Navigating the Landscape of Sustainability Reporting: IFRS S1
Globally, investors and other providers of capital have increasingly called for standardized corporate sustainability reporting. With an interest in protecting the stability of global financial markets and achieving country-specific emissions reductions in line with the Paris Agreement commitments (called “Nationally Determined Contributions”), many national governments now require certain companies to report on their sustainability goals and progress. In addition, many state regulatory bodies also reference existing voluntary reporting frameworks as they too look towards mandating ESG-related disclosures.
Last June, two new global standards were issued:
“IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information”
“IFRS S2, Climate-related Financial Disclosures.”
S1 and S2 were developed by the International Sustainability Standards Board (ISSB) under the purview of the International Financial Reporting Standards (IFRS) Foundation.
A Quick History of IFRS for Context
IFRS’s predecessor was founded in the 1970s by accounting standards organizations from nine nations to develop globally consistent financial accounting standards. Today, the IFRS Foundation’s mission is “to develop high-quality IFRS Standards that bring transparency, accountability, and efficiency to financial markets around the world.” IFRS has two groups of standards: financial reporting and sustainability reporting standards.
An Overview of the IFRS S1 Standard:
IFRS S1 sets principles and general requirements that provide a foundation for reporting against all future IFRS sustainability standards. .. The intention for sustainability-related disclosures is poignantly summarized in the introduction of the S1 Standard:
“Information about sustainability-related risks and opportunities is useful to primary users because an entity’s ability to generate cash flows over the short, medium, and long term is inextricably linked to the interactions between the entity and its stakeholders, society, the economy and the natural environment throughout the entity’s value chain.”
IFRS S1 defines how entities prepare and report sustainability-related financial disclosures. It sets two Conceptual Foundations, which are like important guiding principles for how entities should carry out their reporting: Fair presentation and materiality.
In the Core content section, there are four reporting categories:
Governance
Strategy
Risk Management
Metrics and Targets
This reporting structure mirrors the 2017 Recommendations of the Taskforce on Climate-Related Financial Disclosures (TCFD) - which was intentional. IFRS S2 was developed specifically to replace TCFD. We also anticipate that IFRS will continue to develop several additional topic-specific standards (S3, S4, etc.).
Tips for Preparing to Report in Alignment with the IFRS Sustainability Standards:
Conduct a thorough assessment of sustainability-related risks and opportunities.
Establish clear governance processes, controls, and procedures for monitoring and managing these risks and opportunities.
Develop a comprehensive strategy for integrating sustainability into financial reporting practices.
Identify relevant performance metrics for tracking progress toward sustainability goals.
Engage with stakeholders, including investors and regulators, to communicate the company's commitment to sustainability.
Establish a schedule for re-evaluating and updating sustainability-related financial disclosures to reflect changes in your industry, business model, and global sustainability action areas.
Conclusion:
IFRS S1 focuses on the broader sustainability-related risks and opportunities impacting the financial aspects of a business.
Companies embracing transparency through reporting to the IFRS Sustainability Standards demonstrate their commitment to sustainability and provide stakeholders with valuable information for informed decision-making. Your company will benefit from an external, impartial partner with the right expertise to help your teams prepare for action, report accurately and transparently, and integrate sustainability into your corporate processes and strategy.
Uplift’s expert team is ready to partner with you and make it happen.
The Uplift Agency
Uplift builds strategies, programs, and communication campaigns that advance ESG in workplaces, supply chains and communities.
We know how to navigate the road ahead because we’ve already been down it – 90 percent of our team has led environmental or social programs in corporations or nonprofits. Because ESG is all we do, our services are more comprehensive and integrated than most firms.
