Sustainability is at the front burner of discussions globally. This is because there is an urgent need to preserve the natural environment and prevent the depletion of our natural resources. The climate crisis has created a new way for businesses to be socially responsible, protect the environment through their operations and create a balance in human and natural systems for now and the future.
As such, business organisations have the opportunity to demonstrate and transparently disclose their contributions to sustainability through a new set of disclosure standards, the International Sustainability Standards Board (ISSB) developed by the IFRS Foundation in 2021.
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The ISSB was developed following a global demand for consistency in reporting and comparable information on sustainability performance and risks relevant to investors and other market participants. These standards enable transparent reporting and allow investors, regulators and communities to assess the impact of their investments and hold organisations accountable for their commitments to sustainability.
Companies that can clearly articulate the positive and negative impacts of their operations are more attractive to impact investors. As the interest in impact investing expands, the significance of guaranteeing that investments yield concrete social and environmental benefits has become imperative and gradually leading the market towards mandatory sustainability disclosures.
As an inaugural member of the ISSB Sustainability Consultative Committee, the leadership of the Global Steering Group for Impact Investment (GSG), a global body that catalyses impact investment, is ensuring the global relevance and adoption of the General Requirements for Disclosure of Sustainability-related Financial Information (S1) and Climate-related Disclosures (S2) of the ISSB standards, through capacity-building activities and engagement with stakeholders in emerging economies.
The GSG team’s visit to Nigeria National Advisory Board) NAB and Ghana NAB as part of the capacity-building initiatives on the implementation of the ISSB in emerging markets has shed light on the significant opportunities, gaps and challenges that need to be addressed for effective adoption of the standards. Here are some lessons that were gathered from conversations with stakeholders in the public and private sectors at workshops held in Lagos and Abuja, Nigeria.
1. Nigeria is ready for early adoption: The Financial Reporting Council of Nigeria (FRC) is promoting the early adoption of baseline disclosure standards in Nigeria. The FRC has designed a four-phase adoption roadmap and is guiding organisations on sustainability frameworks for reporting strategies, data-gathering processes, and internal controls. MTN Nigeria, the largest telecommunications company, is one of the early adopters, aligning its sustainability-related information with the International Standards Board.
2. There is a huge knowledge gap: Nigeria is leading in adopting sustainability disclosure standards in Africa, but many organisations lack skilled personnel for reporting. There is a need to increase awareness and develop accounting and sustainability professionals’ capacity for IFRS S1 and S2 implementation. Adequate knowledge of data collection for transparent reporting of climate risks and opportunities is crucial for ensuring reliable, transparent, and easily understood impact metrics.
3. Organisations need to rethink value creation: The sustainability framework emphasises that value creation for businesses goes beyond financial gains and involves a holistic impact on stakeholders, the environment, society, and the economy. Therefore, businesses must re-evaluate their operations, considering the interplay between activities and the ecosystem, assessing resource depletion and replenishment, and evaluating their social and environmental footprints.
4. SMEs face enormous challenges: Small and medium enterprises (SMEs) in Nigeria, with low revenue turnover, face macroeconomic constraints and prioritise immediate survival over long-term sustainability. To transition to transparent sustainability disclosure reporting, they require tailored guidance, capacity-building initiatives, incentives, and streamlined regulatory frameworks that accommodate their unique needs and constraints.
5. Cultivating collaborative initiatives: The IFRS and ISSB standards can be better understood and applied through collaboration among various stakeholders, including industries, businesses, regulatory bodies, educational institutions, and nonprofit organisations. This collaboration can provide insights, best practices, and case studies, while promoting the integration of sustainability principles into business practices. This approach accelerates the transition towards a more sustainable financial reporting landscape.
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Our mission at Impact Investors Foundation goes beyond simply connecting capital with impactful sectors. We believe in fostering active participation from both public and private sectors to drive sustainability efforts. This includes robust impact measurement, management, and reporting. Over time, this will generate valuable data for informed decision-making and industry benchmarking. By strengthening these practices, we empower businesses and investors to accurately assess their social and environmental impact, ensuring the long-term viability of their sustainable strategies.
Ifeoluwa Ogunfuwa an Executive Assistant at Impact Investors Foundation. She is a seasoned corporate communications professional who has gained diverse experience in the impact investing, telecommunications, technology, and manufacturing sectors.
