How IFRS S1 and S2 can benefit your reporting strategy
Streamlined reporting
One of the key benefits of using IFRS S1 and S2 in your company’s sustainability reporting is their alignment with other recognized standards, which allows for streamlined reporting. If you are already reporting to CDP and disclose based on SASB and TCFD, you are at a good starting point to maximize your available data and enhance reporting, given that IFRS S1 and S2 require common disclosures, albeit with a higher degree of detail. If you are not yet reporting based on CDP, SASB, and TCFD, using IFRS S1 and S2 as your framework can give you comprehensive baseline of your company’s sustainability and climate-related information.
Enhanced data collection
With similar datapoints covered across these frameworks, data collection can be made more efficient with little or no duplication in the effort needed for data consolidation in reports. Unrecognized gaps in data and data gathering, as well as governance structures or strategies, may also surface while using IFRS S1 and S2 as guidance for reporting. This can lead management to make targeted initiatives to enhance data collection, build on a company’s sustainability roadmap, and improve future reporting. IFRS S1 and S2’s requirements to connect sustainability and climate-related risks and opportunities to financial statements may also provide the vital perspective that frames these issues to be in equal relevance to traditional financial measures of performance, with annual reports becoming more meaningful in understanding a company’s business context, and its performance and prospects.
Improved investor engagement on sustainability
IFRS S1 and S2 are ultimately meant to aid both companies and investors as the demand for more objective and comparable disclosures increases.
For companies, it allows them to disclose information on their ESG-related risks and opportunities, fostering an objective environment to holistically understand and communicate where they are in their sustainability journey. This information can be used to facilitate engagement with investors as well as internally assess operations and value chains. From a strategic standpoint, the standards can be used as a tool to inform management on sustainability and climate-related topics that are likely to matter to their stakeholders and regulators, as well as which ones are material to the company.
Investors, on the other hand, are provided with substantial context on how a company’s current path can affect short and long-term returns, and they can make decisions for channeling capital to companies that are both profitable and ethical. With a consistent, complete, and comparable set of metrics, investors can also be better informed when exercising their voting rights to influence a company’s actions in the use of its economic resources. The standards can also serve to prevent greenwashing in reporting, which continues to pervade media and information available to the public.
Given their wide applicability across industries and comparable requirements, integrating IFRS S1 and S2 in your reporting strategy can be a means to strengthen the quality and depth of your disclosures, as well as communicate integrity and genuine commitment in addressing sustainability and climate-related issues to your stakeholders