The journey to sustainability reporting for organisations often revolves around key steps. First, organisations must determine their material topics through a financial materiality process, as required by the IFRS sustainability disclosure standards. Next is assessing the disclosure requirements of IFRS S1 and IFRS S2 against the information available across an organisation.
This step will help organisations identify the information gaps that need to be addressed to fulfil the requirements of the standards. Once the information gaps have been closed, organisations can proceed to the final step of reporting.
While the steps are easy to understand, it is the ‘how’ that often determines whether the transition will succeed. Although the transition will require additional time commitments, if executed well, organisations can transition to IFRS S1 and IFRS S2 with minimal disruption to other projects and priorities. To achieve this orderly transition, organisations should consider the following.
Organisations should establish a transition team at the management level that draws members from different functions. This team will be responsible for guiding the organisation at every stage of the transition journey.
It guides the implementation across every level of the organisation and ensures accountability to the board. Another important consideration for a smooth transition is to develop a transition roadmap with timelines and bite-sized goals.
This ensures the organisation can measure progress at shorter time intervals and hold people accountable for their roles and responsibilities in the project. In addition, organisations should plan for stakeholder engagement to support an orderly transition. Proactive stakeholder engagement reduces inefficiencies by ensuring alignment at every step of the process.
For example, seeking the input of senior management and the board on critical milestones, such as material topics and KPIs, before proceeding to the next steps is important to avoid making costly changes further down the road.
Also, the organisation should involve its internal audit teams from the start. Organisations should build the capacity of their internal audit teams to provide assurance-readiness support on the disclosed information.
Organisations aiming to achieve an orderly transition to IFRS S1 and IFRS S2 should adopt this approach when implementing the steps outlined above.
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