based businesses that operate in the EU.

EFRAG Sustainability Reporting Board Chair Patrick de Cambourg said:

“On the basis of our joint efforts, we are very happy to be able to issue this very practical guidance on interoperability illustrating in particular how ESRS embed the global baseline approach developed by the ISSB. It demonstrates EFRAG’s commitment to the much needed international convergence of sustainability-related disclosures, on climate and other critical sustainability matters, and our full support to the global momentum in this crucial space.”

According to the organizations, the new guidance aims to reduce complexity, fragmentation and duplication for companies applying both sets of standards, and to help enable companies to “collect, govern and control decision-useful data once.” The document includes a description of the alignment of general requirements from the standards on key concepts such as materiality, presentation and disclosures for sustainability topics other than climate, I addition to detailed analysis of the alignment in climate-related disclosures, including what a company starting with either standard needs to know to enable compliance with both.

ISSB Vice-Chair Sue Lloyd said:

“We recognise the call to deliver efficiencies for companies that will be required—or choose—to apply both ISSB Standards and ESRS. As jurisdictions around the world move to adopt or otherwise use ISSB Standards, we expect this interoperability guidance will provide practical help to companies needing to understand how to apply the respective requirements of both ISSB Standards and ESRS.”

Click here to access the new interoperability guidance.