The interoperability between the European Union (EU) Directive 2022/2464, commonly known as "CSRD" (Corporate Sustainability Reporting Directive), and the standards of the International Sustainability Standards Board (ISSB) is a crucial topic in the landscape of sustainable finance. This aspect is particularly relevant as it represents a cornerstone in creating a coherent and effective global sustainability reporting framework. Let's examine how CSRD aligns with ISSB and the implications of this interoperability for businesses and stakeholders under these regulations.
Why CSRD?
CSRD is the most widely discussed topic today with growing importance in the sustainability landscape. With the latest developments related to the Omnibus Simplification Package, it is clear that CSRD is an ever-evolving regulation. A wide range of European and non-European companies are now required to publish detailed information on their social and environmental risks and opportunities, as well as their impact on people and the environment. This obligation stems from the growing need for transparency in corporate activities, essential for directing investments towards more sustainable initiatives and for helping businesses access sustainable financing.
Development of the ESRS
The ESRS (European Sustainability Reporting Standards) were developed based on technical proposals from EFRAG (European Financial Reporting Advisory Group), an independent and multi-stakeholder advisory body. Following a public consultation and significant adjustments to attempt to reduce the administrative burden on businesses, the Commission adopted these standards. The ESRS covers a full range of sustainability issues, from environmental impacts to social and governance issues. However, as part of the Omnibus Simplification Package, EFRAG has since released revised Exposure Drafts for a new, simplified set of ESRS. These new proposals, which are currently undergoing public consultation, aim to significantly reduce reporting requirements.
Principles of the CSRD
CSRD requires businesses to disclose not only how sustainability matters impact their business models, strategies, and performance, but also how their operations affect people and the environment. This is underpinned by a double materiality assessment:
- Impact materiality: It captures the company’s significant actual or potential impacts on people and the environment, whether positive or negative.
- Financial materiality: It focuses on sustainability-related risks and opportunities that could reasonably be expected to influence the company’s development, financial performance, position, or cash flows.
This approach is aligned with ISSB standards: ESRS financial materiality corresponds to the ISSB’s investor-focused materiality, while ESRS goes further by requiring companies to assess outward impacts. For example, a company’s carbon footprint must be evaluated not only as an environmental impact but also as a factor influencing regulatory exposure, reputational risk, and strategic resilience.
What is ISSB?
The ISSB is a significant initiative by the International Financial Reporting Standards Foundation (IFRS), a non-profit organization established in 2001. Launched in November 2021 during COP26 in Glasgow, the ISSB addresses a growing need for transparency and accountability in corporate extra-financial reporting, particularly concerning environmental, social, and governance (ESG) criteria.
Its mandate is to develop a global baseline of sustainability disclosure standards focused on investor needs, particularly in relation to ESG risks and opportunities. The ISSB standards aim to simplify the complex landscape of sustainability reporting, offering a clear and consistent framework for companies worldwide.
In June 2023, the ISSB published its first two standards: IFRS S1 (General Requirements for Sustainability-related Disclosures) and IFRS S2 (Climate-related Disclosures). Together, these provide a consistent framework for reporting how sustainability risks and opportunities affect a company’s financial position and outlook.
Since then, the ISSB has advanced global adoption efforts, with several jurisdictions preparing to integrate its standards into their regulatory frameworks. In May 2024, the ISSB and EFRAG released joint interoperability guidance, confirming strong alignment between IFRS S2 and the EU’s ESRS E1 under the CSRD—allowing companies to meet both requirements with minimal duplication. The ISSB is also expanding its scope in collaboration with initiatives like the Taskforce on Nature-related Financial Disclosures (TNFD), reflecting the growing demand for comprehensive, decision-useful sustainability information.
Objectives of Interoperability between CSRD and ISSB
The announced interoperability between CSRD (via ESRS E1) and ISSB (IFRS S1 and S2) aims to harmonize standards, ensuring that companies subject to CSRD can also comply with ISSB standards without redundant or conflicting obligations. This approach facilitates consistent global reporting (especially for international corporate groups), increases the transparency and reliability of information, and supports more informed investments.
A central objective is to achieve a high degree of alignment, especially on climate-related disclosures. This means that the same core information can serve the needs of both EU regulators and global investors, reducing complexity for preparers.
Interoperability also enhances efficiency. Companies that fall under the scope of CSRD and those that voluntarily or mandatorily apply ISSB Standards should be able to report once and use that information to satisfy both requirements, avoiding unnecessary duplication of work.
Another objective is to establish a consistent approach to materiality. ISSB focuses on financial materiality, while ESRS introduces double materiality by adding the impact perspective. The guidance ensures that these approaches are aligned where possible, helping companies meet both investor-focused and broader stakeholder requirements.
Finally, interoperability aims to support global comparability and clarity for preparers. By providing a clear mapping between ESRS and ISSB requirements, the guidance makes it easier for companies to navigate overlapping obligations and for investors to compare sustainability disclosures across jurisdictions.
How Does CSRD Align with ISSB?
- A risk and opportunity-based approach: CSRD and ISSB emphasize the importance for concerned businesses to disclose how environmental and social issues influence their financial performance, and vice versa.
- Materiality: ISSB applies a financial materiality lens, focused on investor-relevant information. CSRD builds on this by requiring a double materiality assessment that combines financial materiality (aligned with ISSB) and impact materiality (effects on society and the environment). This alignment allows companies to use one assessment to meet both frameworks’ financial materiality requirements.
- Sustainability themes: Both frameworks cover similar themes, such as climate, biodiversity, human rights, and governance, although the approach and level of detail may vary. Climate disclosure is most closely aligned: almost all ISSB climate requirements are embedded in ESRS E1, though ESRS includes additional datapoints (e.g., stakeholder engagement, biodiversity, workforce impacts) reflecting the EU’s wider policy mandate.
Challenges of Interoperability
- Detail and application divergences: While the overall objectives are aligned, there may be differences in specific requirements such as GHG emissions boundaries, carbon credit treatment, and sector-specific metrics. Companies may need to provide additional disclosures to satisfy both frameworks.
- Stakeholder Expectation Management: ISSB disclosures are primarily designed for investors, while CSRD/ESRS also serve a broader set of stakeholders. This may lead to differing expectations about the scope and depth of information.
- Complexity for Multinational Companies: Global companies may face complexity in reconciling ESRS’ mandatory requirements with ISSB’s global baseline, particularly in areas where ESRS add incremental disclosures (e.g., governance diversity, due diligence, revenues from fossil fuels).
Perspectives and developments
- Continuous Alignments: The ISSB, European Commission, and EFRAG are committed to ongoing collaboration. The May 2024 interoperability guidance formalized a detailed mapping between IFRS S1/S2 and ESRS 1/2/E1, helping companies report once and use that information to comply with both.
- Integration potential: The EU has confirmed that ISSB standards are fully referenced within ESRS, especially for climate, reducing duplication. Over time, this integration is expected to further streamline global sustainability reporting.
- Feedback loop: Insights from companies preparing reports and from investors using them are expected to shape refinements in future updates, including the development of sector-specific ESRS standards (by 2026) and expanded ISSB guidance on nature-related disclosures.
Recent 2025 developments: The ISSB has confirmed several enhancements in 2025 that further support interoperability with CSRD. These include amendments to IFRS S2 to clarify application challenges, updates to SASB (Sustainability Accounting Standards Board) for greater consistency and cost-effectiveness, and broader jurisdictional adoption of ISSB Standards. These changes underscore the ongoing commitment of both global and EU standard-setters to continuous refinement, making sustainability reporting increasingly harmonized, reliable, and decision-useful for investors and broader stakeholders alike.
Conclusion
The interoperability between CSRD and ISSB represents a significant step towards a global sustainability reporting system that is not only consistent and comparative but also adaptive to the varied needs of businesses and stakeholders.
Importantly, both CSRD and ISSB frameworks are evolving continuously, reflecting ongoing learning, stakeholder feedback, and the dynamic nature of sustainability challenges. This iterative development enhances their interoperability, ensuring that alignment between regional and global standards becomes progressively stronger over time.
By working towards further harmonization, the EU and global bodies like the ISSB can facilitate a transition to a sustainable and transparent economy, where sustainability information is both reliable and useful for making informed decisions. Businesses are encouraged to closely follow these developments, actively participate in consultations, and prepare their internal processes for an era of more integrated and standardized sustainability reporting.
Sources :
Ec.Europa : https://ec.europa.eu/commission/presscorner/detail/fr/qanda_23_4043
EFRAG : https://efrag.org/Assets/Download?assetUrl=%2Fsites%2Fwebpublishing%2FMeeting%20Documents%2F2307280747599961%2F04-02%20EFRAG%20SRB%20%20230823%20-%20EFRAG%20IFRS%20interoperability%20and%20mapping%20table.pdf
IFRS : https://www.ifrs.org/groups/international-sustainability-standards-board/
