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PTWhat information should I report under IFRS?
The ISSB – International Sustainability Standards Board has launched a public consultation on four proposed amendments to IFRS S2 (International Financial Reporting Standards), a standard that involves the disclosure of corporate information related to climate. The objective is to address the application challenges identified by entities implementing the standard. The ISSB expects the changes to reduce reporting complexity, possible duplication and related compliance costs. The space is open for comments between April 28 and June 27.
In this context, the tenth episode of the WayCarbon Talks videocast explores the main challenges for companies in implementing IFRS standards, such as: where to start, what information to report and the main mistakes made, in addition to providing recommendations for companies that will need to adapt. Moderated by Lauro Marins, Head of Consulting and Digital Solutions, the conversation was attended by Danielle Reis (Sustainability Consultant), Alexandre Fioravante (Sustainability Consultant) and João Bueno (ESG Strategy Coordinator), all from the WayCarbon team.
Integration between areas and involvement of senior management
According to the experts, one of the main mistakes made in the implementation of IFRS is the process being isolated in the organization’s sustainability area. “Some companies begin the process of meeting the requirements without first listening to the internal areas properly. It is necessary to level the knowledge so that each business area understands its role in the process and sees value in the report”, evaluates Alexandre Fioravante.
Danielle Reis adds that another common mistake is the lack of involvement of senior management in the initiative. “The C-Level needs to be involved as a sponsor of the idea so that the process moves forward and has the necessary engagement from the areas”, she says. “Leadership is responsible for prioritizing human and financial resources to meet demand, in addition to making the link with the topics that investors want to monitor. Therefore, senior governance bodies need to be involved from the beginning,” adds João Bueno.
What information should be reported to IFRS?
The consultants also point out that companies have doubts about selecting which information is relevant for reporting. Regarding this aspect, they emphasize that having a double materiality study is the starting point and allows greater clarity on the topics that are relevant to the company and its stakeholders. Double materiality is an assessment that considers the impact of organizations on the external environment (people and environment) and the impact of the external environment on a company’s business, whether in financial, operational or reputational terms.
“For a topic to be reported to IFRS, whether from a sustainability or climate perspective, it must have the potential to impact the organization’s revenue. Therefore, it is essential to align the reported topics with the corporate risk matrix,” explains Lauro Marins. “This issue requires the sustainability area to look at the company’s Income Statement (DRE), and I see this as very positive, as it brings more strength and credibility to the ESG agenda”, concludes Fioravante.
Check out the full episode on WayCarbon’s YouTube channel (audio in Portuguese, enable subtitles).
