IFRS S1 and S2: Relevance, Materiality and Responsible Disclosure
- 02/02/2026
- Posted by: Ildar Usmanov
- Categories: Bursa, Compliance, ESG Reports, Inside ESG Reporting
IFRS S1 and S2:
– IFRS S1 (General Sustainability-related Disclosures) and
– IFRS S2 (Climate-related Disclosures) provide a global baseline for how sustainability and climate information is disclosed alongside financial reporting.
They are intentionally broad.
IFRS S1 and IFRS S2 do not require companies to disclose every sustainability topic or every piece of available information. Companies must identify the sustainability- and climate-related risks and opportunities that could reasonably affect their prospects and disclose the material information required by the applicable standards.
For most organisations, the challenge with IFRS S1 and S2 is not understanding the standards in theory, but deciding what is relevant in practice — and how to disclose that information responsibly.
In this article, “responsible disclosure” refers to disclosure that is proportionate, evidence-supported and carefully distinguished between current conditions, plans and future intentions. It is not a term defined by IFRS S1 or IFRS S2 and does not constitute assurance or a compliance conclusion.
Why IFRS S1 and S2 create uncertainty for many companies
In Malaysia, IFRS S1 and IFRS S2 are being introduced through the National Sustainability Reporting Framework under a phased implementation approach. Some companies are already within the formal reporting scope, while others encounter the standards through parent-company reporting, boards, investors, lenders, customers or preparation for future requirements.
Common difficulties include:
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treating IFRS S1 and S2 as a checklist rather than a relevance-based framework
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assuming peer disclosures define what must be reported
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confusing internal planning or early-stage initiatives with disclosure obligations
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attempting to disclose completeness instead of relevance
As a result, companies often over-disclose, introduce ambiguity, or create expectations that are difficult to sustain over time.
Relevance comes before disclosure
IFRS S1 and IFRS S2 focus on sustainability- and climate-related risks and opportunities that could reasonably be expected to affect the company’s cash flows, access to finance or cost of capital over the short, medium or long term.
In practice, this means:
Some matters may be important for internal management but may not result in material information for the primary users of general-purpose financial reports. That conclusion should be based on a documented materiality assessment, not simply on reporting maturity or management preference.
Clarity on relevance is essential.
Over-inclusion does not reduce risk — it often increases it.
From interpretation to responsible disclosure
Once relevance is understood, the next question is how information is disclosed.
IFRS S1 and S2 disclosures are read over time, compared year-on-year, and interpreted by audiences who were not involved in drafting them. Language that appears neutral at publication can later be read as a commitment, a capability claim, or an implied decision.
Responsible disclosure requires:
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clear distinction between current state and future intent
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alignment between disclosed language and governance, data, and decision-making
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restraint where certainty does not yet exist
This is where many organisations unintentionally create exposure — not through inaction, but through how disclosures are framed.
How SuSciCo supports IFRS S1 and S2 interpretation
SuSciCo supports organisations in interpreting IFRS S1 and S2 in context, helping them decide what is relevant to their business and how that information should be disclosed.
This typically involves working with management teams to:
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identify sustainability- and climate-related risks and opportunities relevant to the organisation’s circumstances;
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assess the material information required for the intended reporting scope;
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document disclosure boundaries, assumptions and management judgements;
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improve consistency between sustainability disclosures, governance arrangements, underlying data and related financial narratives; and
- review whether draft wording is proportionate and supported by available evidence.
Where necessary, this may include targeted practical support to stabilise understanding, data logic, or internal alignment — solely to enable responsible disclosure.
SuSciCo does not provide statutory assurance, legal opinions or confirmation of compliance with IFRS Sustainability Disclosure Standards.
The appropriate objective depends on the company’s reporting scope. For entities subject to the NSRF, the work should support implementation of the applicable requirements and transition provisions. For companies preparing voluntarily or responding to group-level expectations, the immediate objective may be to clarify relevance, identify gaps and strengthen disclosure discipline.
These interpretation issues are commonly resolved during disclosure boundary setting, where scope and language are clarified before publication.
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