This is why Sustainability Standards are not mandatory in South Africa

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This is why Sustainability Standards are not mandatory in South Africa

Feb 20, 2024 | Sustainability

SAICA has issued a document that addresses frequently asked questions around Sustainability Reporting. The document provides an overview of International Sustainability Standards Board (ISSB), the European Sustainability Reporting Standards (ESRS), the Global Reporting Initiative (GRI) and Sustainability Terminology.

The document explains the difference between IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. Importantly, it highlights that the ISSB approved a staff proposal for a one-year transitional relief for entities adopting International Financial Reporting Standard S-1. This allows companies to report only on climate-related risks and opportunities in their first year of applying the board’s first two sustainability reporting standards.

Not mandatory

SAICA explains why IFRS Sustainability Standards are not yet mandatory in South Africa. The mandatory application of the ISSB standards is dependent on their adoption by a jurisdiction into applicable law. Section 29 of the Companies Act No 71 of 2008 only state that “in the case of financial reporting standards for public companies, must be in accordance with the International Financial Reporting Standards (IFRS) of the International Accounting Standards Board(IASB) or its successor body …”. Companies Act will need to be amended to include the IFRS Sustainability Disclosure Standards as issued by the ISSB or remain as voluntary.

SAICA opines that even though the standards are not yet mandatory, reporters should strongly consider adopting them. They aim to establish a global baseline for sustainability reporting, promoting transparency, consistency, clarity, and comparability. These standards are intended to provide decision-useful information for investors and facilitate international comparability to attract capital. Moreover, companies can avoid double-reporting by adhering to the IFRS Sustainability Disclosure Standards, which can help meet jurisdictional requirements while benefiting from efficiency and comparability.

‘Aligning with the IFRS Sustainability Disclosure helps SMEs better manage risks by identifying how sustainability and climate issues may affect their prospects. It can help SMEs streamline their internal processes, making them more efficient and effective with improved decision-making,cost reduction, innovative and operational excellence,’ SAICA says.

Download SAICA’S Sustainability Reporting FAQ document here: https://lnkd.in/daGmV6qu

Written by KC Rottok Chesaina, Chief IFRS Officer at Financial Minds Consulting. Email ask@fineminds.co.za

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