New Era: The Shift Toward Sustainability and Digital Reporting in the Middle East and Africa
The business world is on the cusp of a significant transformation in how annual reports are produced, driven by new sustainability disclosure mandates. These changes require companies across various jurisdictions to adapt to new reporting standards and prepare for further complexities that will reshape the landscape of corporate reporting.
The Push for Sustainability Reporting
In June 2023, the International Sustainability Standards Board (ISSB) under the IFRS Foundation published the IFRS Sustainability Disclosure Standards. These standards consist of two parts: IFRS S1, which covers General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, which focuses on Climate-related Disclosures. Jurisdictions around the world are starting by mandating localized standards based on IFRS S2 first, with expectations that IFRS S1 mandates will soon follow. Looking ahead, the ISSB is developing additional standards related to nature, biodiversity, and human capital.
Sustainability reporting is rapidly evolving from a trend to a necessity. Investors, regulators, and stakeholders demand transparency, and the ISSB standards are poised to become the benchmark for global reporting practices.
Middle East and Africa: Emerging Commitments and Developments
United Arab Emirates: The Sustainable Finance Working Group (SFWG) of the Central Bank of the UAE underscored the international movement toward uniformity in its Principles for Sustainability-Related Disclosures published on 14 June 2024. This document acknowledges the international trend towards standardization, highlighting the ISSB Standards which have consolidated frameworks like SASB, TCFD, and CDSB, thus reflecting a broader global shift toward harmonized sustainability reporting practices.
Saudi Arabia: Aligned with its Vision 2030 initiative, Saudi Arabia is moving towards adopting the ISSB Standards. This direction is further evidenced by the collaboration between the IFRS Foundation and the Saudi Organization of Chartered and Professional Accountants (SOCPA) to translate these standards into Arabic, supporting broader accessibility and implementation.
South Africa: The Johannesburg Stock Exchange (JSE) has been proactive in integrating sustainability into its reporting guidelines, recommending the ISSB Standards even when they were in draft status. The Prudential Authority (PA), part of the South African Reserve Bank, published guidance for banks and insurers on climate-related disclosures, governance, and risk that align with these standards. However, challenges remain in mandating sustainability reporting as the current legal framework primarily mandates financial reporting based on IFRS standards without specific directives on sustainability or ESG disclosures.
Kenya and Nigeria: Both countries are at the forefront in the region, having adopted the ISSB Standards. Nigeria has initiated voluntary reporting since January 2024, with mandatory reporting set to begin in FY2027. In Kenya, the standards were adopted as of 1 January 2024, with companies expected to begin disclosure reporting based on these standards from FY2025. This commitment was highlighted during recent meetings between the chair of the ISSB and regional leaders, emphasizing the significance of these standards in driving global sustainability efforts.
Increasing Demands on the Reporting Process
The introduction of sustainability disclosures necessitates significant changes in how companies prepare their reports. More content, more data, and more people involved are just the beginning. There is also a need to integrate with ESG data management systems, which play a crucial role in gathering, cleansing, and consolidating sustainability-related data.
This expansion in reporting requirements imposes greater stress on production processes, requiring enhanced coordination and more robust workflows. The reliance on traditional tools, which may be rigid and error-prone, is being challenged, pushing companies to consider more dynamic and flexible reporting solutions.
The Transformative Impact of Digital Reporting
The transformation extends beyond just content and coordination. The most significant change on the horizon is the shift to digital or electronic reporting formats.
Currently, annual reports are often published in PDF format, with some companies also using microsites to enhance accessibility. However, to achieve full transparency, future reports will need to be made machine-readable. This involves tagging data and narratives based on taxonomies and adopting digital formats for publication.
In the European Union, the Corporate Sustainability Reporting Directive (CSRD) mandates such changes by 2025/2026. Beyond the EU, the IFRS Foundation has introduced the IFRS Sustainability Disclosure Taxonomy to support this transition, and the Global Reporting Initiative (GRI) is also contributing with its own sustainability taxonomy.
This shift to digital reporting signifies a fundamental change in how companies will produce and distribute their annual reports, necessitating investments in new technologies and processes to ensure compliance and maintain competitiveness.
To learn more, see our blog post ‘The Rise of Digital Reporting in Corporate Disclosure’.
Conclusion: The New Reporting Landscape
The landscape of annual reporting is transforming, driven by the dual forces of sustainability mandates and digital evolution. Companies must now prepare not just to meet these new requirements but to leverage them as opportunities to enhance their transparency and engagement with stakeholders. With careful planning and strategic investment, businesses can successfully navigate this new era and set a standard for future reporting practices.