In financial reporting, sustainability disclosures have become increasingly vital for companies seeking to convey their commitment to long-term value creation. Specifically, the International Financial Reporting Standards (IFRS) S1 mandates the disclosure of material sustainability-related information that could impact a company’s financial performance and prospects.

An important reference within IFRS S1 is the Sustainability Accounting Standards Board (SASB) Standards, which provide comprehensive guidance for identifying and disclosing sustainability-related risks and opportunities industry-wise. While IFRS S2 focuses on climate-related disclosures, IFRS S1 covers a broader spectrum of sustainability factors, referencing the SASB Standards for guidance.

The SASB Standards have a prominent role in helping companies to apply IFRS S1 and IFRS S2. It should be noted that IFRS S1 requires that companies consider the applicability of the topics and metrics in the SASB Standards, but does not require companies to apply the SASB Standards.

Utilising SASB Standards offers several advantages for companies aiming to meet the requirements of IFRS S1:

Decision-useful information: SASB Standards are designed to provide investors, creditors, and other stakeholders with relevant and comparable information necessary for decision-making.

Industry specificity: With SASB Standards organised by industry, companies can easily access guidance tailored to their specific business activities, ensuring relevance and applicability.

Comprehensive coverage: In addition to climate-related risks, SASB Standards address a wide range of sustainability topics, including human capital and natural resource management.

As of December 2023, SASB Standards have gained widespread adoption, with over 3,200 companies across 80 jurisdictions, including approximately 75% of the Global S&P 1200, implementing these standards.

So, how can companies effectively leverage SASB Standards to fulfill the requirements of IFRS S1?

Identify the relevant industry standard(s): Begin by locating the SASB Standards relevant to your company’s industry. Each standard includes an industry description outlining typical business activities, facilitating easy identification.

Identify relevant disclosure topics: Review the disclosure topics within the chosen SASB Standard(s) to pinpoint sustainability-related risks and opportunities pertinent to your company’s operations.

Identify relevant metrics: Evaluate the metrics associated with each disclosure topic to determine applicable disclosures for sustainability-related risks and opportunities. Consider utilising activity metrics for normalisation and comparison purposes.

Develop disclosures using technical Protocols: Refer to the technical protocols accompanying each metric for detailed guidance on definitions, scope, implementation, and presentation. Ensure consistency in data collection methodologies to facilitate accurate reporting.

By following this systematic approach, companies can effectively integrate SASB Standards into their reporting frameworks, enhancing transparency and providing stakeholders with valuable insights into their sustainability performance.

All the above: adopted from SASB Educational Material: Using the SASB Standards to meet the requirements in IFRS S1

Our flexible timeline for complying with IFRS S1 and S2

Suggesting a flexible timeline

For the reporting for the 2023 financial year, we suggest reviewing the SASB guides along with the CDSB framework and TCFD recommendations that were used as a foundation for the IFRS S2 standard. Pay special attention to climate scenarios and how the company handles them. Finally, start a pilot project before officially complying with the IFRS S1 and S2 standards.

In 2025, reporting for the 2024 financial year, you may integrate IFRS S2 information and IFRS S1 principles into the MD&A or management report, either for the 2024 year or the initial half of 2025. This is the time to formally declare compliance with IFRS S1 and S2 and enhance information within integrated or separate annual and sustainability reports. Additionally, start applying CDSB standards for disclosing biodiversity and water-related data while working on reducing the time gap between publications.

In 2026, reporting for the 2025 financial year, aim to introduce the disclosure of Scope 3 greenhouse gas emissions and incorporate sustainability-related risks and opportunities as per IFRS S1, as well as comparative data on climate-related risks and opportunities according to IFRS S2. If successful in closing the time gap between reporting, release the annual or integrated report alongside the financial statements. Otherwise, IFRS data can be added to the MD&A or management report, and the annual (or integrated) report can be published later.

How to meet the requirements in IFRS S1 using SASB Standards