Objective
IFRS S1 requires an organisation to provide information about its sustainability-related risks and opportunities.
A sustainability risk is a potential problem related to environmental, social, or governance factors that could negatively affect a company’s operations, reputation, or financial performance. This includes issues like climate change, resource shortages, labor practices, or weak corporate oversight.
A sustainability opportunity is a chance for a company to improve its performance or create value by addressing environmental, social, or governance factors. This could include actions like developing eco-friendly products, improving energy efficiency, supporting fair labor practices, or strengthening governance. These opportunities can lead to cost savings, increased revenue, better reputation, or long-term growth.
Information on sustainability-related risks and opportunities should be useful to the main users of general purpose financial reports when they are making decisions about providing resources to the organisation.
General purpose financial reports give financial information about an organization to help key users make decisions about giving resources to that organization. These reports include, but are not limited to, the organization’s financial statements and reports about sustainability-related financial issues.
Primary users of general purpose financial reports include existing and potential investors, lenders and other creditors. General purpose financial reports help users make decisions on:
buying, selling, or keeping shares or debt;
giving or selling loans or other types of credit; or
using voting rights or other ways to influence how the organization is managed, especially how it uses its resources.
This standard requires an organisation to provide information about all sustainability-related risks and opportunities that could reasonably be expected to affect the organisation’s cash flows, access to finance or cost of capital over the short, medium or long term.
Information about sustainability-related risks and opportunities is useful to primary users because an organisation’s ability to generate cash flows over the short, medium and long term is closely connected to how it interacts with its stakeholders, society, the economy and the natural environment across its value chain. The organisation and the resources and relationships within its value chain form an interdependent system in which the organisation operates. The organisation’s reliance on these resources and relationships, and the effects it has on them, lead to sustainability-related risks and opportunities for the organisation.
This standard also sets out how an organisation should prepare and present its sustainability-related financial disclosures. It includes general requirements for the content and presentation of these disclosures so that the information is useful to primary users when making decisions about providing resources to the organisation.