Survival of the Greenest: The Role of IFRS Sustainability Disclosure Standards in Kenya

Charles Darwin opined that it is not the most intellectual of the species that survives; it is not the strongest that survives; but the species that survives is the one that is able best to adapt and adjust to the changing environment in which it finds itself. 

In today’s fast-paced world, the concept of “survival of the fittest” has evolved beyond physical prowess or economic might to encompass a critical dimension: sustainability.

For Kenya, a country blessed with abundant resources yet grappling with environmental, social, and economic challenges, the journey toward sustainable development is not just a trend; it’s a necessity.

Sustainability is a balancing act between leveraging resources for development and ensuring that the environment, people, and future generations are not left worse off. 

With many players meeting at COP29 to chart a sustainable way forward for the globe, it is imperative that efforts around speaking a uniform global language from a sustainability standpoint are doubled.

The alphabet soup that is sustainability reporting continues to get thicker with many frameworks giving fragmented guidance for users and preparers of sustainability reports.

While the approach is not a one-size-fits-all all, there is a strong case for the interoperability of frameworks to ensure transparency and comparability.

The historical obstacle that has been the separation of sustainability issues from economic prosperity or otherwise is finally being surmounted by the new IFRS Sustainability Disclosure Standards.

Launched by the International Sustainability Standards Board (ISSB) on June 26, 2023, IFRS S1 outlines general requirements for sustainability-related financial disclosures, while IFRS S2 focuses specifically on climate-related risks and opportunities.

These standards require organizations to disclose material information that could significantly affect their financial performance and cash flows due to sustainability-related risks.

This approach not only enhances investor confidence but also aligns corporate strategies with broader sustainability goals.

IFRS S1 mandates that companies disclose their governance structures, strategies, risk management processes, and metrics used to assess sustainability-related risks.

This comprehensive approach ensures that stakeholders can evaluate how well a company is positioned to handle sustainability challenges.

IFRS S2 complements this by requiring detailed disclosures about climate-related risks, including both physical risks (like extreme weather events) and transition risks (related to the shift to a low-carbon economy).

The new standards have now been adopted in the Kenyan jurisdiction through the Institute of Certified Public Accountants of Kenya (ICPAK), the statutory body for setting standards and regulating the accountancy profession in Kenya vide the national Roadmap for implementation of IFRS Sustainability Disclosure Standards.

The Roadmap was developed by a multistakeholder committee drawn from the private sector, public sector, regulators, professional firms and academia. 

Sustainability reporting plays a critical role in advancing sustainable development goals and promoting corporate responsibility.

By adopting the IFRS Sustainability Disclosure Standards, ICPAK aims to provide organisations with clear guidance and frameworks to effectively monitor, manage, and disclose their sustainability impacts, along with climate risks and opportunities.

This approach will enhance comparability, eliminate fragmented reporting frameworks, and align Kenya’s reporting standards with global best practices.

The journey towards sustainable development in Kenya is gaining momentum with the adoption of IFRS Sustainability Disclosure Standards.

These standards not only provide a framework for consistent reporting but also encourage companies to integrate sustainability into their core strategies.

As businesses adapt to these new requirements, they will play a crucial role in shaping a more sustainable future for Kenya—one where economic growth does not come at the expense of environmental integrity or social responsibility.