How to Align ESG Data with ISSB

Sustainability Reporting

Jul 22, 2025

Learn how to align ESG data with ISSB standards, ensuring compliance and enhancing financial transparency in sustainability reporting.

Aligning ESG data with ISSB standards is now a critical requirement for organisations aiming to meet global sustainability reporting expectations. With the release of IFRS S1 and IFRS S2 in June 2023, companies must integrate sustainability disclosures directly into financial reporting. These standards focus on governance, strategy, risk management, and metrics, ensuring that ESG risks and opportunities are tied to financial outcomes.

Key takeaways:

  • ISSB standards connect ESG data to financial performance, prioritising investor needs.

  • IFRS S1 covers general sustainability disclosures; IFRS S2 focuses on climate-related risks.

  • Compliance requires aligning ESG data with financial systems, ensuring audit readiness and transparency.

  • Challenges include reconciling data sources, improving data quality, and integrating ESG metrics into financial processes.

  • Benefits include increased investor trust, better access to capital, and reduced financing costs.

Organisations must establish robust data validation processes, integrate ESG metrics into financial workflows, and leverage automation tools like AI to ensure compliance. Platforms such as neoeco simplify this process by embedding ESG metrics into financial transactions, improving accuracy and efficiency while meeting ISSB requirements.

Aligning ESG data with ISSB standards is not just about compliance - it’s about providing clear, reliable insights into how sustainability impacts financial health. This shift demands collaboration across finance, sustainability, and operational teams, supported by strong internal controls and advanced technology.

Understanding ISSB Standards and ESG Data Requirements

ISSB

What Are ISSB Standards?

The International Sustainability Standards Board (ISSB) aims to equip capital market participants with clear standards - like IFRS S1 and IFRS S2 - that connect sustainability risks and opportunities to financial performance. These standards, effective from 1 January 2024, can also be adopted earlier if implemented together.

IFRS S1 outlines the disclosure requirements for companies to communicate sustainability-related risks and opportunities to investors. This includes providing information on governance structures, strategic approaches, risk management processes, and relevant metrics and targets.

IFRS S2 focuses specifically on climate-related risks and opportunities. It requires detailed reporting on greenhouse gas emissions, assessments of climate resilience, and the assumptions underlying transition plans related to climate.

The ISSB builds on the work of established frameworks like the Climate Disclosure Standards Board (CDSB), the Task Force for Climate-related Financial Disclosures (TCFD), and the Sustainability Accounting Standards Board (SASB). With endorsement from the International Organization of Securities Commissions, these standards are gaining momentum globally, backed by strong regulatory support.

With this foundation, let’s dive into the ESG data categories these standards require.

ESG Data Categories Required for ISSB

The ISSB standards focus on four main content areas - governance, strategy, risk management, and metrics and targets - under both IFRS S1 and IFRS S2.

  • Governance disclosures: Companies must detail how sustainability issues are governed, including board oversight, committee responsibilities, and how sustainability is integrated into executive decision-making.

  • Strategy disclosures: Organisations need to explain their approach to managing ESG risks and opportunities, including the financial impacts. This involves describing how sustainability factors influence business models, value creation, and long-term planning.

  • Risk management disclosures: These require a thorough explanation of how material sustainability risks are identified, assessed, and managed. This includes outlining mitigation strategies and how these processes align with broader risk management frameworks.

  • Metrics and targets: Companies must report specific metrics used to manage sustainability risks and opportunities. For climate-related reporting under IFRS S2, this includes greenhouse gas emissions across all scopes, climate resilience indicators, and progress on transition plans.

While IFRS S1 encourages companies to use SASB Standards for non-climate sustainability topics, IFRS S2 offers optional guidance for industry-specific climate-related disclosures. These standards prioritise risks and opportunities that could impact cash flows, financing access, or capital costs over the short, medium, or long term.

Why Financial Integration Is Required

The ISSB Standards emphasise the need for seamless integration between sustainability and financial data. This ensures that investors and creditors receive clear, actionable information that links ESG factors to financial outcomes.

Both traditional financial reporting and sustainability disclosures are designed to serve the needs of investors, lenders, and other creditors. Sustainability disclosures must maintain the same level of consistency, reliability, and rigour as financial reports. To achieve this, organisations must align the data and assumptions used in sustainability disclosures with those in their financial statements. This eliminates the possibility of using separate datasets for financial and sustainability reporting, requiring integrated data systems instead.

The standards also cover scenario analysis and forecasting. Under IFRS S2, companies must describe how climate change affects their financial performance, position, and cash flows. This means sustainability teams and finance teams must collaborate closely to accurately model these financial impacts.

For businesses with complex supply chains, integrating data becomes even more challenging when addressing Scope 3 emissions and their financial implications. Assessing climate resilience - by evaluating an organisation’s preparedness for climate-related risks - plays a critical role in shaping investment decisions and capital allocation.

"The ISSB Standards issued by the ISSB will help combat the challenges of companies 'greenwashing', meaning stakeholders will be able to make better-informed decisions with confidence." - Grant Thornton

This push for integration is reshaping the way organisations manage ESG data. It requires close collaboration between finance, sustainability, and operational teams to ensure ESG reporting aligns with financial systems. A financially-integrated approach to sustainability management becomes essential, ensuring ESG data meets the audit-ready standards demanded by ISSB.

Next, we’ll look at how to establish robust ESG data validation processes to support this integrated approach.

IFRS S1 & S2 Sustainability reporting Standards

Building ESG Data Validation Processes

Ensuring accurate ESG data validation is essential for aligning with ISSB reporting standards. It connects reliable sustainability metrics with financial reporting, reinforcing transparency and credibility. Achieving this requires a systematic approach to verify data accuracy, reliability, and traceability from its origin to final disclosure.

Setting Up Data Ownership and Accountability

Assigning clear ownership of ESG data transforms reporting from a scattered effort into a coordinated, company-wide initiative. Each ESG metric should have a designated owner responsible for maintaining its accuracy and reliability. This accountability ensures that data is not just collected but also managed effectively across departments.

While finance departments often have well-established systems for tracking and auditing data, other areas of the organisation may lack this structure. As one expert highlights:

"Finance has a strong tradition and experience in establishing an audit trail that clearly shows how information is generated and controlled. But other departments do not have that heritage. This is why it is vital to be clear about responsibilities for the data and to raise awareness of the need for reliable data throughout large parts of the company. Defining these responsibilities is part of Data Governance, which is a key step that should be addressed before defining new infrastructures and systems."

To bridge this gap, organisations can implement structured governance frameworks. These frameworks define roles and responsibilities, such as who collects, validates, approves, and maintains the audit trail for ESG data. A cross-functional team approach works best, bringing together representatives from finance, operations, HR, procurement, and sustainability. Each team member oversees specific data categories - such as energy use, employee metrics, supply chain emissions, or governance indicators - and ensures these align with ISSB requirements and financial systems.

Documenting ESG data management policies is equally important. These policies should outline timelines for data collection, validation procedures, approval workflows, and protocols for addressing data quality issues. Including privacy and security measures in these policies ensures consistency and compliance across the board.

Implementing Data Quality Checks and Audit Trails

ESG audits demand a higher level of traceability compared to traditional financial audits. Audit trails are crucial for documenting how data was calculated, who was involved, and the methodologies used .

Automated systems play a critical role here. They can log every step of the data process, capturing metadata such as source systems, contributors, timestamps, and calculation methods. This reduces errors and creates a timestamped, transparent audit trail .

Regular reviews of ESG data practices are also necessary. These reviews should assess data completeness, accuracy, and consistency across reporting periods. They should also verify that ESG data aligns with financial records where overlaps occur. Centralising ESG data in a single system simplifies management and improves audit readiness. A centralised approach allows organisations to standardise validation rules, approval workflows, and documentation processes for all ESG metrics.

Additionally, audit trails must document any data corrections or adjustments. If errors are found in previously reported data, the audit trail should clearly explain what changed, why it was changed, who authorised the change, and how it impacts both current and historical reports. Combining manual audits with automated systems further enhances data validation.

Using AI-Driven Validation Tools

AI-powered tools are revolutionising ESG data validation by improving accuracy and efficiency. Companies adopting AI for ESG data management have reported up to a 40% reduction in data processing time and a 30% boost in report accuracy. AI excels at identifying anomalies, flagging inconsistencies, and spotting missing values that might otherwise go unnoticed.

For instance, AI can detect deviations from historical data or industry benchmarks. If energy use spikes unexpectedly compared to production levels, AI can flag the anomaly for immediate investigation. This real-time monitoring helps organisations identify ESG risks early and track performance more effectively.

Real-world examples highlight AI's potential. In 2024, SAP's Sustainability Control Tower used generative AI to automate ESG reporting across multiple frameworks, cutting reporting time by over 90%. Similarly, Accenture's ESG Reporting Accelerator enabled alignment with SEC, ISSB, and CSRD standards, streamlining corporate reporting processes.

AI tools also support alignment with established ESG frameworks like GRI, SASB, and CSRD. This ensures that data collection and validation processes meet the requirements of multiple reporting standards simultaneously. For organisations juggling ISSB reporting alongside other frameworks, this capability is invaluable.

By automating data validation and ensuring traceability, AI reduces the risk of non-compliance while maintaining audit-readiness. It can even populate ESG indicators with existing data, saving time and ensuring consistency across reporting periods.

However, successful implementation of AI tools requires careful planning. Organisations must establish clear policies and frameworks for AI use, ensuring transparency and building stakeholder trust. As one expert notes:

"AI won't replace ESG strategy or judgement - but it's becoming the infrastructure that supports both".

These processes form the foundation for integrating ESG data into financial systems, ensuring robust and reliable reporting.

Integrating ESG Data into Financial Systems

Meeting ISSB standards requires ESG data to be seamlessly integrated into financial reporting systems. This ensures that sustainability metrics are treated with the same level of scrutiny and reliability as financial data, meeting the high standards of auditability demanded by ISSB.

Mapping ESG Data to Financial Transactions

A key aspect of ISSB-compliant reporting involves embedding ESG metrics directly into financial transactions. This approach ensures that sustainability data is handled with the same accuracy and traceability as financial records, creating a clear audit trail linking every ESG impact to its corresponding financial activity.

Historically, ESG reporting has often been disconnected from financial systems, leaving gaps in traceability. ISSB standards, however, require businesses to demonstrate how sustainability-related risks and opportunities influence their financial standing and performance. This means ESG data must be integrated into financial systems right from the point of data capture.

For example, when a company purchases electricity, the transaction should not only record the financial cost but also include relevant ESG metrics, such as energy usage and associated carbon emissions. Modern platforms now embed over 90 ESG impact factors into transactions, ensuring that sustainability data is automatically captured alongside financial details. This integration bridges the gap between finance and sustainability teams while maintaining the audit-grade accuracy required by ISSB.

Once ESG metrics are incorporated into financial systems, organisations can eliminate silos and improve accountability.

Connecting Finance and Sustainability Data

For ESG integration to succeed, the barriers between finance and sustainability functions need to be dismantled. ESG considerations should be woven into daily business operations, fostering effective governance, transparency, and clear reporting.

The best way to achieve this is by developing key performance indicators (KPIs) that monitor both financial and sustainability metrics in tandem. By embedding ESG factors into financial planning and budgeting processes, businesses can ensure that sustainability influences decisions on investments and resource allocation.

Board-level involvement is also essential. When boards actively oversee ESG performance and provide strategic guidance, accountability is established at the top. Organisations should align their ESG reporting with frameworks such as GRI, SASB, and TCFD, alongside ISSB requirements. With a unified data system, businesses can streamline multi-framework reporting, using the same data to meet various standards without duplicating efforts.

Once the data is integrated, automation can take reporting to the next level.

Automating Workflows with Integrated Platforms

Manual processes are too slow and error-prone to meet ISSB compliance demands. Companies using ESG software can report up to 2.8 times faster than those relying on manual methods. Automation not only reduces administrative workload by up to 50% but also enhances data quality by at least 45%, enabling real-time reporting.

Despite the benefits, there’s still a technology gap. While 68% of executives report their companies use digital tools for ESG reporting, 85% worry they lack the right technology to meet emerging regulatory requirements.

Capability

Manual Processes

Automated Reporting

Data Collection

Emails, Excel uploads

Direct from source systems or web forms

Data Accuracy

Manual validation

Built-in logic checks and alerts

Framework Alignment

Manually mapped

Preloaded taxonomies (e.g., GRI, ISSB, ESRS)

Audit Trail

Informal notes

Immutable logs and change history

Reporting

Static spreadsheets

Interactive dashboards and exports

A real-world example is EnerSys, an industrial battery manufacturer. EnerSys uses an AI-driven platform to process utility bills from 180 sites globally, automatically extracting details like dates, usage, costs, and units from PDF files. This automation replaced manual data entry, significantly improving accuracy, efficiency, and auditability for tracking Scope 1 and 2 emissions.

EnerSys has also piloted an AI-powered ESG compliance tool that auto-populates responses to similar disclosure questions across frameworks like CSRD, GRI, and TCFD. This has drastically reduced redundant work across multiple reporting requirements.

The most effective platforms integrate seamlessly with existing systems, simplifying emissions data collection, calculations, and validation - including sustainability-related financial metrics. For organisations aiming to excel in ISSB reporting, automation can transform ESG integration from a compliance challenge into a strategic advantage. AI-powered tools streamline tedious tasks, cross-reference vast datasets, and uncover valuable insights, ensuring ESG data becomes a driver of progress rather than a burden.

Using neoeco to Align ESG Data with ISSB

neoeco

To meet the requirements of ISSB-compliant ESG reporting, neoeco embeds sustainability metrics directly into financial workflows. This integration ensures the level of precision and reliability that ISSB standards demand, making sustainability reporting as rigorous as financial reporting.

Overview of neoeco's Capabilities

neoeco's FiSM platform merges ESG data with financial reporting, applying the same standards of accuracy to sustainability metrics as it does to monetary transactions. The platform's FiS Ledger incorporates over 90 ESG impact factors into each financial transaction.

For example, when a company processes a £10,000 electricity bill, neoeco automatically records associated energy usage and carbon emissions. This creates a detailed audit trail linking financial activities to their environmental impact, which aligns perfectly with ISSB's expectations for credible and transparent reporting.

The platform supports a wide range of frameworks, including ISSB, CSRD, GHGP, and TCFD, cutting down on redundant data collection and easing the workload for finance teams. By consolidating these processes, organisations can reduce the administrative strain while improving the quality of their data.

Using AI-powered automation, neoeco simplifies the complex task of linking financial transactions to sustainability impacts across 96 ESG categories. It handles data validation, detects anomalies, and provides real-time reporting, making the process seamless and efficient.

Key Features for ISSB Alignment

neoeco leverages its Life Cycle Assessment (LCA) methodology to provide scientifically grounded data for ISSB reporting. Instead of relying on generic industry averages, the platform calculates actual environmental impacts based on specific business activities. This detailed approach ensures organisations have the granular data needed for robust sustainability disclosures.

One standout feature of neoeco is its seamless integration with existing systems. Whether it’s accounting software like Xero and QuickBooks, ERP platforms, energy metres, or HR systems, neoeco connects effortlessly. This means businesses don’t need to replace their current technology stack - neoeco enhances existing workflows with sustainability insights.

The platform also tackles one of the toughest challenges in ISSB compliance: ensuring comprehensive data coverage. By reconciling 99% of financial transactions with sustainability impacts, neoeco provides the complete and accurate data that auditors and regulators expect.

Custom reporting tools allow organisations to create ISSB-specific disclosures alongside other regulatory requirements. With pre-built templates and customisable dashboards, businesses can accelerate the reporting process and gain real-time insights into sustainability performance. These features empower both finance and sustainability teams to work more efficiently while maintaining high data integrity.

Benefits for Finance and Sustainability Teams

neoeco doesn’t just simplify reporting; it also strengthens data accuracy. For example, Kreston Reeves, a UK-based accounting firm, saw a tenfold increase in emissions data granularity, reduced manual data collection by 60%, and improved assurance readiness by 80%. This demonstrates how technology can turn ESG compliance into a strategic advantage.

By integrating financial and ESG reporting, neoeco allows CFOs to access sustainability metrics through familiar tools and dashboards. This helps organisations meet ISSB requirements to show how sustainability-related risks and opportunities influence financial performance and position.

Sustainability teams benefit, too, as they gain access to finance-grade data quality and audit trails. Instead of piecing together information from various sources, they can rely on accurate, validated data that meets financial reporting standards. This reduces the time spent on data validation and boosts confidence in the final metrics.

On average, neoeco saves enterprise customers £400 million in time and costs. These savings come from eliminating manual processes, breaking down data silos, and streamlining compliance workflows that address multiple regulatory needs at once.

Maintaining ISSB Compliance and Improving Data Management

As ESG data becomes increasingly integrated into financial systems, organisations must adopt flexible monitoring practices to align with evolving ISSB standards. Instead of building rigid systems that demand complete overhauls with every change, it's smarter to design frameworks that can adapt to new requirements without disrupting ongoing workflows.

Continuous Monitoring and Validation

To ensure ISSB compliance, organisations need to establish ESG reporting processes that can evolve with regulatory changes. Stay updated on ISSB announcements and jurisdiction-specific updates, especially as standards like S1 and S2 expand. Keeping an eye on emerging ESG regulations and voluntary frameworks will help your organisation stay ahead of future requirements .

Set up quarterly reviews to validate your ESG data and identify any gaps before they turn into compliance risks. These reviews should focus on data quality metrics, the effectiveness of your validation tools, and whether your processes align with the latest standards.

Use multiple data sources and validation methods to strengthen your reporting. Cross-referencing information across systems and implementing backup procedures for critical data collection ensures continuity, even when primary systems require updates or changes.

As ISSB reporting becomes a key part of financially-integrated strategies, it's crucial to link sustainability and financial data. Effective monitoring not only ensures compliance but also supports robust internal controls.

Setting Up Internal Controls and Audit Trails

Solid internal controls are essential for maintaining ISSB compliance. They should be thorough enough to meet external audit requirements while remaining practical for daily use.

Develop audit trails that document the entire process of turning raw data into final metrics. Include details like timestamps, user IDs, and approval workflows for any data modifications. This level of documentation is critical during external audits and regulatory reviews.

Assign distinct responsibilities for data collection, validation, and approval. This separation reduces errors and adds extra layers of verification for key metrics.

Create clear procedures for handling data quality issues. Define acceptable variance thresholds and establish protocols for investigating anomalies. When automated systems flag potential problems, ensure that qualified experts can quickly address them without delaying reporting deadlines.

Schedule regular internal audits, either monthly or quarterly, to focus on high-risk areas like Scope 3 emissions calculations or materiality assessments. With strong internal controls in place, you can enhance your risk management strategies through real-time monitoring tools.

Using Real-Time Dashboards and Analytics

Real-time dashboards shift ESG compliance from a reactive process to proactive risk management. These tools provide immediate insights, allowing organisations to address performance issues as they arise.

Visualisation tools make ESG performance metrics easy to understand. Dashboards that combine financial and sustainability data help CFOs and sustainability managers spot trends and correlations, enabling quicker corrective actions.

Integrating monitoring tools with enterprise systems eliminates data silos and ensures a seamless flow of information. When ESG platforms connect directly to accounting software, ERP systems, and operational databases, organisations gain real-time visibility into their sustainability performance without the need for manual data transfers.

AI-powered predictive analytics can identify trends and flag risks by analysing both historical and real-time data. This technology helps teams address potential compliance issues before they escalate.

Mobile applications further enhance monitoring capabilities by enabling field teams to track metrics, receive alerts, and review reports on the go. This agility is especially useful for managing complex areas like Scope 3 emissions in real-time, where supply chain data is constantly changing and requires continuous attention.

Real-time dashboards empower organisations to quickly identify and resolve compliance issues, ensuring accuracy even in intricate operations.

Conclusion: Aligning ESG Data with Confidence

Bringing ESG data in line with ISSB standards requires integrating financial systems, enforcing reliable validation processes, and leveraging smart automation. Transitioning from fragmented sustainability reporting to audit-ready ISSB compliance becomes achievable when organisations focus on three key areas: establishing clear data ownership, adopting automated validation tools, and maintaining robust monitoring systems.

Financial integration is at the heart of aligning with ISSB standards. Unlike older ESG reporting frameworks, ISSB demands that sustainability disclosures are presented alongside financial statements, offering a unified perspective on enterprise value and risk. This approach ensures ESG data directly supports investor decisions while meeting the comparability and reliability benchmarks now recognised by over 40 jurisdictions.

Automation plays a critical role. Manual processes simply cannot keep up with the demands of IFRS S1 and S2. AI-powered platforms not only reduce errors but also enable real-time monitoring, which is essential for staying ahead in compliance management. These technological advancements pave the way for solutions like neoeco to provide smooth, efficient compliance through integrated tools.

Platforms such as neoeco revolutionise ESG compliance by merging financial and sustainability data using AI-driven automation and Life Cycle Assessment methodologies.

The regulatory momentum behind ISSB standards is gaining speed. Major global organisations, including the G7, G20, and Financial Stability Board, have strongly endorsed these standards. As ISSB standards evolve from voluntary guidelines to mandatory requirements in various jurisdictions, organisations that invest in strong alignment processes today will be better equipped for tomorrow’s regulatory challenges. This momentum underscores the urgency for integrated, technology-driven ESG strategies as outlined above.

Applying the same level of scrutiny to ESG data as to financial data is crucial for sustaining compliance. This involves implementing robust internal controls, maintaining detailed audit trails, and subjecting sustainability metrics to the same validation processes as financial metrics. Organisations that adopt this disciplined approach gain not only compliance assurance but also the strategic insights needed to drive sustainable business growth.

While the process may be complex, a combination of structured processes, advanced technology, and a firm commitment ensures ISSB alignment. By focusing on the three pillars - financial integration, automation, and continuous monitoring - organisations can confidently secure compliance and unlock long-term value.

FAQs

What challenges do organisations face when aligning ESG data with ISSB standards, and how can they address them?

Organisations often face hurdles when trying to align their ESG data with ISSB standards. Common issues include inconsistent data quality, a lack of standardisation, and the challenges of incorporating ESG factors into financial processes. These problems can complicate efforts to achieve accurate and transparent reporting.

One way to tackle these challenges is by using digital tools to streamline how data is collected and verified. For instance, platforms like neoeco utilise AI-powered automation and Life Cycle Assessment (LCA) methodologies to establish a reliable and unified data framework. This approach not only boosts transparency and compliance with ISSB standards but also makes it easier to weave sustainability metrics into financial reporting.

How does integrating ESG data with financial systems build investor trust and improve access to capital?

Integrating ESG data into financial systems plays a key role in building investor trust. It ensures that sustainability reports are transparent, accurate, and reliable, which helps stakeholders assess risks and opportunities more effectively. This, in turn, boosts confidence in the organisation's potential for long-term value creation.

When companies provide consistent and comparable ESG insights, they align with global standards like ISSB. This not only broadens their appeal to a wider range of investors but also strengthens their position in the market. Clear, data-driven disclosures support better decision-making and improve access to capital by highlighting a genuine commitment to sustainable and responsible growth.

How does AI improve the accuracy and efficiency of ESG data validation for ISSB compliance?

AI is transforming ESG data validation by automating essential tasks and helping organisations comply with ISSB standards. With real-time anomaly detection, it identifies irregularities as they happen, minimises mistakes through automated accuracy checks, and streamlines audit preparation - saving time and cutting down on resource demands.

By adopting AI-powered approaches, organisations can produce ESG disclosures that are accurate, transparent, and in line with global requirements. This doesn’t just improve how efficiently they operate - it also strengthens trust with both stakeholders and regulators.

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