GRI vs ISSB – S2

This week, we are publishing the fifth installment on the similarities and differences between GRI and ISSB. Last time we discussed how both standards approach risk management and stakeholder engagement. With that, we have covered the main areas of ISSB’s S1 and how the reporting requirements compare to what companies shared under GRI. This week we will move to ISSB’s S2 (climate related risks and opportunities).

ISSB’s S2

This standard asks companies to map

1. Physical risks related to climate change
2. Transition risks related to climate change
3. Climate-related opportunities

To do this, the company must discuss

• Climate governance: which governance body or individual in the organization is responsible for climate oversight, policies and mandates related to the management of climate issues, how skills and competencies are defined for people with these responsibilities, how this is communicated internally, how this is integrated into the overall company strategy, and how targets are set and how progress towards those targets is monitored, with additional details.
• Climate strategy: risks and opportunities that could affect the company (classifying them as either physical or transition, as well as by time horizon) together with their current and anticipated effects  (considering the entire value chain) both in terms of operations and financials, how these factors impact decision making, if there is a climate transition plan, how financial planning integrates climate considerations, how the company is responding to this (plans, targets, goals), and the company’s assessment of its climate resilience, with some further details. 

• Climate risk management: processes and related policies to identify, assess, prioritize, and monitor climate risks (including methodology and interaction with other risks).
• Climate metrics and targets: this includes both cross-industry metrics and industry-based metrics, as well as internal metrics and targets. All companies shall report cross-industry metrics (GHG emissions Scope 1, 2, and 3 in accordance with the GHG Protocol) with details on how these were measured, the entities included in the measurement, and other relevant assumptions.

The S2 standard is extensive, covering a broad range of required disclosures related to climate and sustainability risks. This summary touches on only the main aspects, and a full understanding of S2 will require a detailed examination.

One key difference between S2 and other standards, such as GRI, is its universal applicability. S2 is designed to apply to all entities across all industries, regardless of their sector, requiring them to disclose climate-related financial risks. In contrast, GRI adopts a more tailored approach, providing industry-specific standards that ask for data on climate and emissions only when these topics are deemed material for a given industry.

This distinction between ISSB’s approach through S2 and GRI’s method highlights an important shift in the reporting landscape. Under S2, companies are expected to proactively disclose climate-related risks and opportunities, regardless of whether climate change is considered material to their business.

For organizations that have been reporting under frameworks like GRI or SASB, transitioning to S2 will likely require a significant review and adjustment of current practices. We recommend carefully reading the entire S2 standard to fully understand the gaps between your existing reports and the new expectations under ISSB. This shift is likely to be one of the more challenging aspects of adopting ISSB standards in the coming years, as companies will need to align their reporting processes with these new, broader requirements.

It’s important to recognize that the move to ISSB, and particularly S2, will demand not just new disclosures but potentially a new way of integrating climate risks into business strategy and financial decision-making. Companies will need to develop the capabilities to assess, measure, and manage climate risks comprehensively. This may involve enhancing internal processes, updating data collection practices, and engaging with stakeholders to ensure that disclosures are both accurate and aligned with ISSB’s expectations.

If your company is preparing to adopt ISSB standards, we are available to provide guidance and support.

I hope you found this interesting. As usual, if there is anything we can help you with, or if there is an ESG topic you would like to know more about, please let us know.

Best,

Marimar

CEO, Miranda ESG