IFRS S1 and S2 in Africa

IFRS S1 and S2 are the first two IFRS Sustainability Disclosure Standards, issued by the International Sustainability Standards Board in June 2023. IFRS S1 sets the general requirements for disclosing sustainability-related risks and opportunities, and IFRS S2 sets the specific requirements for climate-related disclosures.

The IFRS Foundation describes them as a global baseline of investor-focused disclosures. They are written for investors, lenders and other creditors, so the question they answer is how sustainability matters could affect a company's cash flows, access to finance or cost of capital.

IFRS S1 covers every sustainability-related risk and opportunity that could reasonably be expected to affect a company's prospects, while IFRS S2 covers climate only. The two are applied together: IFRS S2 builds on the concepts, materiality definition and reporting rules set out in IFRS S1.

In practice, IFRS S1 is the framework and IFRS S2 is the first topic-specific standard within it. IFRS S2 adds detailed climate requirements, including transition plans, scenario analysis, and greenhouse gas emissions across Scope 1, Scope 2 and Scope 3.

The International Sustainability Standards Board, or ISSB, issues them. The ISSB sits within the IFRS Foundation, which also oversees the IFRS Accounting Standards that most African companies already use for their financial statements.

The ISSB consolidated earlier voluntary frameworks, including the Climate Disclosure Standards Board, the Task Force on Climate-related Financial Disclosures, the Integrated Reporting Framework and the SASB Standards. The International Organization of Securities Commissions has endorsed the ISSB Standards and encouraged jurisdictions to adopt them.

Both standards organise disclosures into four core content areas: governance, strategy, risk management, and metrics and targets. These are the same four pillars used in the TCFD recommendations.

Governance covers how the board and management oversee sustainability risks. Strategy covers how those risks affect the business model and financial position. Risk management covers how risks are identified and monitored. Metrics and targets cover the measures the company uses, including its greenhouse gas emissions.

Most of the major markets in East, West and Southern Africa have adopted IFRS S1 and S2 as their sustainability reporting standards, usually through the national accounting standard-setter. Each country sets its own start date and decides which companies report first.

Dates refer to annual reporting periods beginning on or after the date shown. Roadmaps are revised from time to time, so confirm the current position with the standard-setter before planning your first report.

The effective date that matters is the one your national standard-setter sets for your category of company, not a single global date. The IFRS Foundation made the standards available for immediate use, but in Africa it is each country's roadmap that makes them mandatory.

Some countries also require a readiness step before the first report. In Kenya, ICPAK's advisory asks for a readiness assessment report six months before the mandatory reporting date. Check whether your country has a similar requirement, because it moves the real deadline earlier than the reporting date.

Yes. IFRS S2 requires companies to disclose Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, measured in line with the Greenhouse Gas Protocol, including which of the fifteen Scope 3 categories are covered.

Companies do not have to disclose Scope 3 in their first year of reporting, and some countries give more time. Tanzania, for example, phases Scope 3 in from 2028, with all categories required by 2029.

In the first annual reporting period, the standards offer optional reliefs. A company may report only on climate-related risks and opportunities, publish up to nine months after the period ends instead of with its financial statements, omit Scope 3 emissions and comparative figures, and keep an existing emissions method instead of the GHG Protocol.

The IFRS Foundation is clear that these reliefs apply only in the first annual reporting period. National roadmaps can add their own reliefs, so read yours alongside the standards.

IFRS S2 fully integrates the TCFD recommendations, so a company applying the ISSB Standards does not need to apply TCFD separately. Companies that already report against TCFD are well placed, because the four core content areas are the same.

The differences between IFRS S2 and TCFD are minor. The IFRS Foundation publishes a comparison table that sets them out.

Start with your country's roadmap: confirm your category, your first reporting period and any readiness requirement. Then put the data behind the climate disclosures in order, because emissions figures take the longest to collect and are the easiest to challenge.

• Confirm the board's oversight. Governance is the first content area, and most roadmaps expect a board decision to adopt.
• Assess materiality. Identify which sustainability and climate risks could affect your prospects, using the industry guidance the standards refer to.
• Build the emissions record. Collect electricity bills, generator and fuel logs for every site, keep grid and generator energy separate, and keep the evidence with each figure.
• Plan for assurance. Record the method and factors behind every number from the first year, so the figures can be checked later.

Emvert supports the emissions part of this work. It calculates Scope 1 and Scope 2 emissions with each country's own grid factors, fugitive, venting and flaring emissions for oil and gas, and financed emissions for banks and lenders, and produces IFRS S1 and S2 outputs from the same record. Check your position with the readiness assessment, or book a demo with your own data.