ISSB Future Standards: Biodiversity & Human Capital

The ISSB biodiversity standard — what to expect

The ISSB announced biodiversity, ecosystems, and ecosystem services (BEES) as a research priority in its 2023–2025 work plan. A future IFRS sustainability standard on biodiversity is expected to draw heavily on the TNFD (Taskforce on Nature-related Financial Disclosures) recommendations, published September 2023.

Expected content based on TNFD and ESRS E4 precedent: governance of nature-related risks and opportunities; strategy for addressing nature dependencies and impacts; risk management processes for nature-related risks; metrics and targets for nature performance including land use, ecosystem condition, and species impacts.

Financial materiality focus: unlike ESRS E4 which uses double materiality (requiring disclosure of biodiversity impacts regardless of financial consequence), the ISSB biodiversity standard will use financial materiality — disclosures only where nature risks affect financial condition or performance. This will result in a narrower biodiversity standard than ESRS E4.

For companies already building ESRS E4 disclosure: the financial materiality subset of your ESRS E4 disclosure will satisfy the future ISSB biodiversity standard. Companies that have invested in TNFD implementation are best positioned — TNFD is the likely methodological foundation for both ESRS E4 and the ISSB biodiversity standard.

The ISSB human capital standard — what to expect

Human capital is the second priority in the ISSB work plan. A future IFRS sustainability standard on human capital will cover workforce-related risks and opportunities from an investor perspective — focusing on human capital as a driver of financial value rather than as a social impact topic.

Expected content: workforce composition and skills; employee health, safety, and wellbeing; talent acquisition, development, and retention; labour relations and social dialogue; diversity and inclusion from a talent pipeline perspective.

Financial materiality focus: the ISSB human capital standard will focus on workforce metrics that affect financial performance — employee turnover costs, productivity metrics, skills gaps affecting strategic execution, and health and safety costs. It will not require the full ESRS S1 impact materiality disclosures — only financially material workforce metrics.

SASB as interim guidance: until a formal IFRS S3 or equivalent human capital standard is published, IFRS S1 requires companies to consider SASB industry-specific human capital metrics. Most SASB industry standards include workforce metrics (turnover rates, training hours, health and safety incident rates) that represent the financially material human capital subset.

For CSRD reporters: ESRS S1 is substantially broader than the likely ISSB human capital standard. Your ESRS S1 disclosure will exceed ISSB human capital requirements — the financially material metrics within S1 will satisfy ISSB, and the additional impact materiality disclosures are unique to CSRD.

Human rights — the third emerging ISSB topic

Human rights due diligence is the third topic identified in the ISSB research agenda. This overlaps with ESRS S2 (workers in the value chain) and ESRS S3 (affected communities) — but again, the ISSB will approach it through a financial materiality lens.

Financially material human rights risks include: supply chain disruption from human rights violations at key suppliers; reputational damage from association with forced labour or child labour; regulatory penalties under CSDDD and national modern slavery legislation; access-to-finance constraints from lender ESG policies; and market access restrictions (US UFLPA import bans).

Expected ISSB human rights disclosure: identification of material human rights risks in the value chain; due diligence processes for identifying and mitigating these risks; financial exposure from human rights risk materialisation; and remediation processes.

For companies building ESRS S2 compliance: your S2 supply chain human rights due diligence programme will substantially satisfy future ISSB human rights disclosure requirements. The additional effort for ISSB will be primarily financial effect quantification — converting the qualitative due diligence programme into financially material risk exposure estimates.

Frequently asked questions