Why ICPAK is adopting sustainability standards

Charles Darwin opined that it is not the most intelligent of the species that survives, nor the strongest, it is the species that is able best to adapt and adjust to its changing environment.

Today, 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 towards sustainable development is a necessity. Sustainability is a balancing act between using resources and ensuring that the environment and people are not left worse off.

With many players meeting at COP29 to chart a sustainable way forward, ensuring uniformity in the global language from a sustainability standpoint is critical. The alphabet soup that is sustainability reporting continues to get thicker with many frameworks giving fragmented guidance for users and drawers of sustainability reports. But there is a strong case for interoperability of frameworks to ensure transparency and comparability.

Climate-related risks

The historical obstacle of separation of sustainability issues from economic prosperity or decline 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 organisations to disclose information that could significantly affect their financial performance and cash flows due to sustainability-related risks. This not only enhances investor confidence but also aligns corporate strategies with broader sustainability goals.

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

Sustainable development 

These standards have been adopted in Kenya through the Institute of Certified Public Accountants of Kenya (ICPAK), which sets standards and regulates 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 and public sectors, regulators, professional firms and academia.

Sustainability reporting plays a critical role in advancing sustainable development goals and promoting corporate responsibility. By adopting the 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 will enhance comparability, eliminate fragmented reporting 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. 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.

Mr Kakai is the chairman of ICPAK