The introduction of IFRS S1 and IFRS S2 created a global baseline for sustainability and climate-related disclosures. These standards mainly focus on climate risks, such as emissions, transition planning, and resilience. However, businesses depend on more than just climate factors. They rely heavily on natural systems such as water, soil, and biodiversity to run their operations and maintain supply chains. When these systems are disrupted or degraded, the impact goes beyond the environment and directly affects business performance. This can lead to production challenges, higher costs, and long-term operational risks. By moving towards nature-related disclosures, the ISSB is recognizing that these risks are also financially important and should be reported alongside climate risks.
Rather than introducing a standalone nature standard, the ISSB has chosen to issue an IFRS Practice Statement. This approach is intentional. A ๐ฃ๐ฟ๐ฎ๐ฐ๐๐ถ๐ฐ๐ฒ ๐ฆ๐๐ฎ๐๐ฒ๐บ๐ฒ๐ป๐ does not impose new mandatory requirements. Instead, it provides structured guidance on how existing standards should be applied. In this case, it will help organizations interpret and disclose nature-related risks and opportunities where they are financially material. This allows the ISSB to expand the reporting framework without creating immediate complexity for companies that are still adapting to recently introduced standards.
The ISSBโs approach builds on existing market developments, particularly the work of the Taskforce on Nature-related Financial Disclosures (TNFD). By aligning with TNFD, the ISSB aims to:
This alignment also provides a clearer pathway for organizations that have already begun assessing nature-related risks using TNFD principles.
For companies, this is less about a new rule and more about changing expectations. Nature-related risks are already expected to be reported under IFRS S1 but only when they can significantly affect business performance. The challenge so far has been understanding how to identify and report these risks clearly and consistently. As a result, organizations will need to start strengthening their internal approach. Key areas of focus include:
Expanding existing frameworks to include dependencies on natural systems and biodiversity
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Developing the ability to track and quantify nature-related impacts and risks
Exploring TNFD-aligned approaches to prepare for future regulatory expectations
While this guidance may not be mandatory right away, it clearly indicates the direction of travel. Companies that begin preparing early will be better positioned as requirements evolve.
The ISSB is expected to release an exposure draft in ๐ข๐ฐ๐๐ผ๐ฏ๐ฒ๐ฟ ๐ฎ๐ฌ๐ฎ๐ฒ, which will bring greater clarity on how nature-related risks should be identified, measured, and disclosed. This consultation phase will be critical in shaping whether the guidance remains a Practice Statement or evolves into a formal sustainability standard over time. While no immediate requirements are being introduced, the direction is clear. Nature is steadily becoming part of mainstream financial reporting, and expectations are already shifting. As these risks become more visible and measurable, they will play a larger role in how companies assess performance, resilience, and long-term value. For organizations, the priority is not to wait for regulation but to start building an understanding of these risks now, before they become formal reporting obligations.
As nature-related disclosures take shape under the IFRS framework, organizations will need to move beyond high-level assessments and adopt a more structured approach to identifying, measuring, and reporting these risks. This requires understanding dependencies on natural systems such as water, land, and biodiversity while building internal processes to translate these into decision-useful disclosures. Cognitud supports organizations in this transition by assessing current reporting practices, identifying gaps in nature-related risk coverage, and developing practical roadmaps aligned with frameworks such as TNFD and IFRS. This includes strengthening data systems, improving visibility into operational and supply chain impacts, and integrating nature considerations into existing sustainability and risk management processes. With a focus on implementation, Cognitud also helps organizations prepare for evolving regulatory expectations by building audit-ready disclosures, strengthening governance, and embedding consistent reporting practices across teams.
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Dr. Somnath Hazra
Build actionable plans grounded in your sectorโs risks and growth priorities.
Natural hazard disclosure is the reporting of risks from events like floods, earthquakes, wildfires, storms, or droughts that could affect properties, businesses, or investments.
IFRS accounting refers to financial reporting based on International Financial Reporting Standards (IFRS), a globally recognized framework designed to improve transparency and comparability of financial statements.
IFRS does not allow the LIFO inventory method because it may distort inventory values and reduce comparability in financial reporting, especially during periods of rising prices.
Biodiversity supports essential ecosystem functions such as pollination, nutrient cycling, climate regulation, soil fertility, and water purification. Healthy biodiversity also improves ecosystem resilience, helping nature adapt to environmental changes and supporting food systems, livelihoods, and human wellbeing.
IFRS S1 and IFRS S2 are sustainability disclosure standards issued by the ISSB. IFRS S1 covers general sustainability-related financial disclosures, while IFRS S2 specifically focuses on climate-related risks, opportunities, emissions, and transition planning.
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