ISSB and financial reporting standards related to sustainability disclosure

Meanwhile, regulators started to standardize the disclosure, as seen in the annual report (56-1 One Report) requirements on sustainability disclosure set by Thailand SEC (Securities and Exchange Commission), starting from 2023.

However, with current diverse and unaligned sustainability reporting frameworks, reporting preparers and users of such data still have challenges around collecting information in a standardized manner and comparability of such data.

To address the challenges, the International Sustainability Standards Board (ISSB) was established during the COP26 meeting in November 2024 to develop a set of global standards for sustainability reporting.

The ISSB has played a key role in developing global guidelines for sustainability reporting, including standards for disclosing information on climate change.

In June 2023, ISSB issued two financial reporting standards related to sustainability disclosure including, IFRS S1, which covers general requirements for financial disclosure related to sustainability, and IFRS S2, which focuses on disclosure related to climate change.

Both standards aim to set key areas and metrics for businesses to disclose significant risks and opportunities related to sustainability (including information related to climate change management).

Disclosing such information is beneficial for financial report users to understand the impacts and risks to the organization that can also affect its business value.

The information disclosed in line with both of the standards will be considered a part of financial reporting that businesses must report alongside their financial statements. This means that the scope of reporting should be consistent with the scope of the company’s financial statements.

For example, the report should encompass all entities in the same scope of subsidiaries as reported in the financial statements. Moreover, the information should be disclosed alongside the financial statements. There may also be a need for external auditing of this information, similar to the financial statements.

The requirements for disclosing information will have fundamental principles as follows:

1.    Governance: This involves disclosing information about the business’s governance, control, and procedures for monitoring and managing sustainability-related risks and opportunities. For instance, disclosing the individuals or business units in charge of governance in these areas, the suitability of their skills and competencies, and how their contribution influences the organization's strategic decision-making.

2.    Strategy: This outlines how the organization addresses sustainability-related risks and opportunities that could impact its business model, value chain and the organization's strategies in the short, medium, and long term. For example, disclosing the impacts of significant risks and opportunities related to sustainability on financial position, operating performance, and cash flows for the reporting period and anticipated future impacts in the short, medium, and long term.

3.    Risk Management: This involves disclosing information about the processes that the organization employs to identify, assess, and manage risks related to sustainability including, disclosing how the organizations assess the possibility and impact of risks (such as qualitative variables, quantitative criteria, or any other criteria), factors used in risk assessment, such as data sources, coverage scope, and modeling assumptions.

4.    Metrics and Targets: This entails the information about how the organization identifies, monitors, and handle significant risks and opportunities related to sustainability. It also includes performance assessment methods and progress towards targets. For instance, disclosing the definition of metrics, methods for calculating targets, data used for calculation, and key assumptions."

IFRS S1 and IFRS S2 will become effective for financial reporting periods beginning on or after January 1, 2027. This means that investors will start to see the information disclosure from the 2028 reporting period.

In Thailand, there is currently no specific date for the mandatory adoption of these two standards. However, considering the widespread acceptance of both standards among international sustainability standard-setting bodies and in many jurisdictions, businesses in Thailand may need to prepare for the future implementation of these standards.

This preparation involves learning about the disclosure requirements, determining whether the company’s sustainability data is ready for disclosure and establishing effective data collection procedures and internal controls.

This would ensure that businesses can be ready to disclose necessary information in an accurate, appropriate, and timely manner when both standards are eventually implemented in Thailand.

Kasiti Ketsuriyonk

Partner | Audit & Assurance 

Deloitte Thailand