Your company has invested in CSRD compliance. A consultant has mapped your ESRS indicators, an ESG module has been activated in your ERP, and your first sustainability report is being drafted. Then your investment banker forwards a data request from a London-based infrastructure fund ahead of a €40 million fundraise. The questionnaire cites IFRS S1 and S2. You have no idea what that means.
This is not a gap in your CSRD project. It is an entirely separate framework, issued by a different body, for a different audience: international investors. And the two frameworks do not produce the same data — even when both are talking about sustainability.
This guide explains the difference, what ISSB concretely requires, and how to adapt your ERP to cover both in 2026.
ISSB vs CSRD: The Core Differences Your CFO Needs to Understand
CSRD (Europe): double materiality, stakeholder audience, ESRS framework
The CSRD (Corporate Sustainability Reporting Directive) requires large companies and mid-size enterprises in Europe to publish a sustainability report covering their full ESG impacts under the ESRS standards developed by EFRAG. Its central logic is double materiality: companies must report both on the risks that sustainability poses to their financial value (financial materiality) AND on the impacts their activities have on society and the environment (impact materiality).
The intended audience is broad: employees, customers, suppliers, civil society organisations, and European regulators. The report is integrated into the management report and subject to external assurance.
ISSB (international): financial materiality, investor audience, IFRS S1/S2 framework
The International Sustainability Standards Board (ISSB), operating under the IFRS Foundation, issued IFRS S1 and IFRS S2 in June 2023. Its logic is fundamentally different: financial materiality only. The ISSB is exclusively concerned with information that affects an entity’s cash flows, access to finance, or cost of capital. Environmental or social impacts with no financial translation fall outside its scope.
The audience is precisely defined: investors and capital markets. ISSB reporting is integrated into annual financial statements, not published as a separate ESG report. It is the standard that buy-side analysts, infrastructure funds, financial rating agencies, and international banks use as their reference.
Comparative table: CSRD vs ISSB
| Criterion | CSRD / ESRS | ISSB / IFRS S1-S2 |
|---|---|---|
| Issuing body | European Commission / EFRAG | IFRS Foundation / ISSB |
| Materiality | Double (financial + impact) | Financial only |
| Primary audience | Broad stakeholders | Investors, capital markets |
| Publication format | Management report (dedicated section) | Annual financial statements |
| Geographic scope | Mandatory in EU | Voluntary or mandatory by jurisdiction |
| External assurance | Mandatory (limited, then reasonable) | Recommended; mandatory in some jurisdictions |
| Time horizon | Short, medium, and long term | Medium term (investor horizon) |
IFRS S1 and S2: What These Standards Actually Require
IFRS S1: general requirements across four TCFD pillars
IFRS S1 defines the general requirements for disclosing all sustainability-related information that affects an entity’s enterprise value. It is structured around four pillars inherited from the TCFD (Task Force on Climate-related Financial Disclosures) framework:
- Governance: how the board oversees sustainability-related risks and opportunities, and how management integrates them into its decisions.
- Strategy: how sustainability risks and opportunities affect the business model, value chain, and financial planning over short, medium, and long time horizons.
- Risk management: the processes for identifying, assessing, and managing sustainability risks, and how these integrate into overall enterprise risk management.
- Metrics and targets: the quantitative indicators that measure performance and track progress toward objectives.
This framework applies across all sustainability topics: climate, water, biodiversity, human capital, working conditions in the supply chain. IFRS S1 is the umbrella standard; IFRS S2 is its specific application to climate change.
IFRS S2: the climate metrics investors focus on
IFRS S2 is focused on climate change and requires disclosures on two categories of risk:
- Physical risks: acute risks (extreme weather events, flooding) and chronic risks (rising temperatures, water stress) that may affect asset values or operational continuity.
- Transition risks: risks linked to carbon policies (carbon tax, ETS), technological shifts (decarbonisation of an industry), or market preferences (capital reallocation toward green assets).
The mandatory cross-sector metrics under IFRS S2 include: GHG emissions Scope 1, 2, and 3 (across all 15 categories of the GHG Protocol), capital expenditure (capex) and operating expenditure (opex) related to the climate transition plan, the internal carbon price used in investment decisions, and the proportion of executive remuneration linked to climate-related targets.
Global adoption: 21 jurisdictions by 2026, representing over half of global GDP
Since the IOSCO endorsement in July 2023, ISSB adoption has accelerated significantly. According to the IFRS Foundation, by early 2026 21 jurisdictions had adopted the standards on a voluntary or mandatory basis, with nearly 40 more finalising their adoption frameworks. These jurisdictions represent over half of global GDP and more than 40% of global market capitalisation (source: IFRS Foundation, May 2024).
Notable adopters include the United Kingdom (UK Sustainability Reporting Standards aligned with ISSB), Canada, Australia, Japan, Singapore, Hong Kong, and Brazil (mandatory for large listed entities from 1 January 2026). China has published its own national standards in strong convergence with ISSB.
For a mid-market company raising funds from a fund based in London, Toronto, or Singapore, ISSB reporting is not optional. It is the common language of international capital markets.
What Your ERP Must Track for ISSB That CSRD Does Not Cover
Climate financial metrics: a different logic
The CSRD asks you to measure your impacts (tonnes of CO2 emitted, cubic metres of water consumed, percentage of waste recycled). ISSB asks you to measure the impact of those risks on your balance sheet and cash flows.
In practice, what your ERP likely does not yet track for ISSB:
- Value of assets exposed to physical risk: what proportion of your fixed assets is located in areas at risk of flooding, extreme heat, or water stress? This is not an ESG metric — it is a balance sheet metric that needs to be cross-referenced with geolocated climate data.
- Transition capex: what portion of your annual investment is allocated to decarbonisation (replacement of fossil-fuel equipment, energy efficiency, EV charging infrastructure)? This tracking must be embedded in the cost accounting module, with a dedicated project code.
- Transition revenues: what proportion of your turnover comes from products or services whose value is tied to the climate transition (energy efficiency, low-carbon materials, decarbonisation services)?
Climate scenarios in the financial model
IFRS S2 requires a climate scenario analysis: companies must assess their resilience under different warming trajectories (1.5°C, 2°C, 3°C scenarios) and measure the potential impact on the business model at 5-, 10-, and 30-year horizons.
This is not something the ERP performs on its own. But the ERP is the source of the historical financial data (revenues by segment, costs by energy type, asset values by site) that feeds these scenario models. A properly configured financial planning (FP&A) module is the indispensable foundation for producing auditable scenario analyses.
Adapting Your ERP for ISSB: Modules and Solutions in 2026
ERP modules involved
| Module | Data for ISSB | Configuration effort |
|---|---|---|
| Finance (cost accounting) | Transition capex by project code, revenues by low-carbon segment | Creation of dedicated analytical codes |
| Asset management (EAM) | Value and geographic location of fixed assets | Enrichment of asset records with GPS coordinates |
| Procurement / Supply chain | Upstream Scope 3 emissions, spend by supplier | Integration of emission factors or third-party ESG platform |
| FP&A / Planning | Climate scenario modelling, P&L impact | Simulation modules or connected planning tool |
| ESG / Sustainability | Consolidated Scope 1-2-3, IFRS S2 cross-sector metrics | Activation of native or configured ISSB reports |
ERP solutions with ISSB support in 2026
SAP is the most advanced vendor on this topic. SAP Sustainability Control Tower centralises pre-configured ISSB S1/S2 metrics and generates audit-ready reports. SAP Sustainability Footprint Management calculates emissions directly from ERP transactions, without export to a third-party tool. In September 2026, SAP announced a “configure once, report across frameworks” approach enabling the same data to serve both IFRS S2 and ESRS E1 requirements (source: SAP News, September 2026).
Oracle Fusion Cloud includes pre-built report templates for CSRD, SEC, and ISSB, enabling mid-market companies to generate all three formats from the same data repository.
Workday combines HR data and carbon data in a single platform, which is particularly relevant for the ISSB S1 metrics related to human capital and social indicators.
Microsoft Dynamics 365 and Cloud for Sustainability enable emission factor integration and ESG reporting, with connectors to TCFD/ISSB frameworks.
A four-step roadmap for mid-market companies
- Data availability mapping (1–2 months): identify in your ERP the data already usable for ISSB — asset values by site, capex by category, revenues by segment. Most of it is already there, just poorly labelled.
- Cost accounting chart enrichment (1 month): create “climate transition” project codes to start tracking green capex from the next financial year, and a “low-carbon revenues” segment in the analytical P&L.
- Scope 1-2-3 connection to the ERP (2–3 months): if your ERP does not yet calculate emissions natively, connect a carbon management platform (Sweep, Persefoni, Watershed) via API to feed IFRS S2 metrics.
- ISSB reporting test (1–2 months): produce a pilot IFRS S1/S2 report for the most recent closed financial year, and submit it to your external auditor to assess data quality before actual publication.
ISSB–ESRS Interoperability: Collect Once, Report Twice
The good news is that both frameworks are converging. In May 2024, the IFRS Foundation and EFRAG published an interoperability guidance showing that companies subject to both CSRD and ISSB can collect, govern, and validate their data once to satisfy both requirements (source: IFRS Foundation, May 2024). This is the “building blocks” concept: ESRS incorporates ISSB requirements as the baseline, and adds Europe-specific layers on top (double materiality, impact indicators).
In practice, for climate disclosures, companies reporting under ESRS E1 (climate change) cover the majority of what IFRS S2 requires, with few additional data points to produce. What is ISSB-specific and not fully covered by ESRS: quantified financial scenario analyses, financial valuation of physically at-risk assets, and traceability of transition capex in the financial statements (rather than in an annex report).
What Investors Look at First
In a fundraising process or an ESG review by a limited partner, financial analysts focus primarily on the following elements in ISSB reporting:
- Scope 3 emissions and their reduction trajectory, as they reveal the value chain’s exposure.
- Transition capex as a proportion of total investment, as a concrete signal of commitment.
- High physical-risk assets and their weight in the balance sheet, particularly for industrial companies and real estate.
- The internal carbon price used in investment decisions, as an indicator of climate governance maturity.
- The quality of external assurance on the data: limited assurance (light audit level) is less reassuring than reasonable assurance (full financial audit level).
The errors that erode investor confidence are not bad numbers — they are missing data, undefined perimeters, or metrics presented without an auditable trail back to the source in the ERP.
To go further on ESG reporting in your ERP, read our guide CSRD and ERP: Preparing Sustainability Reporting in 2026 and our analysis EU Omnibus Directive 2026: Real Impact on Your ESG ERP. For Scope 3 upstream data collection, see our article on ERP and Upstream Scope 3: Collecting Supplier ESG Data.
