ISSB S1 and S2: The UK CFO’s Mandatory Sustainability Reporting Action Plan

UK CFOs of large listed companies must now build the data infrastructure, assurance processes, and finance team capability to meet mandatory ISSB S1 and S2 sustainability reporting requirements — and most are not yet ready.

The Financial Conduct Authority has mandated that UK Premium-listed issuers apply the UK Sustainability Disclosure Standards — aligned with the ISSB’s IFRS S1 (General Sustainability-related Disclosures) and IFRS S2 (Climate-related Disclosures) — for accounting periods beginning on or after 1 January 2025. This means first mandatory ISSB-aligned annual reports will appear in 2026, but the data collection, system development, and assurance readiness must be built now. According to KPMG’s 2025 global sustainability reporting survey, fewer than 30% of companies globally that will be subject to ISSB-aligned standards believe their current data infrastructure is sufficient to meet the requirements. The UK is not materially ahead of this average.

CFOs who treat this as a sustainability team problem will face a rude awakening during their first audit. ISSB disclosures must meet financial reporting standards of rigour — they will sit in or alongside the annual report and accounts and be subject to assurance. This is a finance function ownership issue. Browse INFORMD’s sustainability reporting briefing library for the full regulatory context.

What Do ISSB S1 and S2 Actually Require UK Finance Leaders to Produce?

IFRS S1 requires organisations to disclose material information about sustainability-related risks and opportunities across the full value chain — identifying which sustainability factors could reasonably affect future cash flows, access to finance, or cost of capital. IFRS S2 is specifically focused on climate: physical risks (flooding, extreme heat, sea-level rise affecting assets and operations) and transition risks (carbon pricing, policy change, shifting customer demand) must be quantified and disclosed.

Both standards require disclosure across four pillars: governance (who in the organisation oversees sustainability risks — this is where the board comes in); strategy (the effect of material sustainability risks on the business model, strategy, and financial planning); risk management (how sustainability risks are identified, assessed, and managed); and metrics and targets (quantitative data and progress against stated targets).

The metrics and targets pillar is where the CFO’s ownership becomes non-negotiable. Scope 1, Scope 2, and Scope 3 greenhouse gas emissions must be reported. The financial effects of climate risks on assets, revenues, and capital expenditure must be quantified. These are not qualitative statements — they are numbers that must be supported by documented methodologies, data sources, and in future years, assurance.

Executive Action

• Review the full scope of IFRS S1 and S2 disclosure requirements against your current ESG reporting to identify the gaps between what you currently publish and what the standards require.
• Identify which sustainability factors are material to your business model and value chain — this scoping exercise is the foundation of all subsequent disclosure work.
• Appoint a named finance function owner for ISSB compliance who works directly with the Chief Sustainability Officer and reports to the CFO — not to the sustainability team alone.

What Data Infrastructure Does the CFO Need to Build for ISSB Compliance?

The most significant CFO challenge in ISSB implementation is data quality. Sustainability data has historically been collected informally, by non-finance teams, using methodologies that would not withstand a financial audit. Under ISSB, the data that supports sustainability disclosures must meet financial reporting standards of accuracy, completeness, and auditability.

Three categories of data require urgent attention. Operational emissions data (Scope 1 and 2) is typically manageable if energy procurement records are systematically captured, but methodologies for market-based versus location-based calculations must be consistently applied and documented. Scope 3 emissions are harder: these are the upstream and downstream emissions across the value chain — suppliers, logistics, customer use of product — and require either primary data collection from suppliers or the use of industry-average emission factors with documented assumptions. Financial effects quantification is the hardest: translating physical or transition climate risks into quantified impacts on revenue, cost, or asset valuation requires scenario analysis capability that most finance functions have not yet built.

According to PwC’s 2025 ESG data landscape report, 68% of finance leaders cite data collection from the supply chain as the single most significant operational barrier to ISSB readiness. CFOs should engage their top 20 suppliers on emissions data sharing in 2026 to avoid being unable to disclose Scope 3 data with confidence at first reporting. Access INFORMD’s CFO sustainability reporting template for a structured approach to Scope 3 data collection.

Executive Action

• Commission a sustainability data audit: map every data point required by ISSB S1 and S2 to its current source, owner, collection method, and quality level — identify gaps immediately.
• Evaluate sustainability data management platforms (such as Watershed, Salesforce Net Zero Cloud, or Microsoft Sustainability Manager) against your data integration requirements — do not try to run ISSB-grade disclosure on spreadsheets.
• Issue a supplier data request to your top-20 suppliers covering their emissions data, methodology, and verification status — Scope 3 readiness depends on supplier engagement starting now.

How Does Assurance Work for ISSB Sustainability Disclosures?

The FCA’s UK SRS framework introduces a phased assurance requirement. In the first years of mandatory reporting, limited assurance will be required — a lower standard than the reasonable assurance applied to financial statements, but still a formal engagement that requires the assurance provider to assess whether anything has come to their attention that causes them to believe the disclosed information is materially misstated. Over time, the expectation is that assurance will step up to reasonable assurance, bringing sustainability disclosures to the same evidential standard as the financial statements.

The practical implications for CFOs are significant. Assurance providers will require documented methodologies, data trails, internal controls over sustainability reporting, and management representations — very similar to the requirements of a financial audit. The internal controls over sustainability reporting (ICSR) framework must be built now if it does not exist. CFOs should engage their external auditor or assurance provider in 2026 to understand readiness requirements and to scope an initial limited assurance engagement ahead of first mandatory reporting.

Executive Action

• Brief your external auditor now on your ISSB readiness status and request a preliminary readiness assessment — do not leave engagement with your assurance provider until the year of first mandatory reporting.
• Begin building an internal controls over sustainability reporting (ICSR) framework: document how each disclosed metric is generated, reviewed, and approved before publication.
• Request that the Audit Committee is briefed on ISSB assurance requirements at the next meeting — audit committee oversight of sustainability assurance is explicitly envisaged in the FRC’s corporate governance guidance.

How Should CFOs Connect Sustainability Disclosures to Capital Strategy?

ISSB disclosures are not just a reporting burden — they are a capital strategy tool. Institutional investors and credit agencies are using ISSB-aligned data to make lending, equity, and credit rating decisions. BlackRock, Legal and General Investment Management, and Schroders have all publicly stated that ISSB-aligned disclosures will be weighted in engagement and voting decisions from 2026 onwards.

CFOs who publish credible, assured ISSB disclosures will access better cost of capital terms from sustainability-linked financing and will avoid the valuation discount that markets are beginning to apply to companies with poor ESG disclosure quality. Those who publish disclosures that are incomplete, inconsistent, or unsupported by robust data will face investor engagement, activist pressure, and potential FCA review. Use INFORMD’s sustainability finance readiness assessment to benchmark your current position against investor expectations.

Executive Action

• Review your sustainability-linked financing arrangements against your ISSB disclosure commitments — ensure targets disclosed in loan covenants align exactly with what you will report under the standards.
• Engage your top 10 institutional investors to understand their specific ISSB data requirements before first reporting — investor feedback will sharpen your disclosure significantly.
• Include an ISSB implementation status update in the CFO board report from Q3 2026 — the board must understand the financial and reputational risk of inadequate disclosure.

Frequently Asked Questions

FAQ: What is the difference between TCFD and ISSB S1/S2?

TCFD (Task Force on Climate-related Financial Disclosures) was a voluntary framework that many UK companies adopted from 2017. ISSB S1 and S2 build on TCFD’s four-pillar structure but g