Special feature: SUSTAINABILITY – Embedding sustainability reporting in the integrated report

INTEGRATED REPORTING (IR or <IR>), pioneered by the International Integrated Reporting Council (IIRC), which later consolidated into the IFRS Foundation, seeks to provide a holistic view of an organisation’s performance by combining financial and non-financial information. The International Sustainability Standards Board (ISSB), established under the IFRS Foundation in 2021, has emerged as a cornerstone in standardising sustainability disclosures.

Integrated reporting aims to explain how an organisation creates, preserves, or erodes value over time by linking strategy, governance, performance, and prospects across financial and sustainability dimensions. The International <IR> Framework (updated 2021) emphasises six capitals: financial, manufactured, intellectual, human, social and relationship, and natural.

The ISSB, established under the IFRS Foundation in 2021, issued its inaugural standards in June 2023:

• IFRS S1 − Requires disclosure of all material sustainability-related risks and opportunities affecting enterprise value, including governance, strategy, risk management, and metrics/targets.
• IFRS S2 − Focuses on climate-specific disclosures such as greenhouse gas (GHG) emissions (Scopes 1, 2, and 3), climate resilience, and transition plans.

These standards are investor-focused and explicitly endorse integration with general-purpose financial reports. The ISSB’s ‘Basis for Conclusions’ notes compatibility with IR, stating that sustainability disclosures should be presented alongside financial information to provide a ‘holistic view’ of value creation. As of 2025, over 20 jurisdictions have adopted or aligned with ISSB standards, as per the IFRS Foundation’s adoption tracker.

Data also captures the momentum in sustainability. A PwC Global Sustainability Reporting Survey 20251 found that 28% of companies are getting significant value and 42% are getting moderate value from sustainability reporting. Meanwhile, the Integrated Reporting Global Network reports that more than 1 200 organisations are using <IR> frameworks as of 2023. This indicates a greater need of aligning IFRS Sustainability Standards and the Integrated Reporting Framework.

WHY EMBED ISSB IFRS SUSTAINABILITY STANDARDS IN THE INTEGRATED REPORT?

Embedding sustainability reporting based on ISSB Standards within an integrated report enhances the quality, relevance and decision-usefulness of corporate reporting for the following reasons:

• 
  Alignment with investor needs − ISSB Standards are explicitly designed to meet investors’ information needs regarding sustainability-related risks and opportunities that may materially affect enterprise value. Integrating these disclosures with financial and strategic reporting ensures completeness and consistency in information presented to users.
• Holistic value creation narrative − Integrated reports frame sustainability disclosures within the broader narrative of value creation over the short, medium and long term, aiding investors in understanding how sustainability factors are embedded in business strategy, governance and risk management.
• Consistency in timing and location − IFRS S1 requires that sustainability disclosures be published as part of the general-purpose financial report and at the same time as financial statements. Using the integrated report as the reporting vehicle meets these requirements while enhancing accessibility and coherence.
• Interoperability and guidance − The ISSB and IFRS Foundation explicitly acknowledge the role of the Integrated Reporting Framework in supporting high-quality corporate reporting. The IFRS Foundation has published a ‘Transition to Integrated Reporting Guide’2 and an updated Getting Started Guide to help companies apply ISSB Standards within an integrated reporting context.3 These resources illustrate how the frameworks can work in tandem to provide granular sustainability disclosures supported by integrated narrative and strategy.

PRACTICAL APPROACHES

What are the practical approaches of embedding the ISSB IFRS Sustainability Standards into the integrated report?

Companies looking to embed ISSB-aligned sustainability reporting in their integrated reporting should consider the following practices:

• 
  Use integrated reports as primary location − Companies can choose to locate their ISSB-aligned sustainability-related disclosures within the integrated report itself, ensuring it forms part of the general-purpose financial report and aligns with IFRS S1 timing requirements. ISSB encourages embedding in a single report (IFRS S1, paragraph B36), such as an integrated report, rather than siloed sustainability reports.
• Leverage management commentary − Where integrated reporting is not mature or fully adopted, companies can include sustainability disclosures prepared under ISSB Standards within management commentary or a section that connects financial and sustainability performance within the general-purpose financial report. This approach is supported by the revised Management Commentary Practice Statement,4 which encourages connected reporting and contextualises sustainability disclosures alongside financial narrative.
• Proportionality and materiality − IFRS S1 (paragraph 21) mandates disclosures only on material sustainability matters, aligning with IR’s focus on value creation (IR Framework, paragraph 3.6). Companies must assess cross-capital impacts.
• Metrics and targets − IFRS S2 requires industry-specific metrics (for example Scope 3 emissions per SASB standards, now under ISSB). These feed into IR’s outlook section for scenario analysis.
• Governance integration − Disclosures must detail board oversight (IFRS S1, paras 23–27), mirroring IR’s governance capital.
• Connectivity and mapping − Before embedding, organisations should map sustainability information required under ISSB Standards against existing integrated report content to identify gaps and opportunities for enhancing narrative coherence.
  This process will ensure strategic objectives, governance discussion and metrics are integrated rather than presented in isolation.
• Transition roadmap − Organisations new to integrated reporting may phase in principles and concepts over multiple reporting cycles, using cross-referencing where necessary but planning a path toward a fully integrated presentation.

WHAT ARE THE CHALLENGES AND CONSIDERATIONS?

While embedding sustainability reporting within integrated reporting offers clear benefits, organisations may face challenges:

• Data quality and assurance − Ensuring sustainability data meets the same level as financial data − including methodologies, assumptions and uncertainties. This is essential and resource-intensive.
• Internal coordination − Aligning finance, sustainability and strategic planning teams around materiality assessments and reporting processes can be operationally complex.
• Jurisdictional adoption − Because ISSB Standards still require adoption by jurisdictions, organisations must consider local reporting requirements and ensure interoperability with other frameworks, such as ESRS or GRI, where applicable.

CONCLUSION

Embedding sustainability reporting within integrated reporting, guided by the ISSB’s Sustainability Disclosure Standards, represents a compelling evolution in corporate reporting. It allows organisations to present a connected story of value creation that meets investor needs for comparability, transparency and decision usefulness. The alignment of ISSB standards with integrated reporting principles helps streamline reporting, avoid fragmentation and elevate the strategic role of sustainability disclosures. As adoption grows and guidance evolves, integrated reporting enriched with ISSB disclosures will likely become a hallmark of high-quality corporate reporting globally.

NOTES

1. Global Sustainability Reporting Survey | PwC.
2. FRS – Updated guide to help companies use the Integrated Reporting Framework while considering IFRS Sustainability Disclosure Standards.
3. Irs-ir-gettingstarted-051524.pdf.
4. Management Commentary – At a Glance.

Author
Tsabo Makoloane CA(SA), Manager: Sustainability and Integrated Reporting at SAICA (edited by Nomsa Nkomo, Head: Sustainability and Integrated Reporting at SAICA)