The IFRS Foundation is looking to encourage more integrated thinking, allowing companies and investors to see how a company impacts and connects with society, the economy and environment, as it publishes a guide to help companies share important information about sustainability-related risks and opportunities.
The guide — Sustainability-related risks and opportunities and the disclosure of material information — aims to allow companies to better examine their reliance and impact on various resources, such as people, nature, and financial assets, across their value chain.
Its publication comes as investors are increasingly demanding this information to inform investment decision-making.
Split into three areas, the educational guide covers the definition of material information and its application in International Sustainability Standards Board (ISSB) standards; sustainability-related risks and opportunities that could affect its prospects; as well as how to identify and disclose material information.
A key focus of the guide is helping companies understand how the concept of sustainability-related risks and opportunities is described in the IFRS S1 General requirements for disclosure of sustainability-related financial information, including how these can arise from a company’s dependencies and impacts.
IFRS S1 explains that a company depends both on resources and relationships – such as human, intellectual, financial, natural, manufactured and social – throughout its value chain, and affects those resources and relationships.
This can contribute to the preservation, regeneration and development, or to the degradation and depletion of these resources and relationships, according to the Foundation.
Furthermore, the guide helps companies to use more familiar processes, such as financial materiality judgments. As such it sets out the process a company can follow which is closely aligned with the four-step process illustrated in the International Accounting Standards Board’s IFRS practice statement 2: Making materiality judgements.
Firms looking to apply for ISSB standards will also be guided through relevant connectivity and interoperability considerations.
Earlier this year the IFRS Foundation took over responsibility for transition plan disclosure resources developed by the Transition Plan Taskforce (TPT), a body set up by the UK government in 2022.
Another aspect of the guide will help firms link sustainability reports with financial statements and work alongside other global frameworks, such as the European Sustainability Reporting Standards (ESRS) or Global Reporting Initiative (GRI) standards.
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