Listed and non-listed companies should expect tighter disclosure and compliance requirements with regard to Environmental, Social and Governance (ESG) disclosures with the launch of the inaugural global sustainability reporting standards in the country now slated to take place in early September.
The Institute of Certified Public Accountants of Kenya says it has partnered with the Pan-African Federation of Accountants (PAFA) to launch the inaugural Sustainability Reporting Standards, IFRS S1 and IFRS S2, slated for September 5.
“For the first time, the standards create a common language for disclosing the effect of climate-related risks and opportunities on a company’s prospects. The institute, in collaboration with PAFA, is pleased to announce the official launch of the Standards in the Kenyan Market on the of September 2023,” ICPAK chief executive Grace Kamau.
The launch of the standards locally is expected to address the challenge of non-standardised reporting on matters ESG given that a number of listed entities including Safaricom PLC, East African Breweries PLC and Stanbic Bank PLC are already issuing sustainability reports.
IFRS S1 deals with general requirements for disclosure of sustainability-related financial information and is designed to ensure that companies disclose information about any sustainability-related risks and opportunities that could substantively impact the company’s cash flows.
IFRS S2, on the other hand, requires companies to make disclosures regarding any climate-related risks and opportunities that could substantially impact their cash flows, access to finance and cost of capital.
Both IFRS S1 and IFRS S2 were launched by the International Sustainability Standards Board (ISSB) on June 26, 2023, and both standards have January 1, 2024 as the effective date.
“To reinforce the significance of sustainability, the International Sustainability Standards Board (ISSB) issued its inaugural standards—IFRS S1 and IFRS S2—ushering in a new era of sustainability-related disclosures in capital markets worldwide. The Standards will help to improve trust and confidence in company disclosures about sustainability to inform investment decisions,” Dr Grace Kamau says.
In November 2021, the Nairobi Securities Exchange in collaboration with the Global Reporting Initiative launched an ESG Disclosures Guidance Manual to guide the market towards improvement and standardization of reporting by listed entities.
The adoption of IFRS S1 and IFRS S2 is expected to usher in a phase where companies will have mandatory reporting standards and timelines for sustainability-related disclosures.
