The landscape of ESG reporting is undergoing a seismic shift. The introduction of the IFRS S1 and IFRS S2 standards in 2023 marked the beginning of a new era in sustainability reporting, bringing much-needed standardisation to the field. Effective for annual reporting starting January 1, 2024, these standards are now available for companies to adopt. While they will become mandatory as regulators incorporate them into financial reporting frameworks, their adoption across Asia varies, primarily affecting listed companies. As the region's regulatory environment evolves, the influence of IFRS S1 and S2 is set to grow, shaping the future of corporate transparency and accountability.

But what are the IFRS standards, and what do they mean for the global mobility industry in Asia?

IFRS and standards development

The IFRS Foundation is a not-for-profit organisation established to develop high-quality, understandable, enforceable, globally accepted accounting and sustainability disclosure standards. Two standard-setting boards, the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB), develop the standards.

IFRS S1: Comprehensive Sustainability Disclosure Framework

IFRS S1 establishes a holistic approach to reporting sustainability-related financial risks and opportunities. It mandates disclosure on:

• ·        Governance mechanisms for sustainability issues
• ·        Strategic approaches to sustainability challenges
• ·        Processes for identifying and prioritising sustainability concerns
• ·        Performance metrics and progress towards sustainability goals

This standard ensures that companies provide a 360-degree view of how sustainability influences their operations and future planning.

IFRS S2: Spotlight on Climate-Related Disclosures

Focusing specifically on climate issues, IFRS S2 requires detailed reporting on:

• ·        Strategies for addressing climate risks and opportunities
• ·        Integration of climate considerations into overall risk management
• ·        Performance against climate-related targets, including those mandated by regulations

IFRS S2 covers both physical risks (e.g., extreme weather events) and transitional risks (e.g., policy changes favouring low-carbon economies), emphasising their potential impact on a company's financial health and operational viability.

Global Adoption Landscape

IFRS adoption has been varied across regions, with different approaches in Asia, Europe, and the US. In Asia, Bangladesh has initiated requirements for banks and financial institutions to disclose sustainability and climate-related risks based on the ISSB standards, while Hong Kong plans to mandate these standards for listed companies starting in 2025. The European Union has also aligned its Corporate Sustainability Reporting Directive (CSRD) with the ISSB standards through its own set of European Sustainability Reporting Standards (ESRS).

In the US, the Securities and Exchange Commission (SEC) has introduced its own climate-disclosure standards, which share some similarities with the ISSB standards but are not recognised as an alternative reporting framework. This reflects a broader trend where jurisdictions either adopt the ISSB standards or align their existing frameworks to incorporate similar principles, with variations in scope, timeline, and mandatory versus voluntary application.

Starting from the 2027 fiscal year, large non-listed companies in Singapore with annual revenues of at least S$1 billion and total assets of at least S$500 million will be required to make climate disclosures. These disclosures must align with the standards set by the International Sustainability Standards Board (ISSB). With this move, Singapore becomes the first country in Asia to mandate climate-related disclosures for large non-listed companies, joining the European Union, the United Kingdom, and New Zealand in implementing such requirements.

Adapting to the New Reality and Implications for the Mobility Industry

The IFRS S1 and IFRS S2 standards impact listed corporations by shaping how they report and gather detailed information across their value chains. As a result, Destination Service Providers (DSPs), household good companies and Relocation Management Companies (RMCs) can increasingly anticipate the need for data gathering and sustainability reporting as part of the broader corporate value chain.

For DSPs, RMCs, and household goods companies, these new standards could mean:

1. Enhanced data collection on the environmental impact of relocation services.
2. Development of sustainable relocation policies and practices.
3. Integration of sustainability considerations and material impacts into vendor selection and management.
4. Training for mobility professionals on sustainability topics, reporting and best practices.
5. Requirement for increased collaboration between global mobility teams, RMCs, HR and corporate sustainability departments.

Keeping Up to Date: Recent IFRS developments

• ·        The GHG Protocol and IFRS have established an official partnership, marked by a memorandum of understanding to ensure ongoing compatibility between their standards and the ISSB's work. This collaboration includes governance arrangements that will keep the ISSB actively involved in updates and decisions regarding the GHG Protocol standards and guidance.
• ·        In July 2024, CDP, ISSB's primary global partner for climate disclosure, launched a new disclosure platform. The 2024 CDP questionnaire is now aligned with IFRS S2, using it as the foundational baseline for climate-related disclosures.
• ·        Building on their May 2024 interoperability announcement, the IFRS Foundation and GRI committed to working together through the ISSB and GRI’s Global Sustainability Standards Board (GSSB) to identify, align, and optimise common disclosures. This effort aims to meet the distinct scopes and purposes of their respective thematic and sector-based standards.
• ·        The ISSB has announced a two-year work plan to consolidate and harmonise the sustainability disclosure landscape. Over the next two years, ISSB will prioritise supporting the implementation of IFRS S1 and S2, including integrating disclosure-specific materials developed by the Transition Plan Taskforce into the IFRS Sustainability Knowledge Hub.

Conclusion

The introduction of IFRS S1 and S2 marks a significant shift in how the global mobility industry approaches sustainability. It challenges DSPs, RMCs, household goods companies, and HR to manage successful relocations with a keen eye on environmental impact and sustainability and a new focus on data gathering. As these standards become the norm, companies that proactively adapt their practices and reporting will be better positioned to meet the evolving expectations of clients, employees, and regulatory bodies in the global mobility landscape.

Useful resources

IFRS 1& 2 in full: https://www.ifrs.org/issued-standards/ifrs-sustainability-standards-navigator/