Global ESG Reporting in 2025: ISSB or CSRD – What’s Right for Your Business?

This informal CPD article, ‘Global ESG Reporting in 2025: ISSB or CSRD – What’s Right for Your Business?’ was provided by IFRS Lab, a leading ESG advisory and training institution committed to advancing sustainability.

As the global sustainability reporting landscape matures, two heavyweight frameworks have emerged as de facto standards for ESG disclosure: the International Sustainability Standards Board (ISSB) and the EU’s Corporate Sustainability Reporting Directive (CSRD), implemented through the European Sustainability Reporting Standards (ESRS) (1) (2) (3). On paper, both claim alignment with global climate objectives, investor expectations, and risk transparency. But in practice, they diverge sharply in scope, philosophy, and operational requirements (4).

The perceived convergence—largely due to shared terminology and partial cross-referencing—has created confusion among sustainability professionals and reporting entities. Many companies, particularly multinationals operating in or exporting to the EU, must prepare for dual compliance. This is not a matter of choosing between ISSB and CSRD, but of understanding the fundamental differences and ensuring internal systems, governance, and reporting architecture can serve both.

The ISSB framework is often viewed as a streamlined, global baseline for investor-oriented sustainability disclosures (5). In contrast, CSRD (and the ESRS it mandates) reflects the EU’s ambition to lead in impact transparency—going beyond financial materiality to include environmental, social, and governance impacts on people and planet. These distinctions are not merely academic—they shape how businesses allocate resources, define materiality, engage stakeholders, and structure their internal ESG operating models.

II. Origin and Philosophy: Single vs Double Materiality

At the heart of the divergence between ISSB and CSRD lies a philosophical split in materiality—the lens through which sustainability issues are identified and reported.

ISSB: Enterprise Value and Financial Materiality

The ISSB, under the IFRS Foundation, builds on the principles of TCFD and incorporates key elements of the SASB and CDSB frameworks. Its two published standards—IFRS S1 (General Requirements) and IFRS S2 (Climate-related Disclosures)—are designed to meet the information needs of primary users of general-purpose financial reporting, namely investors, lenders, and creditors.

The ISSB applies a financial materiality lens—disclosing sustainability-related risks and opportunities that could reasonably affect the entity’s cash flows, access to capital, or cost of capital over the short, medium, and long term.

This “enterprise value” focus means companies using ISSB standards report only on issues deemed relevant to their financial performance and market valuation. Broader impacts on society or the environment, if not financially material, are typically excluded from scope.

CSRD: Double Materiality and Impact Transparency

By contrast, the CSRD, enforced through the ESRS developed by EFRAG, adopts the double materiality principle. This requires reporting entities to assess and disclose:

• Financial materiality: how sustainability issues affect the company’s performance
• Impact materiality: how the company’s activities affect people, the environment, and society at large (6)

This dual lens is codified in ESRS 1 (General Requirements), which mandates a structured double materiality assessment covering stakeholders, geographies, and value chains.

From a regulatory standpoint, this distinction is critical. Under CSRD, companies must disclose significant sustainability impacts even if those issues do not pose financial risk—such as biodiversity loss in emerging markets, human rights violations in tier-2 suppliers, or water stress in non-core operations.

The implications are far-reaching:

• Wider reporting scope: CSRD forces companies to consider a broader universe of sustainability topics.
• Higher stakeholder engagement: Disclosures must reflect concerns from civil society, NGOs, employees, and affected communities—not just investors.
• Strategic integration: Double materiality requires cross-functional governance to manage financial, legal, and reputational risks arising from impact areas.

Interoperability Efforts

There have been notable efforts to enhance interoperability between ISSB and CSRD. For example:

• The ISSB and EFRAG released a joint statement in 2023 committing to alignment where possible.
• EFRAG issued mapping documents aligning certain ESRS requirements with TCFD and ISSB disclosures.
• Both frameworks encourage the use of scenario analysis, value chain transparency, and forward-looking metrics.

However, despite these efforts, the two frameworks are not interchangeable. Companies that limit their disclosures to ISSB may fall short of CSRD compliance—particularly in the environmental and social domains (4).

III. Scope and Applicability: Who Must Comply and When

Understanding the scope and applicability of ISSB and CSRD is essential for global businesses operating in or trading with the EU, as well as companies seeking capital from international investors. While ISSB provides a global baseline, CSRD enforces legal compliance within the EU. The distinction is not merely semantic—it drives the urgency and comprehensiveness of disclosure efforts.

CSRD: Legally Enforceable, Broad in Scope

The Corporate Sustainability Reporting Directive (CSRD) came into force in January 2023, replacing the Non-Financial Reporting Directive (NFRD). Its rollout follows a phased schedule, with compliance requirements increasing over time and expanding to a broader set of entities.

• Phase 1 – EU Large Public-Interest Entities (Already under NFRD)

Reporting begins in 2025, covering the financial year 2024. This group includes large public-interest entities within the EU that were already subject to the NFRD.

• Phase 2 – Large EU Undertakings

From 2026, large EU undertakings will be required to report if they meet at least two of the following three thresholds: more than 250 employees, over €40 million in turnover, or more than €20 million in total assets. The first reporting period will be the financial year 2025.

• Phase 3 – Listed SMEs (Excluding Micro-Enterprises)

Listed small and medium-sized enterprises will begin reporting in 2027 for the financial year 2026. An opt-out option is available until 2028 to allow additional preparation time.

• Phase 4 – Non-EU Companies Meeting EU Turnover Thresholds

From 2029, non-EU companies with a net turnover exceeding €150 million within the EU, and with at least one large or listed EU subsidiary or branch, will also fall under CSRD requirements. The first reporting period will be the financial year 2028.

• Legal Mandate and Assurance Requirements

CSRD is legally binding for all qualifying entities. Non-compliance can result in financial penalties, reputational harm, and increased investor scrutiny. Reporting will require mandatory limited assurance from the first year and full reasonable assurance from 2028, raising the standard for data accuracy and audit readiness.

• Extra-Territorial Reach

The directive extends its influence beyond the EU’s borders. Non-EU companies—including those from the Middle East, Asia, and the Americas—will be subject to CSRD if they exceed the €150 million turnover threshold in the EU and maintain a qualifying subsidiary or branch.

ISSB: Global Baseline, Investor-Driven

The ISSB standards—IFRS S1 and S2—are currently voluntary, but their adoption is strongly encouraged by global financial markets, institutional investors, and stock exchanges. Key developments include (8):

• IFRS jurisdictions (e.g., Canada, UK, Nigeria, Brazil, Australia) are either mandating or encouraging adoption.
• Stock exchanges in Singapore, Japan, and South Africa are aligning ESG disclosure guidance with ISSB.
• SEC climate disclosure rules (USA), although independent, are conceptually aligned with ISSB in structure.

Adoption Timeline:

• IFRS S1 and S2 became effective for annual reporting periods beginning January 1, 2024.
• National regulators may enforce earlier or later adoption.

Scope: While not legally mandatory in most jurisdictions (yet), ISSB standards are investor-driven, meaning companies may be compelled to comply by capital providers, rating agencies, or market access requirements. Many companies listed on exchanges or seeking ESG-aligned investment are effectively being pushed to follow ISSB standards—even in the absence of legal compulsion.

Practical Takeaway

• If you are a multinational operating in or exporting to the EU: CSRD compliance is mandatory; ISSB alignment may also be expected by global investors.
• If you are headquartered outside the EU but have substantial EU sales: You may fall under CSRD from 2028 onwards.
• If you are seeking international capital: ISSB-aligned reporting can help improve ESG ratings, investor trust, and access to sustainable finance instruments.

IV. Structure and Content Architecture

Though both frameworks aim to systematize sustainability disclosures, the structure, depth, and data granularity of ISSB and CSRD are distinctly different. A side-by-side analysis highlights these contrasts (4).

1. Modular Composition

ISSB’s current approach is streamlined and climate-focused, offering a concise entry point for sustainability reporting. CSRD, by contrast, is deliberately comprehensive, embedding a wide range of environmental, social, and governance topics into a detailed and highly prescriptive structure.

• Framework Structure

ISSB operates through two modular standards: IFRS S1, which covers general sustainability-related disclosures, and IFRS S2, which focuses specifically on climate-related disclosures. CSRD, delivered through the European Sustainability Reporting Standards (ESRS), combines sector-agnostic general requirements with multiple topic-specific standards.

• Topic Coverage

ISSB’s present scope prioritises climate, governance, strategy, risk management, and metrics. CSRD’s scope is broader, encompassing climate, water, biodiversity, resource circularity, social matters, and governance, each addressed through dedicated ESRS modules.

• Alignment

ISSB aligns closely with global market-oriented frameworks such as TCFD, SASB, and CDSB. CSRD is designed for regulatory integration within the EU and aligns with the GRI, EU Taxonomy, Sustainable Finance Disclosure Regulation (SFDR), United Nations Guiding Principles (UNGPs), and OECD guidelines.

• Structural Breadth

While ISSB’s design makes it streamlined and accessible, it is intentionally climate-centric in its initial phase. CSRD is comprehensive from the outset, with over 12 ESRS standards providing granular requirements across environmental, social, and governance dimensions.

2. Materiality and Topic Selection

• ISSB allows entities to select sustainability-related topics only if they affect enterprise value. This gives firms discretion but can lead to underreporting of systemic risks.
• CSRD mandates a double materiality assessment process to determine which topics must be disclosed. ESRS 1 outlines clear requirements, including engagement with affected stakeholders and documenting the methodology.

3. Disclosure Depth and Specificity

While both the ISSB and CSRD frameworks aim to enhance corporate transparency on sustainability matters, they differ significantly in the depth and precision of their requirements. ISSB establishes a solid baseline for ESG disclosure, focusing on material information for investors. CSRD, however, takes a more expansive and prescriptive approach, mandating granular detail across environmental, social, and governance topics. The distinctions become clear when looking at specific disclosure areas.

• Greenhouse Gas Emissions

Both ISSB and CSRD require Scope 1, 2, and 3 greenhouse gas emission disclosures. The difference lies in granularity. ISSB mandates reporting with scenario-based analysis, while CSRD requires a more detailed breakdown, including emissions by activity and location. This added specificity enables greater comparability and accountability.

• Transition Plans

Under ISSB, transition plan disclosures are encouraged but lack prescribed detail. CSRD, in contrast, makes them mandatory under ESRS E1–6.2. The framework requires companies to set out clear decarbonization levers and outline measurable pathways for achieving climate objectives.

• Biodiversity

ISSB addresses biodiversity broadly, referencing nature-related risks without dedicated metrics. CSRD adopts a targeted approach, introducing ESRS E4, which mandates disclosures on species, ecosystem conditions, and pressure indicators. This provides structured visibility into a company’s impact on natural systems.

• Supply Chain Impacts

ISSB focuses on Scope 3 risks when assessing supply chain impacts. CSRD expands the scope to cover both upstream and downstream impacts, coupled with detailed due diligence reporting. This ensures full value chain transparency, from sourcing to product end-of-life.

• Human Rights

Human rights reporting is optional or thematic under ISSB, generally falling within broader risk disclosures. CSRD makes it a binding requirement, covering the organisation’s own workforce, its value chain, and consumers. These obligations are defined under ESRS S1–S4.

• Governance Disclosures

ISSB’s governance requirements focus on board oversight, defined roles, and control mechanisms. CSRD builds on this by mandating disclosure of governance policies, clear role definitions, links between remuneration and ESG outcomes, and due diligence procedures.

• Structural Complexity

Overall, CSRD is more comprehensive and demanding. It requires a mix of qualitative and quantitative data, both retrospective and forward-looking, supported by precise metrics, targets, and methodologies. This structure leaves little room for ambiguity and sets a higher bar for ESG transparency.

V. Key Disclosure Areas Compared: Where ISSB and CSRD Diverge Most

While both ISSB and CSRD aim to enhance sustainability transparency, their treatment of disclosure areas reflects divergent priorities, especially across climate, social, and governance domains. Below is a deeper comparative analysis of key reporting elements.

A. Climate-Related Disclosures

ISSB (IFRS S2):

• Follows the TCFD four-pillar framework: Governance, Strategy, Risk Management, Metrics & Targets.
• Requires disclosure of Scope 1, 2, and 3 GHG emissions, climate-related risks and opportunities, and resilience assessments through scenario analysis.
• Entities must explain transition planning, including capital deployment, use of carbon credits, and decarbonization pathways (1).

CSRD (ESRS E1):

• Includes all elements required under ISSB and extends further:
  • Mandatory disclosure of internal carbon pricing mechanisms, GHG intensity by segment/geography, and dependencies on fossil fuels.
  • Requires explicit targets, reduction plans, and linkages to financial statements.
  • CSRD disclosures must be supported by a structured transition plan, aligned with the 1.5°C pathway, and include metrics on capex alignment with EU Taxonomy. (4)

Key divergence: CSRD demands greater granularity, stronger alignment with EU policy goals, and legally binding taxonomy integration—features not mandated under ISSB.

B. Social and Human Rights Disclosures

ISSB:

• Does not provide dedicated standards for social or human rights topics as of 2024.
• Entities are expected to disclose these risks only if financially material (e.g., reputational risk, litigation, supply chain disruption).
• Social metrics may emerge under future ISSB standards, but are not currently core.

CSRD (ESRS S1–S4):

• Offers comprehensive coverage of social topics:
  • Working conditions, equal opportunities, social dialogue, training, and compensation.
  • Value chain due diligence for human rights and modern slavery.
  • Stakeholder engagement obligations extend to vulnerable and non-contractual stakeholders (e.g., communities, consumers, temporary workers).

Key divergence: CSRD embeds UNGPs, OECD guidelines, and EU human rights regulations, making social disclosures a foundational, not optional, component.

C. Governance and Oversight

ISSB (IFRS S1):

• Focuses on how governance structures oversee sustainability risks.
• Requires identification of management roles, responsibilities, and decision-making processes.
• Encourages disclosure on board competency, frequency of reviews, and integration into risk management.

CSRD (ESRS G1):

• Builds on ISSB's approach and mandates disclosures on:
  • Governance body diversity, sustainability-related skills, remuneration linkages, and conflict-of-interest management.
  • Anti-corruption, whistleblower systems, and lobbying activities.
  • Oversight and performance evaluation of sustainability targets.

Key divergence: CSRD introduces mandatory, qualitative and quantitative governance metrics, often tied to performance evaluation and regulatory transparency—not required under ISSB.

VI. Assurance Requirements and Digital Taxonomy

The ambition behind both frameworks is not just disclosure—but credible disclosure. Assurance and digital reporting requirements are two areas where CSRD takes a legally binding lead over ISSB.

A. Assurance Standards

ISSB:

• ISSB does not impose assurance requirements.
• Leaves it to national regulators or voluntary market mechanisms to mandate audit of sustainability reports.
• Where applied, assurance will likely rely on ISAE 3000 (international assurance standard for non-financial data).

CSRD:

• Requires limited assurance from the first year of reporting.
• By 2028, transitions to reasonable assurance, equivalent to that of financial statements.
• Assurance providers must be accredited and aligned with the EU Audit Regulation.

Implication: For CSRD reporters, sustainability data must meet audit-grade integrity—requiring robust controls, traceable data flows, and verification-ready systems.

B. Digital Reporting and Machine-Readability

ISSB:

• Promotes interoperability but does not yet prescribe a specific digital format for filings.
• The IFRS Foundation’s Taxonomy is still under development for ESG integration.

CSRD:

• Requires reports to be digitally tagged using the European Single Electronic Format (ESEF) and XHTML.
• Specific sustainability tags (based on XBRL) are mandated for submission to ESMA (European Securities and Markets Authority).
• Disclosures must be machine-readable and publicly accessible via the European Single Access Point (ESAP).

Implication: CSRD compliance necessitates IT readiness—tagging, structured data, and integrated reporting platforms must be in place.

Final Thoughts

The path a company chooses—ISSB, CSRD, or both—should not be viewed as a compliance exercise, but as a strategic alignment decision. These frameworks are rapidly shaping how businesses are evaluated, valued, and held accountable.

• ISSB offers a lean, investor-focused foundation—ideal for companies looking to start or harmonize global ESG disclosures.
• CSRD, via ESRS, delivers the most comprehensive and enforceable sustainability reporting regime to date—particularly relevant for companies with EU exposure or value chains.

The way forward requires:

• Early investment in ESG governance systems
• Robust materiality and stakeholder engagement processes
• Interoperable data infrastructures
• An integrated, long-term ESG strategy beyond checkbox reporting

As regulators, investors, and consumers demand more transparent, comparable, and auditable ESG data, companies that treat sustainability disclosures as strategic communication—not regulatory burden—will gain competitive edge.

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References:

1. https://www.ifrs.org/sustainability/knowledge-hub/introduction-to-issb-and-ifrs-sustainability-disclosure-standards/
2. https://www.ibm.com/think/topics/csrd
3. https://www.managementsolutions.com/en/publications-and-events/regulatory-notes/technical-notes-on-regulations/new-sustainability-reporting-framework-csrd-esrs
4. https://www.manifestclimate.com/blog/csrd-issb-interoperability/
5. https://www.sustain.life/blog/frameworks-explained-issb
6. https://www.sgs.com/en-hu/services/corporate-sustainability-reporting-directive-csrd-double-materiality
7. https://plana.earth/academy/timeline-csrd
8. https://www.accountingtoday.com/news/issb-standards-adopted-more-widely-across-globe