What Is IFRS S1? A Guide to Sustainability Disclosure Standards

Q: What is IFRS S1 and why is it important?

IFRS S1 is a global sustainability disclosure standard issued by the International Sustainability Standards Board (ISSB). It provides a framework for entities to disclose sustainability-related risks and opportunities that could affect financial performance. It enhances transparency and helps investors make informed decisions.

Q: When does IFRS S1 take effect?

IFRS S1 is effective for annual reporting periods beginning on or after January 1, 2024. Early adoption is permitted.

Q: How is IFRS S1 different from IFRS S2?

IFRS S1 sets the general framework for all sustainability-related disclosures, while IFRS S2 focuses specifically on climate-related disclosures such as emissions and transition planning.

Q: Has IFRS S1 been adopted in Kenya?

Kenya has initiated a phased adoption. As of 2025, IFRS S1 is in voluntary adoption, with mandatory adoption for Public Interest Entities (PIEs) starting in 2027, followed by large and small entities in later years.

UNDERSTANDING IFRS S1: GENERAL REQUIREMENTS FOR DISCLOSURE OF SUSTAINABILITY-RELATED FINANCIAL INFORMATION

IFRS Guide>>

May 29, 2025

IFRS S1, officially titled “General Requirements for Disclosure of Sustainability-related Financial Information“, is a global sustainability disclosure standard issued by the International Sustainability Standards Board (ISSB) under the IFRS Foundation.

This landmark standard was issued on June 26, 2023, and became effective for annual reporting periods beginning on or after January 1, 2024.

It was released alongside IFRS S2, which provides guidance specifically on climate-related disclosures.

Together, IFRS S1 and IFRS S2 form a comprehensive framework designed to improve the quality, consistency, and comparability of sustainability and ESG (Environmental, Social, and Governance) reporting across global markets.

In this article, we explore the key elements of IFRS S1, its objectives, disclosure requirements, and its adoption status in Kenya.

What is IFRS S1?

IFRS S1 sets out the general principles and requirements for disclosing sustainability-related financial information in an entity’s general-purpose financial reports.

Under IFRS S1, entities are required to disclose material information about sustainability-related risks and opportunities that could reasonably be expected to affect the entity’s cash flows, access to finance, or cost of capital in the short, medium, or long term.

The objective is to provide investors and other stakeholders with decision-useful information that helps them assess an entity’s ability to create and sustain value over time.

About the ISSB

The International Sustainability Standards Board (ISSB) was established by the IFRS Foundation in November 2021, during COP26, with the mission of creating a global baseline of high-quality sustainability disclosure standards.

The ISSB aims to:

Improve the quality and consistency of sustainability disclosures.
Address investor demands for comparable ESG information.
Integrate sustainability disclosures into the broader financial reporting ecosystem

Drafts of IFRS S1 and IFRS S2 were released in March 2022 for public consultation, followed by a 120-day feedback period. The final versions were approved and issued in June 2023.

Purpose and Goals of IFRS S1

IFRS S1 is designed to ensure entities report on:

Sustainability-related risks and opportunities that could reasonably be expected to impact the entity’s future financial position or performance.
How these risks and opportunities are governed, managed, and monitored.
The strategies and targets in place to address sustainability challenges and opportunities.
Progress made toward meeting those targets.

This information supports stakeholders in making informed decisions regarding resource allocation, investment, and risk assessment.

What Does IFRS S1 Require?

IFRS S1 outlines how an entity should prepare and present sustainability-related financial disclosures. Key requirements include:

1. Governance

Entities must describe the governance processes, controls, and procedures used to monitor and manage sustainability-related risks and opportunities.

2. Strategy

Entities are required to disclose how sustainability risks and opportunities affect their business model, strategy, and financial planning.

3. Risk Management

This involves detailing the processes used to identify, assess, and manage sustainability-related risks and opportunities.

4. Metrics and Targets

Entities must report on the metrics used to measure performance, including targets set (either voluntarily or through regulation), and the progress made in achieving them.

5. Materiality and Connectivity

Disclosures must include material sustainability information that connects to financial statements, helping users understand the full impact on the entity’s financial prospects.

6. Industry-Specific Guidance

Entities are encouraged to use SASB Standards (Sustainability Accounting Standards Board) for industry-specific disclosures.

IFRS S1 vs IFRS S2: What’s the Difference?

While IFRS S1 provides a general framework for all Sustainability-related disclosures – including environmental, social, and governance (ESG) issues – IFRS S2 specifically focuses on climate-related disclosures.

In summary:

IFRS S1: Covers all sustainability topics, including governance, strategy, risk management, metrics, and performance.

IFRS S2: Focuses on climate risks, carbon emissions, transition plans, and climate-related targets.

Important: IFRS S1 and IFRS S2 must be used together when reporting on climate-related matters.

Practical Example of Applying IFRS S1 and S2

If a company is reporting on:

Water usage
Gender diversity
Carbon emissions

It would:

Use IFRS S1 to structure disclosures across governance, strategy, risk, and performance for all three topics.
Use IFRS S2 specifically to report on carbon emissions and climate-related risks, targets, and metrics.

IFRS S1 and S2 Adoption in Kenya - An Overview

1. Standardised Reporting Template for Banks

On April 23, 2025, the Kenya Bankers Association (KBA), in partnership with ICPAK, WWF-Kenya, and FSD Kenya, launched a standardised IFRS S1 and S2 reporting template for banks.

This initiative aims to align Kenya’s banking sector with global sustainability disclosure standards and support the country’s transition to a low-carbon economy.

2. IFRS S2 Adoption Roadmap in Kenya

The Institute of Certified Public Accountants of Kenya (ICPAK) has issued a phased roadmap for IFRS S2 adoption:

January 1, 2024: Voluntary adoption begins.
January 1, 2027: Mandatory for Public Interest Entities (PIEs).
January 1, 2028: Mandatory for Large Non-PIEs.
January 1, 2029: Mandatory for Small and Medium Enterprises (SMEs).

For public sector entities, adoption is still under consideration pending guidance from the International Public Sector Accounting Standards Board (IPSASB).

Kenya’s Global Engagement on IFRS S1 and S2

In March 2024, ISSB Chair Emmanuel Faber met with President William Ruto and other senior officials in Kenya.

The discussions centered on the rollout of IFRS S1 and S2 and emphasized the need for capacity building and transparency in sustainability reporting.

FAQS ON IFRS 1

1. What is IFRS S1 and why is it important?

IFRS S1 is a global sustainability disclosure standard issued by the International Sustainability Standards Board (ISSB).
It provides a framework for entities to disclose sustainability-related risks and opportunities that could affect financial performance.
It enhances transparency and helps investors make informed decisions.

2. When does IFRS S1 take effect?

IFRS S1 is effective for annual reporting periods beginning on or after January 1, 2024. Early adoption is permitted.

3. What are the key disclosure requirements under IFRS S1?

Entities must disclose material sustainability-related risks and opportunities, covering governance, strategy, risk management, metrics, and targets, with clear links to their financial performance.

4. How is IFRS S1 different from IFRS S2?

IFRS S1 sets the general framework for all sustainability-related disclosures, while IFRS S2 focuses specifically on climate-related disclosures such as emissions and transition planning.

5. Has IFRS S1 been adopted in Kenya?

Kenya has initiated a phased adoption.
As of 2025, IFRS S1 is in voluntary adoption, with mandatory adoption for Public Interest Entities (PIEs) starting in 2027, followed by large and small entities in later years.

Conclusion

The shift towards sustainability-related disclosures marks a critical evolution in financial reporting.

IFRS S1 plays a pivotal role in integrating ESG considerations into mainstream reporting frameworks.

As the world continues to confront climate change, economic inequality, and social transformation, frameworks like IFRS S1 will guide companies in delivering transparent, relevant, and globally consistent sustainability information.

All organizations – regardless of size – should prioritize understanding and implementing IFRS S1 and S2 to remain compliant, attract investment, and identify both risks and opportunities linked to sustainability.

Talk to the Experts

Mugo & Co. is a trusted auditing and compliance firm with over 40 years of experience.

We help businesses navigate complex regulatory environments and align with evolving standards like IFRS S1 and IFRS S2.

Get in touch with Mugo & Co. today for tailored guidance on integrating sustainability disclosures into your financial reporting!

Disclaimer

This article is for educational purposes only and does not constitute tax or legal advice. Please consult your auditor or accountant for specific guidance, or reach out to Mugo & Co. for professional support.

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