ISSB vs. CSRD: Data Mapping Differences

ISSB and CSRD are two major frameworks shaping sustainability reporting, but they differ significantly in scope, focus, and requirements.

• ISSB: Focuses on financial risks and opportunities (single materiality). It’s voluntary, with adoption varying by country, and prioritises investor-focused climate-related disclosures.

• CSRD: Mandates double materiality, covering a company’s impact on society and the environment as well as financial risks. It’s legally binding for EU companies and certain non-EU businesses operating in the EU, with detailed ESG reporting requirements.

Key Differences:

• Materiality: ISSB uses single materiality; CSRD requires double materiality.

• Legal Status: ISSB is voluntary; CSRD is mandatory for in-scope companies.

• Scope: ISSB is global but less prescriptive, while CSRD is EU-focused with global implications.

• Audience: ISSB targets investors; CSRD addresses broader stakeholders, including regulators and communities.

Organisations facing both frameworks must navigate these contrasts by developing data systems that meet ISSB’s financial focus and CSRD’s broader ESG requirements. Tools like centralised ESG platforms can simplify compliance by integrating reporting processes. Whether companies prioritise ISSB or CSRD depends on their operations and regulatory obligations. Below is a quick comparison to summarise the differences.

Quick Comparison

Both frameworks are reshaping how businesses report sustainability data, and understanding their differences is critical for compliance and transparency.

EFRAG-ISSB Event on Interoperability Guidance

ISSB and CSRD Coverage and Requirements

The ISSB and CSRD frameworks approach sustainability reporting in notably different ways. These distinctions influence how companies collect and manage sustainability data, shaping their overall reporting strategies.

CSRD: EU Requirements and Legal Obligations

The Corporate Sustainability Reporting Directive (CSRD) significantly expands sustainability reporting obligations within the EU, covering approximately 50,000 companies - far more than previous directives. It applies to large EU-based companies, whether publicly listed or private, and extends to certain international businesses. Specifically, non-EU companies generating over £118 million in annual turnover within the EU and operating at least one subsidiary or branch in the region must also comply with CSRD requirements. This brings multinational corporations with substantial EU operations under its scope.

CSRD is legally binding, meaning non-compliance can result in penalties or enforcement actions. Companies must provide detailed disclosures on a wide range of ESG (Environmental, Social, and Governance) topics, following the European Sustainability Reporting Standards (ESRS). A key feature of CSRD is its double materiality approach, which requires businesses to report on two fronts: how sustainability issues affect their financial performance and how their operations impact society and the environment.

For multinational companies, CSRD offers the advantage of standardising sustainability reporting across global operations, even for activities outside the EU. However, the directive's comprehensive requirements demand robust systems for collecting and reporting data.

ISSB: Global Optional Framework

Unlike CSRD, the International Sustainability Standards Board (ISSB) framework is a voluntary global standard. It aims to harmonise sustainability reporting across international markets but leaves adoption decisions to national regulators. This means some countries may enforce ISSB standards, while others treat them as optional guidelines.

The ISSB framework focuses on climate-related disclosures under IFRS S2 and financially material ESG risks. Its single materiality approach simplifies reporting by concentrating only on sustainability issues that pose financial risks or opportunities. This investor-focused perspective aligns closely with existing financial reporting practices, reducing potential disruptions to a company's data management systems.

Adoption of ISSB standards varies by country, so multinational firms must stay alert to changing regulations. For companies looking to integrate ISSB reporting into their financial strategies, tools like neoeco can help streamline data collection and ensure compliance.

The global applicability of ISSB offers flexibility for companies operating outside the EU or across multiple regions. By using ISSB as a consistent foundation, businesses can establish uniform data collection processes that meet investor demands for clear and comparable sustainability information.

These distinctions play a crucial role in shaping data mapping strategies. Companies subject to both frameworks must balance CSRD's detailed, legally mandated requirements with ISSB's more streamlined, investor-focused approach. Developing systems that address both frameworks is essential for efficient and effective compliance in a multi-framework reporting environment.

Materiality Methods and Data Mapping Effects

The differences in materiality approaches across frameworks require tailored data mapping strategies. How organisations collect, organise, and report sustainability data is shaped by the unique materiality principles of each framework.

Double Materiality in CSRD

The Corporate Sustainability Reporting Directive (CSRD) adopts a double materiality principle. Organisations must report on two fronts: how sustainability issues influence their financial performance (financial materiality) and how their activities affect the environment and society (impact materiality). This dual focus broadens the scope of data collection, encompassing a wide range of ESG indicators, such as social and environmental externalities, stakeholder impacts, and value chain dynamics.

For instance, a manufacturing company must disclose how its carbon emissions affect local ecosystems and communities, even if these effects don't directly impact the company's finances. This comprehensive reporting requires input from various departments and often relies on data from external sources. To manage this, robust data systems and clear internal validation processes are essential.

Single Materiality in ISSB

On the other hand, the International Sustainability Standards Board (ISSB) takes a single materiality approach. It focuses exclusively on sustainability issues that are financially material - those likely to influence investor decisions or impact the company's financial performance. This narrower focus allows organisations to prioritise data directly tied to financial risks and opportunities, such as exposure to carbon pricing, regulatory compliance costs, or market changes driven by environmental factors.

For example, under ISSB guidelines, a manufacturing company would concentrate on emissions data that pose financial risks, potentially excluding broader social or environmental impacts unless they directly lead to financial liabilities. The reporting process here is more streamlined, typically managed by finance and investor relations teams.

While this approach reduces reporting complexity, it risks overlooking environmental or social impacts that, although not financially material in the short term, may hold broader significance for stakeholders or long-term sustainability goals. These contrasting approaches highlight the difficulties in aligning data mapping across both frameworks.

Organisations face the challenge of balancing CSRD's expansive requirements with ISSB's narrower financial focus. Guidance from the IFRS Foundation and EFRAG offers some alignment, such as shared definitions of financial materiality and common terminology, which can help reduce redundancies in reporting.

For companies aiming to navigate these complexities efficiently, financially-integrated sustainability management approaches - like those developed by neoeco (https://neo.eco/fism-manifesto) - offer solutions to unify data collection across frameworks. These methods ensure thorough coverage while minimising duplication. The next section will delve into how technology can help streamline these processes.

Data Mapping Needs and Framework Compatibility

Navigating the technical demands of data collection for compliance with multiple frameworks can be both challenging and rewarding, offering opportunities to enhance organisational transparency and efficiency.

CSRD's Detailed Data Requirements

The CSRD's ESRS imposes rigorous data collection mandates, covering all aspects of ESG topics. Its dual materiality approach significantly broadens the scope, requiring organisations to gather data not only from their own operations but also across their entire value chain - spanning suppliers, customers, and even the communities they impact.

"The biggest challenge for CSRD compliance is not just collecting data but also managing it effectively across the entire value chain, ensuring it's accurate, auditable, and future-proof." – Mirjam van der Velde, Strategic Consultant Environment & Sustainability

ISSB's Flexible Data Framework

In contrast, the ISSB's IFRS S1 and S2 adopt a principles-based, single materiality approach. These standards focus on financially material, climate-related information, resulting in narrower data requirements compared to the CSRD. However, there are signs that ISSB may expand its scope in the future. This creates an interesting dynamic, as organisations work to reconcile the broader demands of CSRD with the investor-focused disclosures of ISSB.

Framework Compatibility and Alignment

Although the materiality approaches of CSRD and ISSB differ, organisations are increasingly striving to align their reporting processes. The challenge lies in the fact that data collected for CSRD may not always meet the investor-focused needs of ISSB, and vice versa.

Technology has emerged as a vital tool in bridging these gaps. Platforms designed for multi-framework compliance can integrate data across various reporting requirements, helping organisations reduce duplication and improve transparency. For instance, platforms like neoeco (https://neo.eco) consolidate finance and sustainability data, enabling smoother compliance with frameworks like ISSB and CSRD.

Investing in advanced data management systems early on can position organisations ahead of the curve. Flexible data architectures that can adapt to evolving standards not only simplify compliance but also offer a competitive edge through enhanced transparency and more efficient processes.

Technology's Role in Data Mapping and Integration

Meeting the dual demands of ISSB and CSRD compliance requires the use of advanced technology. Modern ESG platforms are transforming outdated manual data mapping processes into automated systems that prioritise accuracy and audit-readiness.

Automation and Multi-Framework Compliance

The transition to automated, centralised solutions is key to addressing the unique requirements of each framework. For businesses within the EU, CSRD compliance is a legal obligation, with the first reports expected as early as 2025. Meanwhile, ISSB adoption remains voluntary in most regions.

One of CSRD's more complex challenges is its double materiality principle, which requires organisations to collect extensive data across their entire value chain. This includes information from suppliers, customers, and community impacts - tasks that are nearly impossible to handle manually. Technology platforms simplify this process by automating gap assessments and leveraging AI-powered insights to reduce manual work while ensuring audit-grade traceability.

Platforms like neoeco take this a step further with AI-driven automation and a FiS Ledger that incorporates over 90 ESG impact factors. This system creates a detailed audit trail that meets the rigorous standards of both ISSB and CSRD. By minimising human error and providing granular data visibility, these platforms make comprehensive reporting more manageable.

Additionally, modern platforms centralise reporting processes, eliminating the need for separate compliance workflows across different markets.

Combining Finance and Sustainability Data

Centralised reporting also highlights the growing need to integrate financial and sustainability data - a fundamental shift in ESG reporting. Both ISSB and CSRD frameworks emphasise this integration, albeit with different focuses: ISSB centres on financially material impacts for investors, while CSRD requires a broader disclosure of impacts affecting all stakeholders.

The traditional approach, where finance and sustainability teams operate in silos, no longer meets the demands of modern compliance. Instead, organisations need systems that merge financial precision with sustainability metrics, ensuring both datasets remain accurate and insightful.

neoeco’s Financially-integrated Sustainability Management (FiSM) approach exemplifies this integration in action. By unifying financial and sustainability data within a single platform, neoeco enables organisations to monitor ESG impacts with the same level of detail as financial reporting. This unified system supports compliance with both ISSB reporting requirements and CSRD mandates through a cohesive data structure.

The platform’s integration capabilities extend to existing business tools, seamlessly connecting with accounting, ERP, energy, and HR systems. This ensures that sustainability data flows smoothly from operational systems into reporting frameworks, reducing inconsistencies that often arise from manual processes.

By maintaining a single source of truth for financial and sustainability data, these technological solutions deliver framework-specific reports that align with ISSB and CSRD standards. This not only reduces administrative overhead but also ensures consistency and accuracy in disclosures.

As ESG reporting increasingly adopts verification standards akin to those in financial reporting, the precision offered by integrated systems is becoming indispensable. With heightened scrutiny from auditors and regulators, robust technological infrastructure is now a critical component for achieving compliance and maintaining credibility.

Key statistics indicate that first CSRD reports are due as early as 2025.

Methods for Aligning ISSB and CSRD Reporting

As companies face the challenges of integrating data for sustainability reporting, they must decide how to sequence their compliance efforts. The choice between prioritising the ISSB or CSRD frameworks will shape their data collection processes, resource allocation, and overall compliance strategy. Each approach offers distinct benefits depending on a company's regulatory landscape, geographic operations, and stakeholder needs. Below, we'll explore two key methods for aligning these frameworks effectively.

ISSB-First Method

The ISSB-first approach begins with climate-related financial disclosures and then expands to meet CSRD requirements. This method takes advantage of the significant overlap in climate reporting between the two frameworks.

Starting with ISSB provides a streamlined entry point, particularly for financial reporting teams already accustomed to investor-focused disclosures. The framework’s emphasis on single materiality simplifies the process, focusing on financial impacts. Moreover, ISSB standards are gaining traction globally, with 20 jurisdictions - accounting for roughly 55% of global GDP - either adopting or planning to adopt these standards. Given the global prioritisation of climate disclosures by regulators and the ISSB itself, this approach is well-suited for organisations looking to address the most immediate and critical reporting needs.

Once the ISSB framework is in place, organisations can incorporate CSRD’s broader social and governance elements. However, it’s crucial to account for CSRD’s double materiality requirements early on, ensuring the ISSB implementation can accommodate assessments of wider stakeholder impacts.

This strategy is particularly effective for multinational companies operating outside the EU. By establishing global consistency with ISSB, these organisations can later add CSRD-specific elements for their European operations. The approach ties seamlessly into integrated reporting by using financial materiality as a unifying element.

CSRD-First Method

Alternatively, the CSRD-first approach begins with comprehensive ESG disclosures and later adapts to ISSB’s investor-driven focus. This strategy is ideal for organisations with mandatory CSRD obligations, especially as the number of entities required to report under CSRD is set to grow from 11,700 to over 50,000.

For EU-based companies and their subsidiaries, prioritising CSRD ensures compliance with legal requirements while building a robust data foundation that can later support ISSB reporting. CSRD’s double materiality principle requires organisations to collect data not just from their operations but also across their value chain, including suppliers, customers, and community impacts - data that often goes beyond ISSB’s scope.

A key advantage of this method lies in CSRD’s prescriptive nature. Unlike ISSB’s flexible framework, CSRD provides clear guidelines on the information companies must disclose, reducing ambiguity during implementation. This comprehensive approach ensures ESG topics are covered from the outset.

However, adapting CSRD’s broad stakeholder focus to ISSB’s narrower investor-centric lens can be challenging. Organisations must develop processes to extract financially material insights from their CSRD datasets while maintaining the broader context required by CSRD. Modern sustainability platforms can help by supporting both frameworks within a unified system, allowing companies to manage CSRD datasets while generating ISSB-specific reports neoeco.

To succeed with either method, organisations need to examine joint guidance carefully, identifying points of alignment and areas where additional disclosures are needed. Harmonising materiality assessments can also boost efficiency - for example, using findings from ESRS assessments to inform ISSB disclosures and vice versa.

Ultimately, developing a unified operational model is critical for companies subject to multiple regulatory regimes with staggered timelines. By ensuring adequate expertise and capacity, organisations can navigate the complexities of dual compliance while maintaining accuracy and readiness for audits across both frameworks.

Conclusion

The ISSB and CSRD frameworks take distinct approaches to materiality. CSRD requires dual reporting, covering both the business's impact on society and the environment, as well as how external factors affect the business. In contrast, ISSB focuses solely on risks and opportunities that are financially material.

These differences extend to disclosure requirements. CSRD's ESRS standards push for broad ESG reporting, while ISSB, through IFRS S2, prioritises climate-related data with a financial focus. This means companies need systems capable of addressing both stakeholder-wide impacts and investor-specific needs.

Another key distinction lies in their legal status. CSRD is mandatory for EU companies, demanding significant investment in compliance and data systems. ISSB, however, remains voluntary, allowing businesses more flexibility but potentially influencing how resources are allocated for compliance and reporting timelines.

To navigate these complexities, advanced FiSM platforms like neoeco offer solutions by integrating ESG and financial data. These tools, powered by AI automation, ensure audit-ready accuracy and help organisations meet the demands of both frameworks.

Ultimately, whether a business adopts an ISSB-first or CSRD-first approach will depend on its regulatory environment and stakeholder expectations. Investing early in flexible data systems and aligning materiality criteria are essential steps for achieving compliance with both standards, even as framework-specific requirements continue to pose challenges.

FAQs

How can businesses align the materiality requirements of ISSB and CSRD in their sustainability reporting?

To meet the materiality requirements of both ISSB and CSRD, businesses should implement a double materiality approach. This means addressing two key perspectives: financial materiality (focused on what matters to investors) and impact materiality (focused on the broader social and environmental effects). Taking this approach ensures compliance with CSRD's emphasis on double materiality while staying in line with ISSB's financial materiality standards.

Aligning disclosures, such as climate-related risks and opportunities outlined in ISSB’s IFRS S2 and CSRD’s ESRS E1, can simplify reporting and enhance consistency. Using integrated tools like a Financially-integrated Sustainability Management (FiSM) platform, such as neoeco, allows organisations to merge finance and sustainability data seamlessly. This ensures ESG disclosures are audit-ready and meet the requirements of both frameworks.

What challenges might non-EU companies face with CSRD compliance, and how can they prepare effectively?

Non-EU companies might face hurdles when navigating CSRD compliance, especially when figuring out if the framework applies to them - this is often the case for those with subsidiaries or operations within the EU. Another challenge is setting up robust systems to gather, analyse, and report sustainability data according to the European Sustainability Reporting Standards (ESRS).

To tackle these challenges, businesses should begin by carefully assessing whether they fall under the scope of the CSRD. Building internal expertise to handle detailed sustainability data is also crucial, as is ensuring that reporting processes meet EU standards. Starting early can prevent last-minute scrambling and minimise operational risks. Tools like neoeco can simplify the process by integrating financial and sustainability data, making it easier to achieve compliance and produce audit-ready ESG reports.

How does combining financial and sustainability data improve compliance with ISSB and CSRD standards?

Integrating financial data with sustainability metrics offers a streamlined way to comply with ISSB and CSRD standards. By unifying these reporting requirements, organisations can produce consistent, transparent, and audit-ready disclosures that meet the needs of regulators and stakeholders alike.

Bringing together financial figures and environmental, social, and governance (ESG) data allows businesses to spot risks more effectively, monitor performance, and simplify reporting workflows. This comprehensive approach not only improves decision-making but also provides a clearer picture of financial and sustainability impacts, helping organisations stay ahead in an ever-changing regulatory environment.

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