The adoption of sustainability reporting standards is gaining momentum globally, and Nigeria is no exception. International Financial Reporting Standards (IFRS) S1 and S2 were introduced to enhance transparency and accountability in sustainability reporting. These standards are designed to help organisations report their environmental, social, and governance (ESG) activities consistently and comparably. But how well are Nigerian corporate entities adopting these standards?

In a recent announcement by the Financial Regulatory Council of Nigeria, companies like Access Bank Plc, Fidelity Bank Plc, MTN Nigeria, and Seplat Energy, have taken significant steps towards adopting IFRS S1 and S2. These companies have recognised the importance of sustainability reporting and have embraced these standards to align their operations with global best practices. Their commitment demonstrates a forward-thinking approach to business, where environmental and social responsibilities are integrated with financial performance.

These early adopters are setting a precedent for other companies. Their actions show that sustainability is a critical aspect of modern business practices. Adopting IFRS S1 and S2 by these companies shows that they are positioning themselves as leaders in responsible business conduct, showcasing that it is possible to achieve profitability while being mindful of environmental and social impacts.

The adoption of IFRS S1 and S2 is not just about meeting regulatory requirements; it is also about building trust with stakeholders. Transparency in sustainability reporting enables stakeholders to understand how companies are managing their environmental and social responsibilities. This, in turn, enhances the credibility of the company and fosters stronger relationships with investors, customers, and the broader community.

Companies that have adopted these standards are taking a proactive stance in communicating their sustainability efforts. This transparency is crucial in a world where consumers and investors are increasingly demanding that companies demonstrate their commitment to sustainability. Reporting on their ESG activities clearly and consistently makes these companies meet stakeholder expectations and contributes to a more sustainable future for Nigeria.

While the early adoption of IFRS S1 and S2 by these companies is commendable, the journey towards widespread adoption is not without challenges. One of the primary obstacles is the lack of awareness and understanding of these standards among many businesses. Smaller companies may find it difficult to grasp the full scope of these reporting requirements, leading to slower adoption rates.

Another challenge is the cost associated with implementing these standards. For many businesses, particularly those with limited resources, the expense of aligning their reporting practices with IFRS S1 and S2 can be prohibitive. This financial burden may deter some companies from adopting the standards, despite the long-term benefits they offer.

Moreover, the absence of a regulatory mandate for sustainability reporting means that the adoption of these standards remains voluntary. While this provides flexibility for businesses, it also means that there is less pressure to adopt the standards unless there is a clear business case for doing so.

The leadership within corporate entities played a crucial role in the adoption of IFRS S1 and S2. Companies that have successfully adopted these standards often have leaders who understand the importance of sustainability and are committed to integrating it into their business strategies. These leaders recognise that sustainability reporting is not just a compliance exercise but an opportunity to drive positive change within their organisations and the broader community. In companies where leadership is less engaged with sustainability issues, the adoption of IFRS S1 and S2 may be slower or non-existent. This highlights the need for education and awareness-raising efforts targeted at corporate leaders.

For Nigeria to fully embrace sustainability reporting through IFRS S1 and S2, several steps need to be taken. First, there must be increased awareness and education about the benefits of these standards. Organisations such as the Financial Reporting Council of Nigeria (FRC) and other industry bodies can play a key role in this by organising workshops, seminars, and training sessions for businesses.

Second, there should be efforts to make the adoption of these standards more accessible to smaller companies. This could involve providing financial incentives or technical assistance to help these businesses align their reporting practices with IFRS S1 and S2. Reducing this barrier to adoption will allow more companies to be able to join the early adopters in contributing to a sustainable future.

Finally, there may be a need for regulatory changes to encourage or even mandate the adoption of sustainability reporting standards. While voluntary adoption has its benefits, a regulatory mandate could accelerate the adoption process and ensure that more companies are reporting their ESG activities consistently and transparently.

The adoption of IFRS S1 and S2 in Nigeria is still in its early stages, but the commitment shown by companies like Access Bank Plc, Fidelity Bank Plc, MTN Nigeria, and Seplat Energy is encouraging. These companies are leading the way in demonstrating that sustainability reporting is not just about compliance but also about building a responsible and profitable business. However, to fully realise the benefits of sustainability reporting, more companies need to follow suit. This will require concerted efforts to raise awareness, provide support, and possibly introduce regulatory measures to encourage adoption.

Research & Advocacy Department,

Chartered Institute of Directors (CIoD)

28, Olawale Edun Road, (Formerly Cameron Road), Ikoyi, Lagos.