IFRS sustainability disclosure standards to transform business practices

The Institute of Certified Public Accountants of Uganda (ICPAU) recently announced the adoption of the International Financial Standards (IFRS) sustainability disclosure standards, a major initiative in sustainability reporting.

The move marked a significant shift in how businesses will report on their environmental, social, and governance (ESG) practices, setting a new dispensation for sustainability across the country.

According to CPA Charles Lutimba, the Director of Standards and Regulations ICPAU, the policy rationale for adopting the IFRS Sustainability Disclosure Standards in Uganda is expected to enhance the availability of reliable, comparable, and cost-effective information on sustainability-related risks and opportunities faced by organizations.

It will also facilitate the use of complementary reporting frameworks, such as the Global Reporting Initiative (GRI), to address the information needs of various stakeholders, as may be permitted by the sustainability disclosure standards.

Improve domestic entities' access to foreign capital markets and encourage foreign direct investment, including access to green financing, and support the availability and flow of sustainability information throughout the supply chain.

“Since the inception of the Financial Reporting (FiRe) Awards in 2011, the ICPAU’s focus has evolved from assessing compliance with IFRS Accounting Standards to integrating broader Environmental, Social, and Governance (ESG) aspects into corporate reporting,” he explains.

Historically, companies have adhered to various frameworks such as the Global Reporting Initiative (GRI), the UN Sustainable Development Goals (SDGs), the Task Force on Climate-related Financial Disclosures and the Integrated Reporting Framework among others.

Sustainability disclosure standards are essential for responsible resource management and mitigating future environmental and social risks.

They address critical issues such as climate-related risks and opportunities. By implementing these standards, entities can improve the reliability and comparability of their sustainability information, making it easier for investors and other stakeholders to assess their practices.

Without these standards, future generations may face severe environmental and social challenges. Adopting these standards allows entities to offer clear, consistent, and cost-effective sustainability data, facilitating meaningful comparisons across different regions.

Benefits to consumers

Consumers can identify products adhering to sustainability standards through clear disclosure practices, packaging indicators, and company missions/ visions and values.

Products from companies committed to sustainability are likely to attract more consumers, fostering brand loyalty and reducing environmental impact.

Consumers benefit from products that adhere to sustainability standards through healthier and more environmentally friendly options. Sustainable practices ensure the longevity of resources and contribute to a cleaner future.

Sustainability disclosure standards are built around core principles including, strategic alignment, governance, risk management and clear metrics and targets that enable measurement of an entity’s progress in relation to sustainability-related risks and opportunities.

Effective implementation involves establishing governance structures, integrating sustainability into business strategy, managing sustainability risks, and setting m

ustainable practices help entities explore how they can interact with their stakeholders, society, the economy and the environment for short-, medium-and long-term resource efficiency. Entities that fail to adopt sustainable practices may face market backlash and decreased consumer support.