The Corporate Sustainability Reporting Directive (CSRD) and the International Sustainability Standards Board (ISSB) both require companies to disclose climate-related risks. They share common DNA through the TCFD framework. Yet the two standards differ in fundamental ways that determine what companies report, to whom, and under what enforcement. CSRD vs ISSB is a question of which framework applies to your entity and whether you can satisfy both with a single data strategy.
CSRD vs ISSB at a Glance
| Dimension | CSRD (EU) | ISSB (Global) |
|---|---|---|
| Materiality | Double materiality (financial + impact) | Single materiality (financial only) |
| Scope | Around 5,000 companies (estimate): EU companies with more than EUR 450M net turnover AND more than 1,000 employees (post-Omnibus) | More than 45 jurisdictions using or introducing the standards (IFRS Foundation, Aug 2026) |
| Physical risk metric | ESRS E1-9 today: amount and share of assets at material physical risk before adaptation. From FY 2027 (E1-11): carrying amount of those assets and % covered by adaptation | IFRS S2 Para 29(c): amount and percentage of assets or business activities vulnerable to climate-related physical risks |
| Scenario analysis | Hazard identification must consider high emission scenarios; formal scenario analysis optional from FY 2027 | Scenario analysis required; approach suited to the entity’s circumstances |
| Assurance | Limited assurance required from the first report; reasonable-assurance step removed by Omnibus | Varies by jurisdiction; no global mandate |
| Enforcement | EU law with penalties; legally binding | Voluntary global baseline; binding only where jurisdictions adopt it |
| Geographic focus | EU companies above the thresholds; non-EU groups with more than EUR 450M EU turnover and an EU subsidiary or branch above EUR 200M (from FY 2028) | Global; mandatory in markets including Australia, Japan (from 2027) and Singapore; UK rules final, comply or explain from 2027 |
The most consequential distinction is in materiality.
How Materiality Differs
CSRD applies double materiality assessment. Companies must evaluate two questions simultaneously: how do climate risks affect our financial position (outside-in), and how do our operations affect the environment and people (inside-out)? ISSB applies single materiality, asking only the first question: does a sustainability matter affect enterprise value?
The practical difference shows up quickly. A logistics company with coastal warehouses faces financial exposure from flooding under both frameworks. Under CSRD, that same company must also report whether its diesel fleet contributes to climate change, regardless of whether that creates financial risk. Under ISSB, fleet emissions only matter if they threaten the company’s own value through regulation, litigation, or market shifts. If no such threat exists, ISSB does not require the disclosure.
Physical Risk Disclosure Requirements
Physical risk is where CSRD vs ISSB requirements converge most closely and where the data demands are most concrete. Both frameworks require companies to identify which assets face climate-related physical hazards and quantify that exposure. The mechanisms differ.
ESRS E1: Hazard Screening and Assets at Physical Risk
Under ESRS E1 as it applies today, companies describe how they identify climate hazards, considering at least high emission climate scenarios, and how they assess the exposure and sensitivity of their assets and business activities. Where physical risk is material, E1-9 asks for the amount and share of assets at material physical risk before adaptation actions, and the share of those assets addressed by adaptation actions. The revised standard, Delegated Regulation (EU) 2026/1563, applies from FY 2027. Its E1-2 asks for the key elements of the screening method and asks companies that use scenario analysis whether they used a high-emission scenario. Its E1-11 asks for the carrying amount of assets at material physical risk before adaptation and the percentage covered by adaptation actions.
IFRS S2 Para 29(c): Assets Vulnerable to Physical Risks
IFRS S2 takes a different approach. Paragraph 29(c) requires a cross-industry metric: the amount and percentage of assets or business activities vulnerable to climate-related physical risks. The standard is less prescriptive about methodology. It specifies what to disclose (asset vulnerability) but gives entities more flexibility in how they arrive at that figure. Paragraph 30 asks for all reasonable and supportable information available without undue cost or effort, and Appendix B points entities to where risks are concentrated, such as locations, facilities or asset types.
| Requirement | ESRS E1-2 / E1-11 | IFRS S2 Para 29(c) |
|---|---|---|
| What to disclose | Amount of assets at material physical risk before adaptation + % addressed by adaptation (carrying amount from FY 2027) | Amount and % of assets or business activities vulnerable to physical risks |
| Methodology | Process and key methodology elements must be described | Entity-determined; reasonable and supportable information without undue cost or effort (Para 30) |
| Scenarios | Hazard identification considers high emission scenarios; formal scenario analysis optional from FY 2027 | No set scenarios; discloses whether a Paris-aligned scenario was used |
| Hazard scope | Acute and chronic hazards screened against the EU Taxonomy hazard list | Acute and chronic risks identified per Appendix A |
Both ESRS E1 disclosure requirements and IFRS S1 and S2 requirements point to the same underlying data need: physical risk assessment at the asset level, across multiple hazards and scenarios. The data requirements overlap significantly. Platforms like Continuuiti provide 12-hazard physical risk assessment under SSP scenarios that supports both the ESRS E1 hazard screening requirement and the IFRS S2 Para 29(c) asset vulnerability metric, allowing companies subject to both frameworks to source physical risk data once.
Both frameworks ask the same question with one wrinkle: ESRS E1-9 (E1-11 from FY 2027) requires a “before adaptation” presentation, while IFRS S2 Paragraph 29(c) is silent on adaptation framing. The four definitional questions of Paragraph 29(c) apply under either standard.
Scenario Analysis Under CSRD and ISSB
CSRD does not require scenario analysis as a standalone exercise. Under ESRS E1 today, the process for identifying physical climate hazards must consider at least high emission climate scenarios, and a separate 1.5C scenario reference applies to transition risk. From FY 2027, companies that use scenario analysis must say whether they used at least one high-emission scenario for physical risk.
IFRS S2 requires scenario analysis but lets each entity choose an approach suited to its circumstances. The entity must disclose whether it used a diverse range of scenarios and whether one was aligned with the Paris Agreement. Australia went further in law: companies must use at least a 1.5C scenario and one well exceeding 2C. For a detailed comparison of scenario analysis requirements across frameworks, including CDP and TCFD alignment, see our dedicated guide.
Scope, Timeline, and Enforcement
CSRD is European Union law. The Omnibus I Directive (EU) 2026/470, in force since March 18, 2026, narrows the scope from FY 2027 to EU companies with more than EUR 450 million in net turnover and more than 1,000 employees, around 5,000 companies by Commission-cited estimates. Non-EU groups report from FY 2028 if they earn more than EUR 450 million in the EU and have an EU subsidiary or branch above EUR 200 million. Reporting is mandatory, every report carries a limited-assurance opinion, and Member States set the penalties. For the full timeline and threshold details, see our CSRD climate risk disclosure guide.
ISSB operates differently. The standards are voluntary at the global level. The ISSB publishes IFRS S1 and S2 as a baseline that jurisdictions then choose to adopt, often with local modifications. Adoption is accelerating:
- United Kingdom: UK Sustainability Reporting Standards published for voluntary use in February 2026. Under the FCA’s final rules (September 2026), listed companies apply them on a comply-or-explain basis for periods starting on or after 1 January 2027
- Australia: AASB S2 mandatory in three groups, from 2025 for the largest companies, from July 2026 for the second group and from July 2027 for the third
- Singapore: SGX rules based on IFRS S2 apply to STI constituents from FY2025 and to other listed issuers from FY2028 or FY2030
- Japan: SSBJ Standards mandatory for the largest Prime Market companies from periods ending March 2027
The result is a patchwork. A multinational corporation headquartered in the EU with operations in Australia, the UK, and Singapore could face CSRD, AASB S2, UK SRS, and SGX requirements simultaneously. The physical risk data needs overlap substantially across all four, even where the materiality lens, assurance requirements, and reporting formats diverge.
Can You Report Under Both Frameworks?
Yes. The IFRS Foundation and EFRAG published joint interoperability guidance in May 2024 mapping where CSRD and ISSB requirements align. The overlap is substantial for climate-related disclosures. Physical risk data, scenario analysis inputs, GHG emissions metrics, and governance disclosures can all serve both frameworks with minimal duplication.
The divergence occurs in three areas. First, impact materiality: CSRD requires assessment of how your operations affect the environment, which ISSB does not. Second, topical breadth: CSRD covers pollution, water, biodiversity, circular economy, and social topics through ESRS E2 through S4. The ISSB has one topic standard so far, IFRS S2 on climate, though IFRS S1 reaches other sustainability risks. Third, assurance: CSRD sets limited assurance across the EU, while ISSB-adopting jurisdictions set their own rules, and Australia already phases from limited to reasonable assurance.
For physical risk specifically, a single platform assessment can support disclosures under both frameworks. The hazard screening and asset vulnerability data overlap almost entirely. Companies subject to both CSRD and ISSB can build their physical risk data layer once and map the outputs to each framework’s disclosure format.
Frequently Asked Questions
What is the difference between ISSB and CSRD standards?
The most fundamental difference is the materiality lens. CSRD applies double materiality, requiring companies to report both how climate risks affect their finances and how their operations affect the environment. ISSB applies single materiality, focusing only on risks that affect enterprise value. CSRD is mandatory EU law with penalties, while ISSB is a voluntary global baseline that jurisdictions adopt individually.
Are IFRS and ISSB the same?
No. The ISSB (International Sustainability Standards Board) is a board within the IFRS Foundation that issues sustainability disclosure standards. IFRS S1 and IFRS S2 are the specific standards the ISSB has published. IFRS S1 covers general sustainability disclosures, while IFRS S2 covers climate-related disclosures specifically.
Is CSRD still relevant after the Omnibus simplification?
Yes. The Omnibus I Directive, in force since March 2026, cut CSRD scope from an estimated 50,000 companies to around 5,000 by requiring more than EUR 450 million in net turnover and more than 1,000 employees. The Commission says the revised ESRS, which apply from FY 2027, cut mandatory data points by over 60% and total data points by over 70%. CSRD remains binding EU law for in-scope companies, and the core climate disclosures under ESRS E1 remain substantive.
What is CSRD replacing?
CSRD replaces the Non-Financial Reporting Directive (NFRD), which applied to large public-interest companies with more than 500 employees. CSRD introduces mandatory reporting standards (ESRS) and requires limited assurance of every report. It also calls for digital tagging in XBRL, which applies once the Commission adopts the sustainability tagging rules.
Can a company report under both CSRD and ISSB?
Yes. The IFRS Foundation and EFRAG published joint interoperability guidance in May 2024 mapping the overlap. Climate disclosures such as physical risk data, scenario analysis, GHG metrics, and governance processes align closely. The main divergence is impact materiality (CSRD only), topical breadth beyond climate, and assurance requirements.
Which framework requires double materiality?
CSRD requires double materiality through the European Sustainability Reporting Standards (ESRS). Companies must assess both financial materiality and impact materiality. ISSB uses single materiality, focusing only on the financial perspective. For a detailed explanation, see our guide to double materiality assessment.
