Sustainability reporting explained: ISSB, ESRS, GRI and US rules

What is sustainability reporting?

Sustainability reporting covers environmental matters such as greenhouse gas emissions, energy, water and biodiversity; social matters such as a company's workforce, its supply chain and its customers; and governance matters such as business conduct and how sustainability is overseen. Climate is the most developed area, because investors, regulators and customers all ask for emissions data. Reports are increasingly part of the annual report, prepared to set standards and checked by assurance providers, rather than standalone documents. For the metrics most companies lead with, see ESG KPIs explained, and for everything else, the sustainability section.

Which sustainability reporting frameworks matter?

These frameworks overlap rather than compete. A European group may report under the ESRS, use the GHG Protocol for its emissions, publish a GRI content index for stakeholders, and supply ISSB-aligned data to investors elsewhere, while its US subsidiary reports to California. See the GRI Standards explained.

How do the ISSB standards and the ESRS differ?

The biggest difference is materiality. The ISSB standards require information that could reasonably be expected to affect a company's cash flows, access to finance or cost of capital: financial materiality, aimed at investors. The ESRS require double materiality: information about the company's impacts on people and the environment, as well as how sustainability matters affect the company financially. GRI reports impacts. The ISSB and the EU have worked on interoperability, especially for climate, so a company reporting under the ESRS climate standard can cover much of IFRS S2. See IFRS S2 climate disclosures.

What changed in the EU?

The Omnibus I Directive, published on 26 February 2026, narrowed the CSRD to EU companies and groups with more than 1,000 employees and net turnover above 450 million euros, and to non-EU groups with more than 450 million euros of EU turnover and a large EU subsidiary or branch. New reporters start with financial years beginning in 2027, and member states may exempt companies that were already reporting but fall below the new thresholds from their 2025 and 2026 reports. The revised ESRS, published on 21 September 2026, cut mandatory datapoints by more than 60% and apply from 2027. See the CSRD after the Omnibus, the revised ESRS and CSRD wave 1 relief.

What applies in the United States?

The SEC adopted climate disclosure rules in March 2024 but stayed them in April 2024 before they took effect, stopped defending them in court in March 2025, and voted on 29 May 2026 to propose rescinding them. No SEC climate disclosure rule is in force. California fills part of the gap: SB 253 requires US companies with more than one billion dollars of revenue doing business in the state to report scope 1 and 2 emissions, with first reports due on 10 November 2026 and scope 3 from 2027, while SB 261, which requires climate risk reports, is paused by a court injunction. See California SB 253.

Where do the emissions numbers come from?

Almost every framework measures greenhouse gases using the GHG Protocol, which divides emissions into scope 1, direct emissions from sources a company owns or controls; scope 2, indirect emissions from the electricity, heat and steam it buys; and scope 3, all other emissions in its value chain. Scope 2 is reported both on a location basis, using grid averages, and a market basis, reflecting the electricity contracts a company has chosen. The GHG Protocol is revising its standards, and in July 2026 agreed with ISO to merge them into a single corporate standard planned for late 2028. See calculating scope 1 and 2 emissions.

How does sustainability reporting connect to the financial statements?

Sustainability information does not change the accounting standards, but climate risks and commitments affect the numbers through them: the cash flows used in impairment tests, the useful lives of assets that may be retired early, provisions for obligations a company has taken on, expected credit losses for lenders, and fair values. Investors look for consistency: assumptions about carbon prices or transition plans in the sustainability report should match those in the accounts. See climate risk in the financial statements and IAS 36 impairment.

Which companies need to act now?

US companies with more than one billion dollars of revenue that do business in California face the 10 November 2026 deadline; see who must report under SB 253. Large EU groups and non-EU groups with significant EU operations need to plan for the revised ESRS and their start dates. Companies in countries adopting the ISSB standards follow local timetables; see ISSB adoption by country. And many smaller companies are asked for emissions data by large customers, although EU rules now cap what CSRD reporters can demand from smaller companies in their value chains.

This guide is general information. It is not tax or legal advice for your situation.