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IFRS S1 What's the point of Sustainability Standards?

May 12, 2024

This is not just a standard to make your financial statements look good.

If you're not yet up to speed with sustainability-related reporting, you might think the standard is just about making annual reports look good. However, the objective of S1 is to provide material information useful to investors.

Ironically, though, the standard focuses on sustainability-related information that is expected to affect the cash flows of the company and is reasonably expected to influence the decisions of investors.

Information related to sustainability risks and opportunities is valuable for primary users. This is because the ability of an entity to generate cash flows in the short, medium, and long term is closely connected to its interactions with stakeholders, society, the economy, and the natural environment along the entity's value chain.

Yes, sustainability-related matters are relevant to investors because they can influence the company's cash flows.

Think of it like this: the company, along with all the things it needs and the people it interacts with, creates a system where everything relies on each other. The company depends on these resources and relationships, and how they affect them can bring up risks and chances related to sustainability.

What is Sustainability-related material information?

In the context of sustainability-related financial disclosures, information is material if omitting, misstating, or obscuring that information could reasonably be expected to influence decisions that primary users of general purpose financial reports make on the basis of those reports, which include financial statements and sustainability-related financial disclosures and which provide information about a specific reporting entity.

What sort of guidance does the standard provide? 

IFRS S1 outlines how an organization should prepare and report its sustainability-related financial disclosures. It sets out general requirements for the content and presentation of those disclosures. The objective is that the information disclosed is useful to primary users in making decisions relating to providing resources to the entity.


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