IFRS S1 and S2 readiness: build the evidence chain before the report

SECP has notified phased adoption in Pakistan of IFRS S1, General Requirements for Disclosure of Sustainability-related Financial Information, and IFRS S2, Climate-related Disclosures.

Disclosure readiness is not a writing project. It is the ability to identify material sustainability-related information, connect it to enterprise decisions and financial prospects, produce supportable data and operate controls over what is reported.

Organisations should confirm their exact scope, timing and requirements from current SECP materials and qualified professional advice.

Start with the user and the decision

IFRS sustainability disclosures are designed around information useful to primary users of general-purpose financial reports. A large catalogue of activities is not automatically decision-useful.

The readiness question is:

Can the organisation identify sustainability-related risks and opportunities that could reasonably affect its prospects, and support the resulting disclosures with governance, process, evidence and controls?

Six readiness areas

1. Governance

Document who oversees sustainability-related risks and opportunities, what information they receive, how often they meet and how responsibilities interact with strategy, risk, finance and controls.

Avoid copying a committee name into the report without showing how oversight works.

2. Strategy and financial connection

Identify how relevant risks and opportunities may affect business model, value chain, strategy, cash flows, access to finance and cost of capital over appropriate time horizons.

This requires coordination between sustainability, strategy and finance, working from a single account and not parallel narratives.

3. Risk and opportunity processes

Map how sustainability-related issues are identified, assessed, prioritised and monitored. Show how the process relates to the organisation’s overall risk management.

4. Metrics, targets and methodology

For each material metric or target, define:

• purpose and decision use;
• boundary and period;
• unit and methodology;
• data owner and source;
• estimates and assumptions;
• quality checks and approval;
• restatement approach; and
• connection to performance management.

5. Climate capability

IFRS S2 brings climate-specific requirements. Organisations may need capability across physical and transition risk, greenhouse-gas emissions, scenario analysis, transition planning, targets and industry-based metrics.

These topics can require technical expertise beyond a general reporting team.

6. Reporting controls

Create a disclosure inventory linking each statement or metric to its owner, evidence, reviewer and approval. Apply version control and maintain a record of judgments, limitations and changes.

Build an evidence chain

For every material disclosure, be able to move through:

external requirement → internal interpretation → responsible owner → source data → method and assumptions → review/control → approved statement

If a link is missing, the disclosure may be fragile even when the prose is polished.

A readiness workshop agenda

A cross-functional session can test:

1. scope and reporting timetable;
2. primary users and material-information lens;
3. priority risks and opportunities;
4. governance and decision ownership;
5. data, method and control gaps;
6. links to financial planning and risk management;
7. specialist capability required; and
8. a sequenced roadmap with accountable owners.

Include finance, risk, strategy, operations, sustainability, legal/compliance, internal controls, data/technology and relevant business units.

Common failure modes

• treating the sustainability report as separate from financial reporting;
• collecting every ESG metric without a material-information rationale;
• making future claims without a governed plan or assumptions;
• using emissions or scenario outputs without documenting method and limitations;
• assigning the entire programme to one sustainability officer;
• treating a framework mapping as evidence of operational readiness; and
• waiting for perfect data when the task is to govern estimates, proxies and improvement.

A proportionate first output

Create a readiness register with these columns:

• requirement or disclosure topic;
• why it may be material;
• current process and owner;
• available data and evidence;
• methodology or judgment;
• control and review;
• gap and risk;
• next decision; and
• target date.

The report is the visible output. The real capability is the system that makes its information reliable, connected and repeatable.

Primary sources

Use the original materials for authoritative requirements and context.

• SECP notification on adoption of IFRS Sustainability Disclosure Standards ↗
• SECP ESG Sustain, guidelines and circulars ↗