Vi-M Professional Solutions

Category: ESG Reporting

  • Early Adoption of IFRS Sustainability Disclosure Standards by Nigerian Entities: FRC Calls for Documents

    In its recent Public Notice, the Financial Reporting Council of Nigeria (FRC), announced Nigeria’s early adoption of the International Financial Reporting Standards (IFRS) Sustainability Disclosure Standard, IFRS S1 (the General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (The Climate-related Disclosures).

    Issued in June 2023 and effective for annual reporting periods beginning on or after January 1, 2024, the IFRS Sustainability disclosure standards provide a comprehensive framework for disclosing sustainability-related financial information, such as risks and opportunities for entities.

    The FRC has, through this Public Notice, called on Nigerian entities willing to be part of this early adoption phase to submit specific documents indicative of their readiness to implement IFRS S1 and S2.

    Here are the key points and submission guidelines:

    1. Early Adoption Announcement: The FRC has officially declared Nigeria’s intention to be an early adopter of IFRS Sustainability Disclosure Standards.

    2. Entities Eligible for Early Adoption: The FRC is currently identifying reporting entities with reasonable sustainability reports over the past two years who are willing to be part of the “early adoption category” for these standards. Entities selecting to adopt IFRS S1 and S2 for reporting periods ending on or before December 31, 2023, will be considered as early adopters.

    3. Submission Requirements: Entities desiring to be part of the early adoption phase are required to submit the following documents, which indicate their readiness for early adoption:

       a. A Board Resolution affirming the decision to adopt early.

       b. GAP Analysis Report.

       c. Implementation Plan for the adoption of the standards.

    4. Submission Deadline: The soft copies of these submissions should be sent to arwg@frcnigeria.gov.ng , and hard copies, to the FRC’s head office, no later than October 31, 2023.

    5. Additional Information: Please note that the FRC may request further documentation or information during the process to determine an entity’s readiness.

    6. Clarification: FRC emphasized that only entities choosing to be early adopters and meeting the its readiness criteria will be permitted to declare that they are early adopters.

    A copy of the Public Notice can be viewed or downloaded from here.

    For any inquiries or clarification regarding this process, please feel free to contact us via clients@vi-m.com

  • Understanding IFRS Sustainability Disclosures Standard – IFRS S2

    Understanding IFRS Sustainability Disclosures Standard – IFRS S2

    As the world becomes increasingly conscious of the impacts of climate change, businesses are under growing pressure to disclose their sustainability efforts. In response to this demand, the International Sustainability Standards Board (ISSB) has introduced the IFRS Sustainability Disclosure Standard S2 (IFRS S2). This standard seeks to provide a clear and consistent framework for disclosing climate-related risks and opportunities, aligning these disclosures with financial reporting. In this guide, we highlight the key aspects of IFRS S2, shedding light on its requirements and implications for companies.

    A Global Response to Climate-Related Disclosures:
    IFRS S2 is a part of the ISSB’s commitment to creating a unified and robust global standard for sustainability disclosures. By enhancing transparency and aligning sustainability reporting with financial statements, IFRS S2 aims to provide investors with a deeper understanding of a company’s climate-related risks and opportunities. This, in turn, contributes to more informed investment decisions and resilient global capital markets.

    Incorporating TCFD Recommendations:
    At its core, IFRS S2 fully embraces the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. By adopting IFRS S2, companies can fulfill TCFD requirements while also providing more extensive and detailed information. This harmonization simplifies the reporting landscape and streamlines the process for businesses.

    Value Chain Insights:
    Understanding the manifestation of climate risk throughout a company’s value chain is central to both IFRS S1 and S2. This holistic approach encourages companies to disclose how climate-related risks extend beyond their immediate activities, offering a broader perspective to investors.

    Integrated Reporting Approach:
    IFRS S2 advocates for an integrated reporting approach, marrying sustainability-related information with financial statements. This integration enables investors to discern the interplay between sustainability risks and opportunities and a company’s financial performance, fostering greater transparency.

    Greenhouse Gas Emissions and Financial Impacts:
    A pivotal facet of IFRS S2 is the disclosure of absolute Scope 1, Scope 2, and Scope 3 greenhouse gas emissions. Scope 1, Scope 2, and Scope 3 greenhouse gas emissions are classifications used to categorize different types of emissions associated with a company’s activities, as defined by IFRS S2. These classifications provide a comprehensive framework for companies to disclose their direct and indirect contributions to greenhouse gas emissions, allowing investors and stakeholders to better understand their climate-related risks and opportunities. This requirement aligns with the standard’s focus on elements that can influence future cash flows, cost of capital, and access to finance. The disclosure also provides insights into a company’s exposure to transition risks and opportunities. ‘The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004)‘ is the acceptable method / guide for measuring greenhouse gas emissions, but may not be required where any jurisdiction stipulates another measurement method.

    Scope 1 Emissions:
    Scope 1 emissions refer to direct greenhouse gas emissions that result from sources that are owned or controlled by a reporting company. These emissions are typically produced from activities carried out within the company’s operational boundaries. Examples of Scope 1 emissions include emissions from company-owned vehicles, equipment, and manufacturing processes.

    Scope 2 Emissions:
    Scope 2 emissions encompass indirect greenhouse gas emissions that result from the consumption of purchased energy, such as electricity, steam, or heat. These emissions occur as a result of the company’s activities but take place outside its operational boundaries. Scope 2 emissions allow companies to account for the environmental impact of the energy they use, even if the energy generation itself occurs elsewhere.

    Scope 3 Emissions:
    Scope 3 emissions cover a broader range of indirect greenhouse gas emissions that result from activities that are not directly owned or controlled by the reporting company but are associated with its value chain. These emissions are often more complex to measure and include emissions from sources such as suppliers, customers, transportation, and product use. Scope 3 emissions provide insights into a company’s extended environmental impact and highlight potential climate-related risks and opportunities throughout its value chain, allowing investors to comprehensively assess a company’s risk profile.

    Climate Resilience and Scenario Analysis:
    Companies are expected to assess their climate resilience and disclose how climate change might impact their strategy and business model. This involves employing climate-related scenario analysis to inform disclosures, aligning the approach with a company’s specific circumstances, exposure, and capabilities.

    Industry-Based Metrics and Targets:
    IFRS S2 accentuates industry-specific disclosure, necessitating companies to refer to industry-based metrics outlined in the Industry-based Guidance. This approach ensures comparability and aids investors in grasping climate-related risks and opportunities specific to various sectors.

    Setting Climate-Related Targets:
    Companies with climate-related targets must disclose their characteristics, formulation process, review mechanisms, and performance status. This disclosure also underscores the influence of international agreements, such as the Paris Agreement, on target establishment.

    Adoption of Standard:

    Although this standard is effective for annual reporting periods beginning on or after 1 January 2024, with earlier adoption permitted, countries are allowed to choose their own adoption dates. On 8 November, 2022, the Financial Reporting Council of Nigeria (FRCN) announced Nigeria’s adoption of IFRS sustainability disclosure standards. Listed companies and Public Interest Entities in Nigeria are required to adopt the IFRS Sustainability Disclosure Standards but no effective date has yet been announced for Nigeria.

    Core Contents of IFRS S2 Required Disclosures:

    The core contents of the required disclosures under the IFRS S2 (IFRS S2) include a comprehensive set of information related to climate-related risks, opportunities, strategies, targets, and resilience, among other sustainability aspects. These disclosures are expected to be made by all entities, regardless of the industry (in addition to industry specific metrics as outlined in the IFRS S2’s Industry based guidance), with certain concessions in the first year of adoption, to allow for gradual learning and capacity building by reporting entities. The key elements covered in the required disclosures are:

    Climate-Related Risks and Opportunities:

    • Companies are expected to provide material information about both physical risks (e.g., flooding, extreme weather events) and transition risks (e.g., regulatory changes, shifts in consumer preferences) associated with climate change.
    • Disclosure should cover potential impacts on the company’s business model, operations, financial performance, and prospects.

    Governance, Strategy, and Risk Management:

    • Companies are required to disclose how they integrate climate-related risks and opportunities into their governance structures, decision-making processes, and risk management practices.
    • This includes information on board oversight, executive responsibility, and the company’s approach to identifying, assessing, and mitigating climate-related risks.

    Metrics and Targets:

    • Disclosure should provide details about the company’s climate-related metrics, including greenhouse gas emissions (Scope 1, Scope 2, Scope 3) and other relevant sustainability performance indicators.
    • Companies should share their climate-related targets, including greenhouse gas emissions targets and other goals related to reducing environmental impact.

    Current and Anticipated Financial Effects

    • Companies are required to disclose both quantitative and qualitative information on the effects of climate related risks and opportunities on the company’s current and anticipated financial performance, financial position and cash flows. The quantitative information can be a single amount or a range.
    • A company can provide qualitative rather than quantitative information when, information is not separately identifiable, there is high level of measurement uncertainty, or, for anticipated effects, this is not commensurate with the company’s skills, expertise and resources.

    Climate Resilience:

    • Companies are required to assess their climate resilience and disclose information about how climate change uncertainties could affect their business strategy and model.
    • Disclosure should cover the financial and operational capacity to adjust or adapt over the short, medium, and long term in response to climate-related challenges.

    Scenario Analysis:

    • Companies are expected to use climate-related scenario analysis to inform their disclosures about resilience.
    • Disclosure should include relevant scenarios used, inputs, and assumptions for the analysis, as well as how these inform the company’s understanding of its climate resilience.

    Cross-Industry Metrics:

    • Companies should disclose industry-based metrics relevant to their business models and activities. These metrics are designed to provide sector-specific insights into sustainability performance.
    • Disclosure topics and metrics are based on industry-based guidance provided in the IFRS S2 framework.

    Climate-Related Targets:

    • Companies with climate-related targets should disclose information about the characteristics, setting, review, and performance against these targets.
    • Disclosure should also highlight how the latest international climate agreements, such as the Paris Agreement or any local agreements within respective jurisdictions, have informed the company’s targets.

    Financed Emissions:

    • For companies involved in asset management, commercial banking, or insurance, disclosure of absolute gross financed emissions is required, disaggregated by Scope 1, Scope 2, and Scope 3 greenhouse gas emissions.
    • Information about the industries to which finance is provided should also be disclosed.

    It is important to note that the IFRS S2 framework provides guidance on using both quantitative and qualitative information, ensuring that companies tailor their disclosures based on their circumstances. The goal of these disclosures is to enhance transparency, enable informed decision-making, and provide investors and stakeholders with a clear understanding of how companies are addressing sustainability risks and opportunities.

    Conclusion:

    IFRS S2 ushers in a new era of comprehensive and standardized sustainability reporting. By intertwining climate-related disclosures with financial statements, this standard empowers investors to make informed decisions and paves the way for a more resilient global financial landscape. For deeper insight and understanding of the IFRS S2, you may watch the IFRS’ Foundation’s webinar on the topic following this link – https://www.ifrs.org/supporting-implementation/supporting-materials-for-ifrs-sustainability-disclosure-standards/ifrs-s2/an-in-depth-explainer–ifrs-s2-climate-related-disclosures/.

    To gain a deeper understanding into how the sustainability disclosures will specifically impact your business, we, at Vi-M Professional Solutions are available to assist you. Please contact us via our email address – clients@vi-m.com.

  • Understanding IFRS Sustainability Disclosures Standard- IFRS S1

    Understanding IFRS Sustainability Disclosures Standard- IFRS S1

    Introduction:
    In an era marked by increasing emphasis on sustainability, businesses and investors are recognizing the vital role of Environmental, Social, and Governance (ESG) factors. In response, the International Sustainability Standards Board (ISSB) has unveiled a groundbreaking initiative—the IFRS Sustainability Disclosure Standards. These standards, beginning with IFRS S1, aim to revolutionize sustainability reporting, providing a comprehensive framework for organizations to disclose their ESG performance and engage with stakeholders in a more transparent manner.

    Unveiling IFRS S1:
    Recently introduced by the ISSB, the IFRS S1 marks the first of a series of standards designed to set a global baseline for sustainability disclosures. This initiative responds to the escalating demand for more robust and consistent ESG information by investors and stakeholders, ultimately contributing to more resilient and efficient capital markets.

    The Essence of IFRS S1:
    IFRS S1 is not merely about compliance; it is about fostering meaningful communication between companies and investors. By providing a structured approach to disclosing sustainability-related risks and opportunities, IFRS S1 equips companies with the tools to effectively convey their prospects and attract potential investors.

    Core of IFRS S1:
    At the heart of IFRS S1 lie its disclosure requirements, which offer a framework for companies to provide investors with essential information on sustainability-related matters. These requirements are designed to facilitate informed investment decisions while ensuring comparability and reliability across entities.

    Materiality in Focus:
    Materiality serves as a cornerstone in IFRS S1. Companies are called upon to disclose information that is not just relevant but also has the potential to impact investment decisions. This principle aligns with the existing materiality concept in financial reporting, ensuring that sustainability disclosures are investor-focused.

    Connected Information:
    Another vital aspect of IFRS S1 is its emphasis on connected information. The standard seeks to establish clear links between different sustainability-related risks, opportunities, and financial statements. This connection ensures that the information provided presents a holistic view of the organization’s sustainability performance.

    Guidance for Robust Reporting:
    IFRS S1 provides companies with guidance on comprehensive reporting. It directs attention to sources such as the SASB Standards and the CDSB Framework (and even GRI and ESRS), offering assistance in identifying and disclosing a wide array of sustainability-related risks and opportunities. This comprehensive approach contributes to more meaningful and informative disclosures. See our blog post on https://vi-m.com/esg/navigating-esg-reporting-frameworks-focus-on-the-differences-and-similarities/.

    Adopting the Standard:
    Companies embarking on the journey toward adopting IFRS S1 can begin with a focus on climate-related risks and opportunities. The standard acknowledges the need for a gradual transition and offers reliefs in the first year to ease the process. This approach allows organizations to align with their resources and gradually expand their sustainability reporting efforts. Although this standard is effective for annual reporting periods beginning on or after 1 January 2024, with earlier adoption permitted, countries are allowed to choose their own adoption dates. On 8 November, 2022, the Financial Reporting Council of Nigeria (FRCN) announced Nigeria’s adoption of IFRS sustainability disclosure standards. Listed companies and Public Interest Entities in Nigeria are required to adopt the IFRS Sustainability Disclosure Standards but no effective date has yet been announced for Nigeria.

    Conclusion:
    In the pursuit of a sustainable and transparent future, the IFRS Sustainability Disclosure Standard S1 stands as a transformative tool. By enhancing the quality and comparability of sustainability disclosures, the standard empowers organizations to engage with investors and stakeholders on a deeper level. As businesses embrace these standards, they contribute to a more informed investment landscape and pave the way for a resilient global economy.

    Accessing the Path Forward:
    For companies and investors eager to navigate the complexities of sustainability reporting, IFRS S1 provides a comprehensive roadmap. As organisations embrace the shift toward ESG transparency, these standards become a catalyst for positive change, driving progress and accountability in the realm of sustainable business practices. For deeper insight and understanding of the IFRS S1, you may watch the IFRS’ Foundation’s webinar on the topic following this link – https://www.ifrs.org/supporting-implementation/supporting-materials-for-ifrs-sustainability-disclosure-standards/ifrs-s1/an-in-depth-explainer-ifrs-s1/

    To gain a deeper understanding into how the sustainability disclosures will specifically impact your business, we, at Vi-M Professional Solutions are available to assist you. Please contact us via our email address – clients@vi-m.com.

  • Navigating ESG Reporting Frameworks: Focus on the Differences and Similarities

    Navigating ESG Reporting Frameworks: Focus on the Differences and Similarities

    In the realm of responsible investing, Environmental, Social, and Governance (ESG) reporting has emerged as a pivotal tool for companies to communicate their sustainability endeavors and performance. ESG reporting frameworks provide a structured approach for organizations to disclose their ESG-related information, aiding stakeholders in making informed decisions. This article will delve into a comprehensive comparison of five notable ESG reporting frameworks: the IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2), the Global Reporting Initiative (GRI), the Sustainability Accounting Standards Board (SASB), the Task Force on Climate-related Financial Disclosures (TCFD), and the European Sustainability Reporting Standards (ESRS), highlighting their distinctive features and shared objectives.

    IFRS Sustainability Disclosure Standards (IFRS S1 and IFRS S2)

    Adoption in Nigeria: On 8 November, 2022, the Financial Reporting Council of Nigeria (FRCN) announced Nigeria’s adoption of IFRS sustainability disclosure standards. On 26 June 2023, the International Sustainability Standards Board (ISSB), which was set up in 2021 by the International Financial Reporting Standards (IFRS) Foundation, issued its inaugural standards, IFRS S1 and IFRS S2. Both Standards are effective for annual reporting periods beginning on or after 1 January 2024, with earlier adoption permitted. Listed companies and Public Interest Entities in Nigeria are required to adopt the IFRS Sustainability Disclosure Standards. No effective date has yet been announced for Nigeria.

    Basis: The IFRS standards build on the existing Sustainability Accounting Standards Board (SASB) Standards. They however, allow for adoption of other sources of guidance on sustainability disclosures, e.g. SASB (see below), CDSB, GRI and European Sustainability Reporting Standards (ESRS), where these last three do not conflict with the provisions of the IFRS sustainability disclosure standards, in which case the IFRS’ will supersede.

    Focus and scope: IFRS S2 focuses majorly on disclosures of information on climate related risks (physical and transition risks) and opportunities that is useful to primary users of general purpose financial reports in making decisions relating to providing resources to the entity. IFRS 1 however allows for guidance from other sustainability frameworks on other ESG metrics. The climate related financial disclosures (on risks and opportunities) are to focus on governance, strategy, risk management, metrics and targets. ‘The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard (2004)‘ is the acceptable method / guide for measuring greenhouse gas emissions.

    Integrated Reporting: IFRS S1 and IFRS S2 provide a globally consistent and investor-oriented approach to sustainability reporting, closely integrated with financial reporting. This integration underscores the interdependence of financial and sustainability performance.

    Financial Materiality: The IFRS Sustainability Disclosure Standards are anchored on financial materiality, aiming to establish links between ESG factors and financial performance. It identifies ESG topics that are likely to exert a material impact on a company’s financial condition.

    Investor Relevance: Developed with investors and capital markets in mind, these standards focus on providing information that is pertinent to investors’ evaluation of the impact of sustainability issues on a company’s financial performance.

    Standardization: They maintain uniformity across industries, providing cross industry metrics (for 11 sectors with 77 industries) that simplify the task of investors comparing ESG performance across companies within the same sector.

    GRI: Global Reporting Initiative

    Scope and Focus: GRI stands out as one of the most widely recognized ESG reporting frameworks, emphasizing the significance of comprehensive sustainability reporting. It encompasses a broad spectrum of topics, ranging from environmental impact and labor practices to human rights, society, and governance.

    Materiality: GRI’s approach encourages companies to report on matters that hold material relevance to their business and stakeholders. The focus is on offering a holistic perspective of the company’s influence on diverse ESG aspects.

    Flexibility: GRI enables companies to customize their reporting according to their specific industry, size, and geographical context. This adaptability empowers organizations to address ESG concerns pertinent to their operations.

    SASB: Sustainability Accounting Standards Board

    Industry-Specific Reporting: SASB excels in offering industry-specific standards for divulging financially material ESG information. Its primary focus lies in furnishing information that investors can employ to make informed investment decisions.

    Financial Materiality: SASB’s foundation is anchored in financial materiality, aiming to establish links between ESG factors and financial performance. It identifies ESG topics that are likely to exert a material impact on a company’s financial condition.

    Standardization: SASB’s standards maintain uniformity across industries, simplifying the task of investors comparing ESG performance across companies within the same sector.

    TCFD: Task Force on Climate-related Financial Disclosures

    Climate Focus: TCFD takes a distinctive approach by primarily addressing climate-related risks and opportunities. It advocates for companies to divulge information concerning their governance, strategy, risk management, and metrics and targets concerning climate change.

    Financial Implications: TCFD’s emphasis is placed on comprehending how climate-related issues can give rise to financial implications for companies. Its overarching goal is to enhance the transparency of climate-related risks within the financial system.

    Forward-Looking Approach: TCFD goes a step further by encouraging the disclosure of forward-looking information, motivating companies to factor in the potential impact of climate change on their forthcoming operations and financial performance.

    European Sustainability Reporting Standards (ESRS)

    Harmonization and Consistency: ESRS sets its sights on establishing a unified set of sustainability reporting standards for companies operating within the European Union. Its primary goal is to achieve harmonization and consistency in ESG reporting practices.

    EU Alignment: The ESRS framework is aligned with the objectives of the European Green Deal, underscoring the importance of sustainability and environmental preservation within the European Union.

    Comparing and Contrasting Frameworks

    Scope and Coverage: GRI offers a wider scope, encompassing ESG topics across social and governance aspects. In contrast, SASB, TCFD, IFRS S1, and IFRS S2 each have more specific focal points, whether it is financial materiality, climate change, or integrated reporting.

    Materiality and Investor Focus: SASB, TCFD, IFRS S1, and IFRS S2 place a central focus on financial materiality, aligning with investors’ interest in understanding how ESG factors influence financial performance.

    Forward-Looking Approach: TCFD uniquely emphasizes the disclosure of forward-looking information about climate-related risks and opportunities.

    Stakeholder Engagement: GRI and ESRS stress the importance of stakeholder engagement in identifying material ESG issues, contributing to transparency and accountability.

    Conclusion: The Quest for Comprehensive ESG Insights

    Selecting an ESG reporting framework hinges on a company’s industry, objectives, and stakeholders. GRI furnishes a comprehensive view of sustainability practices, while SASB hones in on financially material ESG factors. TCFD and IFRS S1/S2 target climate-related risks and opportunities, acknowledging the pivotal role of climate change in financial decision-making. Additionally, ESRS, region-specific, aligns with the European Union’s drive for sustainable progress. The convergence of these frameworks reflects the collective endeavor to harness the power of ESG reporting for a more responsible and sustainable business landscape. As companies and investors continue their journey towards sustainability, the diversity of reporting frameworks offers a comprehensive toolkit to drive positive change on multiple fronts.

  • Navigating ESG Reporting: A Comprehensive Guide to Transparent Sustainability Disclosures

    Navigating ESG Reporting: A Comprehensive Guide to Transparent Sustainability Disclosures

    As Environmental, Social, and Governance (ESG) considerations take center stage in the business world, the demand for transparent and comprehensive ESG reporting is on the rise. ESG reporting is a powerful tool that allows companies to communicate their commitment to sustainable practices, provide insights into their impact on the environment and society, and engage with stakeholders effectively. In this post, we delve into the world of ESG reporting, offering a comprehensive guide to help companies navigate the process and unlock the benefits of responsible disclosure.

    Understanding ESG Reporting

    Why ESG Reporting Matters: ESG reporting is not just about compliance; it is an opportunity for companies to showcase their sustainability initiatives, enhance transparency, and build trust with stakeholders, including investors, customers, employees, and regulators.

    Key Components of ESG Reporting:

    1. Environmental Performance: Metrics related to carbon emissions, water usage, waste management, and energy efficiency.
    2. Social Impact: Information on diversity and inclusion, labor practices, human rights, community engagement, and supply chain ethics.
    3. Governance: Insights into board composition, executive compensation, transparency in financial reporting, and anti-corruption policies.

    Navigating ESG Reporting: A Step-by-Step Guide

    1. Identify Relevant Metrics: Determine the key ESG metrics that are relevant to your industry, operations, and stakeholder expectations (see list of ESG metrics below).

    2. Set Clear Goals and Targets: Establish meaningful and achievable ESG goals that align with your company’s values and long-term strategy.

    3. Data Collection and Verification: Gather accurate and reliable data related to your chosen ESG metrics. Consider third-party verification to enhance credibility.

    4. Follow the Reporting Frameworks and Standards:

    • IFRS Sustainability Disclosure Standards. These are new standards developed by the International Sustainability Standards Board (ISSB), which was set up in 2021 by the International Financial Reporting Standards (IFRS) Foundation. The IFRS standards build on the existing SASB Standards and also supersede the Climate Disclosure Standards Board (CDSB) Framework following the consolidation of the organizations responsible for those two frameworks into the IFRS Foundation in 2022. On 8 November, 2022, the Financial Reporting Council of Nigeria (FRCN) announced Nigeria’s adoption of IFRS sustainability disclosure standards. On 26 June 2023, the ISSB issued its inaugural standards, IFRS S1 and IFRS S2. Both Standards are effective for annual reporting periods beginning on or after 1 January 2024, with earlier adoption permitted. IFRS S1 allows for use of other sources of guidance on sustainability disclosures, e.g. SASB (see below), CDSB, GRI and European Sustainability Reporting Standards (ESRS), where these last three do not conflict with the provisions of the IFRS sustainability disclosure standards, in which case the IFRS’ will supersede. Listed companies and Public Interest Entities in Nigeria are required to adopt the IFRS Sustainability Disclosure Standards. No effective date has yet been announced for Nigeria.
    • Global Reporting Initiative (GRI): A widely used framework that provides guidelines for ESG reporting.
    • Sustainability Accounting Standards Board (SASB): Industry-specific standards for disclosing financially material sustainability information. The IFRS Sustainability Disclosure Standards are majorly built on these standards which are, like the IFRS’ targeted towards sustainability metrics and disclosures that have material financial effect on the entity.
    • Task Force on Climate-related Financial Disclosures (TCFD): Guidelines for reporting climate-related risks and opportunities.
    • European Sustainability Reporting Standards (ESRS): The ESRS are designed to make corporate sustainability and environmental social governance (ESG) reporting within the EU more accurate, common, consistent, comparable, and standardized, just like financial accounting and reporting.

    5. Integration with Financial Reporting: Integrate ESG information into your financial reports, annual reports, and other corporate communications.

    6. Stakeholder Engagement: Engage with stakeholders to understand their expectations and concerns. Consider conducting materiality assessments to prioritize ESG issues.

    7. Transparent Communication: Clearly communicate your ESG performance, goals, progress, and challenges. Use visuals, narratives, and case studies to enhance engagement.

    Key ESG metrics for Business Evaluation:

    Environmental Metrics:

    1. Carbon Emissions: Measure of the company’s greenhouse gas emissions, often reported in metric tons of CO2e (carbon dioxide equivalent).
    2. Water Usage: Quantification of the amount of water consumed by the company’s operations, often measured in cubic meters or gallons.
    3. Energy Efficiency: Calculation of energy consumption per unit of production, indicating how efficiently the company uses energy resources.
    4. Waste Management: Measurement of waste generated, recycled, and sent to landfills or incineration, often presented in tons or kilograms.
    5. Renewable Energy Usage: Proportion of the company’s energy consumption that comes from renewable sources like wind, solar, or hydropower.

    Social Metrics:

    1. Employee Diversity: Representation of different demographic groups within the company’s workforce, including gender, ethnicity, and age.
    2. Employee Turnover Rate: Percentage of employees who leave the company within a specified period, reflecting employee satisfaction and company culture.
    3. Health and Safety Incidents: Number of workplace accidents, injuries, or fatalities, indicating the company’s commitment to employee safety.
    4. Labor Practices: Assessment of fair wages, benefits, and working conditions, including compliance with labor laws and adherence to ethical labor practices.
    5. Community Engagement: Involvement in community projects, charitable initiatives, and contributions to social development in the areas where the company operates.

    Governance Metrics:

    1. Board Diversity: Representation of diverse backgrounds, skills, and experiences among the company’s board members.
    2. Executive Compensation Ratio: Comparison of executive pay to median employee compensation, indicating potential wage disparities.
    3. Shareholder Rights: Evaluation of shareholder rights and protections, including voting power and access to company information.
    4. Anti-Corruption Policies: Assessment of measures taken to prevent corruption, bribery, and unethical business practices within the company.
    5. Whistleblower Protection: Implementation of policies and mechanisms to protect employees who report unethical behavior within the organization.

    It is important to note that these metrics are not exhaustive and may vary depending on the industry, company size, and stakeholder expectations. Additionally, metrics should be chosen based on their relevance to the company’s operations and the potential impact on financial performance and stakeholder trust.

    Benefits of ESG Reporting

    1. Enhanced Reputation: Transparent ESG reporting builds credibility and enhances your company’s reputation as a responsible and ethical organization.

    2. Access to Capital: ESG reporting can attract socially responsible investors who seek to align their investments with their values.

    3. Stakeholder Trust: ESG reporting demonstrates your commitment to accountability and transparency, fostering trust among investors, customers, and employees.

    4. Risk Management: By identifying and addressing ESG risks, you can mitigate potential negative impacts on your business.

    Conclusion: A Journey Towards Sustainability and Transparency

    ESG reporting is not just a regulatory obligation; it is a journey towards creating a sustainable and responsible business. By following a structured approach, integrating ESG considerations into decision-making, and engaging with stakeholders, companies can leverage ESG reporting to drive positive change, enhance reputation, and contribute to a more sustainable future. As the world places greater emphasis on ethical and sustainable practices, embracing ESG reporting is an opportunity for companies to stand as beacons of responsible business conduct.