Sustainability has become a core part of how businesses are expected to operate, whether we like it or not.
You might think that all the talk about environmental, social, and governance (ESG) issues is only relevant to big corporations or public companies, but that’s not quite the case anymore.
Even though adopting International Financial Reporting Standards (IFRS) might be optional for smaller businesses right now, the new IFRS S1 and IFRS S2 standards are worth understanding, as they could shape the future of sustainability for businesses of all sizes.
What are IFRS S1 and S2?
In June 2023, the International Sustainability Standards Board (ISSB) launched two new sustainability reporting standards:
- IFRS S1 – General Requirements for Disclosure of Sustainability-related Financial Information.
- IFRS S2 – Climate-related Disclosures.
These standards are currently under review here in the UK, and the Government is planning to endorse them by March 2025.
The idea is to create a common language around sustainability reporting, helping businesses communicate clearly and consistently about how they’re managing risks and opportunities related to ESG.
And, once the Government gives the green light, these standards are going to be part of a broader Sustainability Disclosure Reporting framework.
They will play a big role in how UK-listed companies report sustainability-related information to investors.
What’s happening next?
Once endorsed in March 2025, the Financial Conduct Authority (FCA) is expected to roll out these requirements for public companies, and there’s a consultation process to see if private companies, including SMEs, should also follow these rules.
The Government will also be looking at the cost of these reporting requirements for smaller businesses, but they’ll be weighing that against the benefits for investors and the wider economy.
There’s even talk of introducing a green taxonomy – which basically helps define what counts as environmentally sustainable.
If you are curious about how IFRS standards could apply to your business or want to improve your ESG reporting, get in touch with us today.
