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2022-09-02
Companies to face challenges with new requirements : report
New IFRS S2 on climate-related disclosures: Companies to face challenges with new requirements.
Climate change is one of the most pressing challenges facing the world. There are increasing calls from investors and society for companies to provide more transparent and consistent reporting both about how they are dealing with climate change, and about the impacts of their activities on the climate.
In March 2022, the newly-formed International Sustainability Standards Board (ISSB), founded by the IFRS Foundation, issued a draft standard – ED IFRS S2 Climate-Related Disclosures (‘IFRS S2’) for public comment. IFRS S2 aims to provide a global baseline for consistent and comparable climate-related disclosures. In doing so, it builds upon existing standards and frameworks including the TCFD Recommendations, while also adding a number of ‘new’ disclosure requirements. Along with IFRS S2, the ISSB also published ED IFRS S1 General Sustainability-Related Disclosures, which provides overarching requirements applying to investor-focused sustainability reporting, including the materiality judgement that should be applied and the location of disclosures.
Climate-related reporting regulation is one important mechanism to reduce business impact on the environment by, amongst others, reducing their carbon footprint and designing better sustainable development models. This study explores how well companies with significant carbon footprint engage with relevant disclosures in light of the new mandatory sustainability reporting standards proposed by the International Sustainability Standards Boards of the IFRS Foundation.
Over the coming 2-3 years, jurisdictions around the world are expected to adopt the ISSB’s finalised standards. However, are companies ready for the change ahead?
Dr Diogenis Baboukardos. from Audencia Business School, led a research project in collaboration with ACCA and the Adam Smith Business School at the University of Glasgow in the UK which examined the extent of ‘preparedness’ of companies to provide the disclosures proposed in IFRS S2, by reviewing current reporting practice from companies in two industries (construction materials and chemicals) that face significant risks due to climate change, while also emitting high levels of greenhouse gas emissions from their operations. The results of this research endeavour have been published in the report found in the link:
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