IFRS S1 & S2 – Sustainability Disclosure Standards: First-Time Adoption in 2026

IFRS S1 sets out general requirements for disclosing sustainability-related risks and opportunities, while IFRS S2 sets specific requirements for climate-related disclosures, both built around the same four pillars as the TCFD framework: governance, strategy, risk management, and metrics and targets. For companies adopting the standards for a 2026 reporting period, the first-time application reliefs matter as much as the substantive requirements.

The transition reliefs allow first-time adopters to report only on climate-related risks and opportunities in year one under IFRS S2, deferring the broader IFRS S1 sustainability topics to year two. Entities can also use reasonable and supportable information without undue cost or effort in the first year, and are permitted to disclose scope 3 greenhouse gas emissions with a one-year lag against the rest of the report.

The practical challenge for most first-time adopters isn't understanding the standard — it's data. Scope 1 and 2 emissions data is usually available through existing environmental reporting, but scope 3 data depends on supply chain engagement that most finance functions haven't previously had to coordinate. Building that data pipeline is the single biggest driver of how smoothly the first adoption cycle goes.

Key actions to take now

• Confirm which transition reliefs the business intends to apply for year one
• Map existing ESG data sources against IFRS S2's climate metrics requirements
• Start scope 3 supply chain data requests early — this is the usual bottleneck
• Align sustainability and finance teams on a single reporting governance process