IFRS Sustainability Standards Jurisdiction

IFRS Sustainability Standards: Global Adoption Timelines and Requirements by Country

The IFRS Sustainability Disclosure Standards—S1 and S2—set a new benchmark in corporate ESG reporting. These standards help companies disclose sustainability and climate-related information, providing consistency, comparability, and transparency. Here’s a detailed look at how and when countries adopt these standards, including exact timelines and specific compliance requirements.

Overview of IFRS S1 and S2 Standards

The International Sustainability Standards Board (ISSB) developed IFRS S1 and S2 to address the growing demand for transparent ESG disclosures:

• IFRS S1: Covers general sustainability-related financial disclosures across environmental, social, and governance topics.
• IFRS S2: Focuses on climate-related disclosures, aligning with TCFD guidelines and requiring metrics on emissions, scenario analysis, and climate risks.

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Country-Specific Adoption Timelines for IFRS S1 and S2

The timeline for adopting IFRS Sustainability Standards varies significantly across regions. Here’s a breakdown by country:

European Union (EU)

• Status: Adopted IFRS S1 and S2 within the European Sustainability Reporting Standards (ESRS) framework.
• Timeline:
  • 2024: Large public-interest companies (over 500 employees) begin mandatory reporting.
  • 2025: Applies to other large companies and SMEs in high-risk sectors.
• Compliance Requirement: Aligns with IFRS and ESRS requirements, covering sustainability and climate disclosures with reasonable assurance.

United Kingdom

• Status: Adopted IFRS S1 and S2 in line with TCFD recommendations.
• Timeline:
  • April 2024: Large public companies and financial institutions begin reporting.
  • 2026: Expands to private companies meeting specific revenue and employee thresholds.
• Compliance Requirement: Includes climate disclosures, with expectations for limited assurance initially, moving to reasonable assurance.

Canada

• Status: Considering phased adoption of IFRS S1 and S2.
• Timeline:
  • 2025: Large publicly accountable companies will begin reporting.
  • 2026-2027: Mid-sized companies will adopt gradually, with small entities phased in later.
• Compliance Requirement: Limited assurance initially, progressing to reasonable assurance for financial credibility.

Australia

• Status: Reviewing IFRS S1 and S2 for potential adoption.
• Timeline:
  • 2025: The anticipated start date for large, listed companies.
  • 2026: Expansion to other companies, including private entities, meeting set thresholds.
• Compliance Requirement: Climate and general sustainability disclosures, with a focus on emission metrics and energy use.

Singapore

• Status: Adopting IFRS standards in alignment with national sustainability goals.
• Timeline:
  • 2024: Large publicly listed companies in high-risk industries (e.g., finance, real estate) begin reporting.
  • 2025: Extends to other publicly listed companies and significant non-listed entities.
• Compliance Requirement: Focus on climate-related risks, sustainability disclosures, and scenario analysis requirements.

Japan

• Status: Voluntary adoption of IFRS S1 and S2 initially, with potential mandatory requirements.
• Timeline:
  • 2025: Voluntary disclosures for large corporations.
  • 2027: Potential transition to mandatory disclosures for publicly listed entities.
• Compliance Requirement: Emphasis on climate disclosures, with plans to expand to broader ESG metrics.

United States

• Status: IFRS not officially adopted; SEC’s climate disclosure rules align with IFRS S2 principles.
• Timeline:
  • 2024: Large SEC registrants are expected to begin reporting.
  • 2025-2026: Applies to mid-sized companies and high-risk sectors.
• Compliance Requirement: Limited to climate-related disclosures under SEC rules; broader ESG requirements may follow.

India

• Status: IFRS Sustainability Standards are under review; adoption has yet to be confirmed.
• Timeline:
  • There is no confirmed date for mandatory adoption. The Ministry of Corporate Affairs evaluates global sustainability trends and may consider a phased approach aligned with existing Indian standards.
• Compliance Expectation: Currently aligned with India’s Business Responsibility and Sustainability Reporting (BRSR) framework. If adopted, IFRS standards may initially apply to large public companies.

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United Arab Emirates (UAE)

• Status: UAE has not mandated IFRS S1 and S2; however, sustainability reporting requirements are increasing.
• Timeline:
  • There is no specific adoption timeline for IFRS. The UAE Securities and Commodities Authority (SCA) monitors global standards but has yet to mandate IFRS S1 and S2.
• Compliance Expectation: UAE companies currently follow UAE-specific ESG reporting guidelines. However, with Dubai’s and Abu Dhabi’s growing emphasis on sustainability, adopting IFRS may be considered shortly.

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Core Requirements for IFRS S1 and S2 Compliance

Regardless of the adoption timeline, the essential requirements under IFRS S1 and S2 remain consistent. Businesses should be prepared to meet these standards as they come into effect globally:

IFRS S1: General Sustainability Disclosures

• Governance: Detailed governance structures and oversight of sustainability risks.
• Strategy: The impact of sustainability risks and opportunities on business strategy and performance.
• Risk Management: Processes for identifying, assessing, and managing sustainability risks.
• Metrics and Targets: Clear metrics and targets demonstrating progress toward sustainability goals.

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IFRS S2: Climate-Related Disclosures

• Climate Risks and Opportunities: Comprehensive identification of climate-related risks, including physical and transition risks.
• Scenario Analysis: Resilience of business strategy under various climate scenarios (e.g., 1.5°C and 2°C warming scenarios).
• GHG Emissions Metrics: Disclosure of Scope 1, 2, and, where applicable, Scope 3 greenhouse gas emissions.
• Climate Targets: Measurable climate-related goals and tracking of progress.

These disclosures give investors insights into how sustainability risks and opportunities may impact financial performance and long-term resilience.

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How Businesses Can Prepare for IFRS Sustainability Compliance

For companies in countries adopting IFRS standards, preparing for compliance involves a structured approach. Here are some actionable steps:

Conduct a Sustainability Readiness Assessment

• Identify current reporting gaps and areas that require improvement.
• Prioritize sustainability and climate data collection processes.

Assemble a Dedicated Sustainability Team

• Collaborate across departments to manage ESG compliance effectively.
• Consider hiring or upskilling staff for expertise in ESG reporting.

Implement Data Collection and Management Systems

• Build a reliable system to collect and track ESG data, especially for climate metrics.
• Standardize data collection across departments to ensure consistency.

Engage Assurance Providers Early

• Begin with limited assurance to move towards reasonable assurance.
• Partner with certified assurance providers to build trust and credibility.

Regularly Communicate with Stakeholders

• Share sustainability goals, progress, and updates with investors and employees.
• Proactive communication strengthens stakeholder relationships and enhances trust.

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Benefits of Complying with IFRS Sustainability Standards

Aligning with IFRS Sustainability Standards offers multiple advantages:

• Enhanced Transparency and Trust: Transparent reporting builds trust with ESG-conscious investors.
• Global Competitiveness: IFRS standards provide an internationally recognized framework, helping companies meet global ESG expectations.
• Risk Mitigation: By proactively addressing ESG risks, businesses protect themselves against potential financial and reputational impacts.

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Frequently Asked Questions (FAQs) on IFRS Sustainability Standards

Which countries have mandatory IFRS S1 and S2 standards?

The EU, UK, Singapore, and Canada have mandated IFRS S1 and S2 standards with set timelines, while countries like Japan and Australia are in the process of phased adoption.

When will IFRS S1 and S2 be mandatory in India and UAE?

India and UAE still need to set timelines for IFRS S1 and S2 adoption. India currently follows BRSR, while the UAE is considering IFRS in the context of local sustainability initiatives.

What’s the difference between IFRS S1 and S2?

IFRS S1 covers general sustainability disclosures across ESG factors, while IFRS S2 is specific to climate-related disclosures, requiring detailed reporting on climate risks and greenhouse gas emissions.

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Summing up IFRS Sustainability Standards Jurisdiction

The adoption of the IFRS Sustainability Standards is transforming ESG reporting on a global scale. With timelines set across regions, businesses must stay informed to meet compliance requirements and leverage sustainability as a competitive advantage. Aligning with these standards enhances transparency, builds investor trust, and ensures resilience in an increasingly sustainability-focused market.