SAICA’s launch of the ISSB standards pave the way for sustainability reporting in South Africa
Johannesburg, 17 July 2023 – The South African Institute of Chartered Accountants (SAICA), in collaboration with the JSE, hosted the South African leg of the global launch of the ISSB’s (International Sustainability Standards Board) first two Sustainability Disclosure Standards on 29 June, marking a new era of reporting and accountability, and providing a common language for businesses to showcase their commitment to sustainable practices for the benefit of everyone.
Milton Segal, Executive Director of Standards at SAICA, said that, for decades, SAICA members have been at the helm of standard setting, governance, decision-making, and value creation.
“In a country like ours, sustainability is of paramount importance. We live in an unequal society still grappling with its past; at the same time, we need to create a new legacy, a moral and equal society that is a beacon of hope for both the African continent and the international community.
“The sustainability of our resources, our profession, our talent, are core to what we urgently require. We’ve seen the impact of climate change. Devastating floods in one province, and equally devastating droughts in another, are affecting our citizens and our economy. SAICA members are difference makers, people in positions of power and of influence, with skills and competencies to make a difference for all stakeholders.”
Better information leads to better decision-making
Dr Suresh Kana, trustee of the International Financial Reporting Standards Foundation (IFRS), and deputy chairman of the JSE, said the launch of the standards was the culmination of two years of collaboration from people all around the world, and was designed to provide a transparent, robust, global baseline of sustainability-related disclosures for the capital markets that was built on investor-focused standards and frameworks.
“The standards will help solidify financial reporting frameworks, and enable companies to tell their stories about risks, opportunities, and metrics in line with governance rather than just disclosures,” Dr Kana said. “Connectivity and interoperability are key. The standards have been developed to work with any accounting requirements but are built on the concepts underpinning IFRS Accounting Standards, already used by more than 140 jurisdictions.
“The IFRS adopted the Task Force on Climate-related Financial Disclosures structure to align with existing reporting and regulations. The CDP‘s disclosure system will incorporate the climate standard, and we are also working with the GRI (Global Reporting Initiative) to harmonise the sustainability reporting landscape.”
A priority for 2023 is to facilitate digital reporting. To that end, a taxonomy for S1 and S2 will be published soon, he noted, making implementation quick. There are also efforts to build capacity with more than 30 global and local partners to ensure readiness, to consider developing economies, and to enable consistent and comparable sustainability disclosures for the benefit of all.
“We appeal to SAICA members to get involved,” Dr Kana said. “Download the standards, listen to our monthly podcast, sign up for news alerts, turn to support services like the IFRS Sustainability Alliance and the Fundamentals of Sustainability Accounting (FSA) Credential, and watch live ISSB meetings. We appreciate the inputs South Africa has made through SAICA and the JSE, and we look forward to your continued contributions.”
Robust reporting system
Dr Ndidi Nnoli-Edozien, member of the International Sustainability Standards Board of the IFRS Foundation, said it was inspiring to be part of the move away from an alphabet soup of 300 – 600 reporting initiatives and the building of one truly global baseline for sustainability standards as called for by the G7, the G20 and the FSB (Financial Sustainability Board). The robust reporting system will provide information to support investor decisions, be cost-effective for preparers, and allow for rigorous and transparent due process.
“Proportionality has been an important factor,” she said. “We want to benefit small as well as large companies without undue pressure on costs and effort, and with consideration for skills, capabilities and resources. Transition relief will allow entities to report only on climate-related risks and opportunities in the first year they apply IFRS S1 and IFRS S2, and to begin reporting on their other sustainability-related risks and opportunities in the second year to ease the shift. On materiality, information is material if a misstatement, omission or obfuscation could be expected to influence investor decisions.”
Dr Nnoli-Edozien stressed that Africa’s voice matters if the standards are to be truly global. “Three early adopters are Nigeria, Zimbabwe, and Ghana. I have been told that South African entities will voluntarily adopt the sustainability standards, and to those we say thank you. There has been a lot of action behind the scenes, and many are indicating a desire to progress and push for the necessary amendments to the Companies Act.”
In a fireside chat with Dr Nnoli-Edozien, Professor Mervyn King affirmed the significant connections between financial statements and sustainability disclosures. “Financial reporting is critical, but it’s not enough. “The new standards are important steppingstones towards a comprehensive global corporate reporting system. There is a recognition of the need for collaboration and alignment between sustainability standard setters and framework providers in order to create an integrated approach to financial and non-financial reporting. This is critical if we are to offer a holistic picture for capital providers.”
In a panel discussion, Jonathan Labrey, Chief Strategy Officer of the International Integrated Reporting Council, stressed that integrated reporting is safe and secure in its new home at the IFRS Foundation.
“We’ve been working to introduce integrated reporting to both the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB) and ensure that the framework and its concepts and principles are reflected in S1 and S2. We also recognise that businesses do not operate in a vacuum. The needs of investors have to be considered, but so do the needs of the environment and other stakeholders. In South Africa, privatisation of the role of the board and governance are embedded in King 4 and corporate governance, and the same cannot be said about many countries around the world. That makes it clear that integrated thinking is a particular strength in this country.”
The South African Institute of Chartered Accountants (SAICA), South Africa’s pre-eminent accountancy body, is widely recognised as one of the world’s leading accounting institutes. The Institute provides a wide range of support services to more than 50 000 members and associates who are chartered accountants (CAs[SA]), as well as associate general accountants (AGAs[SA]) and accounting technicians (ATs[SA]), who hold positions as CEOs, MDs, board directors, business owners, chief financial officers, auditors and leaders in every sphere of commerce and industry, and who play a significant role in the nation’s highly dynamic business sector and economic development.
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