IFRS Sustainability Disclosure Standards: Preparing for the new IFRS S1 and IFRS S2
In June 2022, the Malaysian Accounting Standards Board, through its Sustainability Reporting Working Group provided consultation comments on two exposure drafts (EDs) of the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standards:
- General Requirements for Disclosure of Sustainability-related Financial Information (IFRS S1); and
- Climate-related Disclosures (IFRS S2)
The proposed IFRS S1 sets out the core content for a complete set of sustainability-related financial disclosures, establishing a comprehensive baseline of sustainability-related financial information, while the IFRS S2 sets out the requirements for the identification, measurement and disclosure of climate-related physical and transition risks and opportunities, including the disclosure of information based on the Taskforce for Climate-related Financial Disclosures (TCFD) recommendations.
The International Sustainability Standards Board aims to issue the finalized standards by end-2022, which will form a global baseline of sustainability disclosures designed to meet the information needs of investors and stakeholders when assessing enterprise value.
What are the next steps?
To prepare for the upcoming sustainability standards requirement, companies can consider the following actions:
- Identify the reporting metrics and targets
- Put environmental, social and governance (ESG) and sustainability reporting on the Board agenda
- Integrate the finance function
- Contribute to the standard setting process
- Seek assurance to build trust in sustainability reporting
With the development of sustainability and climate-related disclosures, it is pivotal for companies to commence careful alignment of their sustainability reporting efforts to support corporate strategies. More than ever, Boards, senior management and employees need to embrace and adopt sustainability, a key principle to steer their organizational success.
