The International Sustainability Standards Board (ISSB) has issued the following first two new Sustainability Disclosure Standards in June 2023 for guidance on disclosures of sustainability related financial information:
- IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information (48 pages)
- IFRS S2 Climate-related Disclosures (46 pages)
These standards could be viewed as groundbreaking because they represent the first steps for a financial reporting body to take the lead in sustainable reporting. In doing so, ISSB may override the disparate standards of sustainability reporting currently issued by various bodies such as TCFD, GRI, SASB, etc.
Who is required to apply these standards?
No specific persons
IFRS S1 is not specific as to who should disclose sustainability related information. Logically, it should be those required by law or by regulators such as the stock exchange which require listed companies to disclose such information.
Requirements by regulators
At present, disclosures of sustainability information in Malaysia are only mandatory for companies which are listed on the Bursa Malaysia. Non-listed companies do not have such a requirement. Where sustainability information is disclosed, IFRS S1 requires the entity to disclose information about its sustainability-related risks and opportunities that are useful to primary users of general-purpose financial reports i.e. normal financial statements. The core of the disclosures are the “sustainability risks and opportunities”.
Requirement by ISSB
IFRS S1 has stated that an entity whose sustainability-related financial disclosures comply with all the requirements of IFRS Sustainability Disclosure Standards shall make an explicit and unreserved statement of compliance. An entity shall not describe sustainability-related financial disclosures as complying with IFRS Sustainability Disclosure Standards unless they comply with all the requirements of IFRS Sustainability Disclosure Standards.
When are the standards applicable?
Reporting periods after 1 January 2024?
Where to disclose the sustainability related information?
- An entity’s management commentary which forms part of the entity’s general purpose financial reports. This would certainly lengthen the already long annual reports of listed companies.
- Same location as information disclosed to meet other requirements such as information required by regulators.
- By way of cross-referencing to another report published by the entity.