ESG Emerging Regulations & Standards
IFRS S1S1 & IFRS S2
T3 helps you navigate the intricacies of IFRS S1 and S2 standards, ensuring your disclosures are aligned with the latest international sustainability reporting requirements, enhancing the consistency and comparability of your sustainability performance.
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Overview of Topic
On the 26th of June on the year 2023 the International Sustainability Standards Board (the “ISSB”) issued for public comment the publication of its first ever International Sustainability Disclosure Standards (the “IFRS SDS” or the “Standards”) to apply to reporting periods beginning on or after the first day of January 2024 In the event that the IFRS S1 and S2 standards take effect in January 2024, they will represent the foundation on which to build future sustainability reporting. Compliance with the IFRS S1 and S2 standards will be expected within a large number of the entities operating globally, with T3 services being a key factor to undertake such compliance. This is because the new standards require comprehensive disclosures for sustainability-related financial and climate-related financial disclosures. The application of such standards are not only for regulatory matters but also are to be seen as strategic given the fast growing market of global sustainable investments that in 2020 scored an impressive thirty trillion seven hundred billion dollars total assets under management, as reported The Global Sustainable Investment Alliance.
T3 can help you with your IFRS S1 and IFRS S2 requirements:
IFRS S1: General Requirements for Disclosure of Sustainability-Related Financial Information
- Scope: Applies to all entities, whether they follow IFRS or another GAAP, outlining a full set of sustainability-related disclosures.
- Objective: To integrate sustainability-related risks and opportunities into general-purpose financial reporting, providing information to aid decisions on resource allocation, potentially affecting cash flow, finance access, or cost of capital.
- Content & Materiality: Requires relevant, clearly represented, comparable, and timely disclosures, focusing on qualitative and quantitative aspects of governance, strategy, risk management, and sustainability metrics and targets.
IFRS S2: Climate-related Disclosures
- Scope: Specifies reporting on climate-related risks and opportunities, excluding risks not expected to impact an entity’s future prospects.
- Objective: To provide decision-useful information on how climate-related issues might affect cash flows or financial standing.
- Content: Expands on TCFD’s framework, requiring disclosures under governance, strategy, risk management, and metrics, including detailed Scope 1, 2, and 3 GHG emissions data.
- Industry-Specific & Transitional Provisions: Encourages the use of ISSB standards (like IFRS S2 for climate) and SASB standards, where ISSB ones are not yet available, with transitional reliefs for first-time application, including exemptions on comparative data and certain emissions reporting requirements.
These standards aim to enhance the consistency and comparability of sustainability reporting, addressing the need for high-quality information that reflects an entity’s sustainability performance and the impact of climate change on its operations.
Significance in Today's Landscape
While it is certainly not an ephemeral fad, sustainability reporting has transformed into a basic expectation from stakeholders and an increasingly common regulatory requirement. The International Sustainability Standards Board (ISSB) builds on the work of, for instance, the Climate Disclosure Standards Board (CDSB) and the Value Reporting Foundation (VRF) and incorporates mature standards like Sustainability Accounting Standards Board (SASB) Standards. Uniting standards, in fact, is crucial due to the existing discrepancy in the quality of sustainability information that is generated. Delivering globally comparable data, the ISSB would help tackle ‘greenwashing’. Given the wide international support for those standards and a pressing need for transparency, the ISSB’s work presents a groundbreaking moment. With the standards’ backing from the G7, G20 and other key international players, the ISSB standards will be vital in providing the clarity needed so that stakeholders can take informed decisions on corporate sustainability with no doubt on what that implies.
The financial burden of failing to comply with existing regulations could be severe and multiple, posing material risks for a business. Non-compliance could lead, first, to a loss of customer base and market access, with clients focusing on dealing only with compliant and sustainable organisations. Second, it could mean being excluded from procurement opportunities, since many companies make compliance a pre-condition to participate in tenders or projects. Third it could lead to a lack of access to key financial resources as lenders or insurers increasingly refuse to finance non-compliant companies. Fourth, it could result in increasing operating costs, from the carbon taxes or costs related to operational inefficiencies. And finally, it could result in heavy regulatory fines and significant reputational damage, with long term negative impacts on brand equity and the trust of stakeholders.
WHO DOES IT IMPACT?
IFRS S1 & IFRS S2 impact a wide range of firms, particularly those with public accountability or those that choose to adopt these standards (Publicly Accountable Firms, Large Multinational Corporations, Firms Operating in IFRS-Adopting Jurisdictions (over 140 jurisdictions use IFRS), Companies Seeking Cross-Border Investments or Listings, Subsidiaries of IFRS-Compliant Parent Companies, and Sustainability-Conscious Firms)
How Can We Help?
T3 is ready to provide your esteemed entity with the knowledge and tools required to comply and excel in sustainability reporting which includes full understanding and familiarization of IFRS S1 and 2, development of sustainability roadmap and reliable data collection for disclosure of high-quality data. The services of T3 are detailed and holistic. We will guide you through understanding where you are currently, detecting the gaps and help in setting up a solid governance structure which is well-tuned with your sustainability strategy.
1
Readiness Assessment
Initial Briefing: T3 provides a comprehensive introduction to the ISSB standards, ensuring your team understands the expectations and timelines.
Current Systems Review: We evaluate your existing governance structures, sustainability strategies, and reporting mechanisms against the ISSB benchmarks.
2
Gap Analysis
Identifying Discrepancies: Through meticulous analysis, T3 pinpoints specific areas where your current reporting falls short of ISSB standards.
Strategic Recommendations: We provide actionable insights and recommendations to bridge these gaps effectively.
3
Sustainability Roadmap Development
Customized Planning: T3 helps you construct a tailored sustainability roadmap, detailing key milestones and deliverables.
Resource Allocation: We assist in identifying and allocating the internal and external resources needed for compliance.
4
Data Management Enhancement
Data Quality Improvement: T3 aids in establishing or refining data collection, control processes, and analysis methods to ensure the integrity of your sustainability data.
Disclosure Complementing: We ensure that the data not only complements your disclosures but also is robust enough to withstand the scrutiny of assurance processes.
5
Standards Familiarization
Educational Workshops: T3 conducts workshops to educate your team on the nuances of IFRS S1 and S2, including industry-specific standards where applicable.
Reporting Practices Update: We guide you through updating your reporting practices to align with the new standards, including addressing the nuances that differ from frameworks like TCFD.
6
Organizational Training
Stakeholder Engagement: T3 works to ensure that all levels of your business grasp the importance of sustainability, fostering an organizational culture that prioritizes these efforts.
Leadership Buy-In: We engage with top management to secure their commitment, which is crucial for the successful adoption of sustainability strategies.
7
Reporting Timeline and Synchronization
Reporting Schedule: T3 assists in creating a schedule to align the timing of your sustainability report with your financial statements, easing the year-end reporting burden.
Transitional Support: We offer guidance on the transitional provisions for first-time application of the standards to make the process as seamless as possible.
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