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ISSB Year Two: Every Transition Relief Expires at Once, and Scope 3 Arrives With Them

Socious Team
ISSB Year Two: Every Transition Relief Expires at Once, and Scope 3 Arrives With Them

Most teams preparing their first ISSB-aligned report are working against a set of requirements that will not exist the following year.

The standards were built that way. IFRS S1 and IFRS S2 apply to annual reporting periods beginning on or after 1 January 2024, and both carry transition reliefs intended to make the first year manageable (IFRS Foundation). The shape of those reliefs is what gets missed. Each one is available in the first annual reporting period and in no other, so the whole set falls away at the same moment rather than tapering over several years.

If you have read our overview of what ISSB is and what IFRS S1 and S2 require, this is the sequel that matters operationally.

The five reliefs, and the single condition attached to all of them

In the first annual reporting period a company applying IFRS S1 and IFRS S2 may (Grant Thornton):

  • Report only on climate. Sustainability-related risks and opportunities on non-climate topics can wait.
  • Omit comparative information. No prior-year column.
  • Publish later than the financial statements. The disclosures need not appear at the same time as the related financial statements.
  • Omit Scope 3 greenhouse gas emissions.
  • Keep an existing measurement method. A company already measuring emissions under something other than the GHG Protocol may continue with it.

The condition attached to all five is the same: first annual reporting period only. They are not available in subsequent periods (IFRS Foundation).

Taken together, the reliefs describe a first report that is climate-only, single-year, published on its own schedule, and silent on the emissions category that is usually the largest. Year two is the same list with every item switched on.

What year two asks for

Three changes land together.

Non-climate topics enter the report. A company that used the climate-first relief must, from the second year, disclose sustainability-related risks and opportunities across all topics that could reasonably affect its prospects. For most filers this is the first time the report requires input from functions outside the climate or sustainability team — human capital, supply chain, product safety, whatever the entity’s own materiality assessment surfaces.

Comparatives appear, with one specific carve-out. A company that used both the climate-first relief and the Scope 3 relief discloses comparatives for its climate-related disclosures in year two, excluding Scope 3, but does not disclose comparatives for the broader sustainability-related financial disclosures it is reporting for the first time (IFRS Foundation). The practical consequence is that year one’s climate numbers become a published comparative in year two, whether or not they were assembled with that in mind.

The calendar compresses. Teams underestimate this one most often. Using the timing relief, a company’s first annual sustainability disclosures are published alongside its next interim financial report — that is, during its second annual reporting period (KPMG). From the second year onward, the disclosures must be published at the same time as the financial statements.

In year one the sustainability report has, in practice, several extra months. In year two it has none. A team that filed comfortably in month nine now files in the same window as the financial statements, while adding non-climate topics, a comparative column and Scope 3.

KPMG add one point that is easy to lose: the relief does not override jurisdictional requirements, so a local regulator can impose a stricter timeline regardless of what IFRS S1 permits.

Scope 3 is the one that cannot be caught up later

Four of the five expiries are scoping and scheduling problems. Scope 3 behaves differently.

Scope 1 and Scope 2 come from meters and invoices the company already holds. Scope 3 comes from other people’s operations — suppliers, logistics providers, customers, the use phase of a sold product. Collecting it means asking hundreds of counterparties for data they may not compile, in a format they have never produced, for a period that has already closed.

A fiscal year cannot be re-lived. If year two’s Scope 3 disclosure covers a period that began before anyone asked suppliers for the data, the only options are secondary emission factors and spend-based estimates — which are defensible under the standard, and which an assurance provider will look at very closely.

This is why collection dominates the effort. In Workiva’s survey of more than 2,200 reporting practitioners, 83% named collecting accurate data as the hardest part of the job. The months go there, before anyone writes a sentence.

Our guidance on SSBJ Scope 3 preparation covers the mechanics; the timing point holds regardless of which standard you file under. Start the collection cycle in the fiscal year you will report on, not in the one you report during.

What the December 2025 amendments change

On 11 December 2025 the ISSB issued Amendments to Greenhouse Gas Emissions Disclosures, a set of targeted amendments to IFRS S2, effective for annual reporting periods beginning on or after 1 January 2027, with early application permitted (IAS Plus).

Three things they do:

Narrow Scope 3 Category 15 for financial institutions. An entity may limit Category 15 to financed emissions — those arising from loans, project finance, bonds, equity investments, undrawn commitments and assets under management — rather than the wider set of financial activities. Emissions related to derivatives may be excluded. Facilitated emissions from investment banking and insurance-associated emissions from underwriting fall outside financed emissions on this reading.

Require disclosure of what was excluded. An entity taking that relief must describe, qualitatively, what it treats as a derivative for this purpose and which other financial activities it has left out. The scope narrows; the obligation to explain it does not.

Extend jurisdictional flexibility. The amendments extend the reliefs around measurement methods and global warming potential values, and allow more latitude in choosing an industry-classification system for disaggregated disclosures.

The amendments do not extend the first-year reliefs, and they do not defer Scope 3 for a non-financial company. For a manufacturer, a retailer or a services firm, the December 2025 amendments leave the year-two Scope 3 date where it was.

The Japanese timetable makes this concrete

Japan’s SSBJ standards are mandatory for fiscal years ending March 2027 for TSE Prime issuers above ¥3 trillion in market capitalisation, extending to ¥1 trillion in 2028 and ¥500 billion in 2029.

For the first cohort, the first mandatory year covers the fiscal year that began in April 2026 — a year already underway as you read this. Their year two is the fiscal year ending March 2028, which starts in April 2027. That is the year in which the comparative column, the non-climate topics and Scope 3 all become live at once, and it is also the year in which the data has to be collected as it happens rather than reconstructed afterwards.

Our SSBJ roadmap sets out the sequence in more detail. Teams also filing in Europe should read it against the CSRD compliance sequence, since the two regimes ask overlapping questions of the same underlying dataset — and the ISSB’s nature-related practice statement indicates where the topical scope is heading next.

What to do with the next twelve months

The reliefs defer work rather than removing it, and year two is when all of the deferred work arrives at once.

Three things are worth doing while year one is still in progress:

Write year one’s climate numbers as if they were a comparative, because they will be. Document the boundary, the factors and their versions, and the judgements, at the time you make them.

Open the Scope 3 supplier conversation now, for the period you are currently living through. Asking early costs a few emails. Asking after the year has closed leaves you with an estimate to defend.

Check whether your close calendar survives the timing change. If the sustainability report currently ships months after the financial statements, find out what breaks when it has to ship with them. That is a resourcing question, and resourcing questions have long lead times.

All three are questions about the dataset rather than the report: whether it can still answer for itself a year after it was collected. An assurance provider will ask it in almost the same words.

If you want a quick read on where your own gaps are, our free SSBJ readiness check takes a few minutes and returns a specific list rather than a score; the CSRD version does the same for European filers. Socious Report exists for the part that comes after: one dataset that produces CSRD, SSBJ and ISSB reports, with an independent Socious Verify credential attached to the result.