IFRS 1 and IFRS 2 Consultants in Indonesia

Historically, financial statements have been the primary source for investors to assess a company’s performance. However, global business dynamics indicate that financial information alone is no longer sufficient to depict an organization’s prospects. Factors such as climate change risks, supply chain disruptions, the transition to a low-carbon economy, and sustainability policies now influence corporate value and investment decisions. These shifts have driven the development of more structured sustainability reporting standards. Through the International Sustainability Standards Board (ISSB), the IFRS Foundation issued IFRS S1 and IFRS S2 to serve as global benchmarks for disclosing sustainability information relevant to investors and capital providers. These two standards assist companies in explaining how sustainability issues impact their strategy, business model, risk management, and financial prospects across short-, medium-, and long-term horizons. In Indonesia, interest in IFRS S1 and IFRS S2 is steadily growing. The Institute of Indonesia Chartered Accountants (IAI) has adopted these standards as Sustainability Disclosure Standards (SPK) 1 and SPK 2, effective January 1, 2027. For many companies, the pre-implementation period offers an opportunity to evaluate organizational readiness, improve the quality of sustainability data, and establish more integrated reporting systems. Consequently, the need for IFRS S1 and IFRS S2 consultants in Indonesia has become increasingly significant. Implementing ISSB standards goes beyond mere report preparation; it encompasses adjustments to business processes, governance, and ESG data management, as well as cross-functional coordination, ensuring that the disclosed information truly reflects the company’s actual conditions.

Why Are Companies Paying Attention to IFRS S1 and IFRS S2?

Many organizations in Indonesia are already implementing various sustainability programs. Activities such as greenhouse gas emissions inventory, energy efficiency, waste management, water conservation, and the preparation of sustainability reports are no longer new—particularly for companies participating in PROPER, those with ESG targets, or those integrated into global supply chains. However, the challenges faced today differ from those of a few years ago. Investors, financial institutions, and international customers want to know not only about the sustainability programs a company runs but also how these issues might impact future business performance and financial standing. For instance, rising carbon emissions are no longer viewed merely as an environmental indicator. Investors assess whether such emissions could drive up operating costs due to carbon pricing policies, affect access to sustainable financing, or pose risks to the company’s competitiveness in international markets. The same applies to physical risks associated with climate change—such as floods, droughts, or extreme weather—which can disrupt operations and supply chains. The need for this type of information forms the basis for the development of IFRS S1 and IFRS S2. These standards provide a clearer framework regarding the information that must be disclosed, enabling investors to understand the interconnections between sustainability risks, corporate strategy, and future business prospects.

IFRS S1 and IFRS S2 Are Not Replacements for Sustainability Reports

One of the most frequently asked questions is whether companies still need to prepare a Sustainability Report if they have adopted IFRS S1 and IFRS S2. The answer depends on reporting objectives and stakeholder needs. Sustainability Reports are generally used to communicate ESG performance to diverse stakeholder groups, including the public, customers, regulators, employees, and investors. Their scope is broad and may align with various frameworks, such as the GRI Standards. In contrast, IFRS S1 and IFRS S2 were developed with a more specific focus: providing sustainability information that is material to investors and capital providers. Consequently, companies must explain how environmental, social, and governance (ESG) issues can impact cash flows, access to finance, business strategy, and the company’s ability to create long-term value. In practice, the two approaches complement each other. Sustainability Reports continue to serve as a medium for communicating sustainability matters to a wide range of stakeholders, while IFRS S1 and IFRS S2 enhance the quality of disclosures by adopting a perspective more closely aligned with the needs of capital markets and investors.

Why Are Many Companies Not Yet Ready?

Experience across various ESG projects shows that implementation challenges rarely stem from a lack of data. Most companies already possess information regarding energy consumption, greenhouse gas emissions, water usage, waste, and various other operational indicators. Issues typically arise when this data needs to be consolidated into consistent, accountable information. Data is often siloed across different divisions using disparate recording methods, lacks adequate verification mechanisms, or remains unconnected to risk management and business planning processes. These conditions mean companies require more time to prepare sustainability disclosures that meet the requirements of IFRS S1 and IFRS S2. Consequently, many organizations begin the implementation process with a gap assessment to identify the discrepancies between their existing systems and the requirements of ISSB standards. A gap assessment also helps companies determine implementation priorities, allowing investments of time and resources to be focused on the areas that have the greatest impact on reporting readiness.

What Needs to Be Disclosed Under IFRS S1?

IFRS S1 provides guidance on sustainability information that must be disclosed if it has the potential to influence the decisions of investors and providers of capital. In other words, the focus is not on the sheer number of ESG programs a company has, but rather on information that genuinely impacts business performance and prospects. In practice, companies need to explain how sustainability issues are identified, how associated risks and opportunities affect the business model, and how management addresses them. Disclosures must also be supported by the targets, performance indicators, and monitoring processes employed by the company. For instance, an energy-intensive manufacturing company needs to explain how rising energy prices, decarbonization policies, or regulatory changes could impact its operating costs and business strategy. Similarly, companies reliant on imported raw materials must consider the risk of supply chain disruptions caused by climate change or environmental policies in their suppliers’ countries of origin. Through this approach, investors gain a more comprehensive picture of a company’s ability to manage sustainability risks while simultaneously capitalizing on opportunities arising from the transition to a more sustainable economy.

IFRS S2: Focusing on Climate-Related Risks and Opportunities

While IFRS S1 addresses all material sustainability issues, IFRS S2 specifically governs climate-related disclosures. This standard was developed by adopting the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD); consequently, its disclosure structure aligns with the four key pillars: governance, strategy, risk management, and metrics and targets. For companies, implementing IFRS S2 entails more than simply reporting the volume of greenhouse gas emissions. The expected disclosures are far more comprehensive, encompassing how climate change impacts business strategy, investments, and operations, as well as the company’s long-term resilience. By way of illustration, companies operating in high-flood-risk areas need to evaluate potential disruptions to production or distribution facilities. Meanwhile, companies reliant on fossil fuels must consider transition risks—such as changes in carbon pricing policies, rising energy costs, or shifts in market demand toward low-emission products. Therefore, implementing IFRS S2 requires the involvement of various organizational functions. The necessary information must be sourced not only from the ESG team but also from operational, finance, risk management, and strategic planning units.

Do IFRS S1 and IFRS S2 Replace GRI or TCFD?

This question often arises when companies begin preparing for the implementation of ISSB standards. The answer is no. GRI Standards, CDP, SASB, and TCFD were developed with different objectives and target audiences in mind. Many companies have utilized these frameworks for years to meet reporting requirements for regulators, customers, investors, or other stakeholders. IFRS S1 and IFRS S2 do not require companies to abandon the frameworks they are already using. Instead, these two standards can serve as a reference to align existing sustainability information, making it more relevant to investors. For instance, companies that have prepared sustainability reports based on GRI generally already possess data regarding emissions, energy, water, waste, and social aspects. This information can serve as a foundation for preparing sustainability-related financial disclosures, although adjustments will still be necessary to meet the specific requirements of IFRS S1 and IFRS S2. Similarly, companies that have implemented TCFD recommendations will have an advantage, as the disclosure structure of IFRS S2 is built upon a similar foundation. This can reduce the effort required during the implementation process.
Calculate My Factory's Energy-Saving Potential

Initial Steps Before Implementing IFRS S1 and IFRS S2

A common mistake is proceeding directly to report preparation without first assessing the organization’s readiness. Such an approach risks producing disclosures that are inconsistent or difficult to sustain in subsequent reporting periods. In practice, implementation typically begins with a gap assessment. This stage aims to compare the company’s current state against the requirements of IFRS S1 and IFRS S2, allowing areas requiring improvement to be identified early on. The results of the gap assessment usually serve as the foundation for developing an implementation roadmap. Companies can then determine development priorities—ranging from strengthening governance and refining data collection processes to enhancing internal controls and establishing more integrated reporting mechanisms. This phased approach also enables companies to optimize their existing systems. Many organizations already possess relevant data and policies, meaning implementation can focus on refining processes rather than building new systems from scratch.

How Does Actia Support the Implementation of IFRS S1 and IFRS S2?

Every company has a different level of readiness for adopting IFRS S1 and IFRS S2. Some organizations already possess sustainability reports, greenhouse gas emission inventories, and clear ESG targets. Conversely, other companies are just beginning to build their sustainability data management systems. Consequently, implementation cannot follow a one-size-fits-all approach for every organization. Actia supports companies throughout the process, ranging from the readiness assessment stage to the preparation of sustainability disclosures aligned with ISSB standards. This support is provided in phases, enabling companies to leverage their existing data, systems, and processes while simultaneously identifying areas that require further strengthening.
The services we provide range from gap assessments, the formulation of implementation roadmaps, and the development of sustainability governance frameworks to the identification of required data, the preparation of climate-related disclosures, and the review of disclosure quality prior to publication. This approach helps companies establish a more consistent reporting system that is ready for use in the subsequent reporting period.
Drawing on experience with greenhouse gas (GHG) inventory projects, sustainability reports, decarbonization strategies, ESG, and carbon footprint assessments, Actia helps companies integrate various sustainability initiatives into reporting frameworks aligned with IFRS S1 and IFRS S2.

Frequently Asked Questions by Clients

  • Are IFRS S1 and IFRS S2 already in effect in Indonesia?
    Yes. The Institute of Indonesia Chartered Accountants (IAI) has adopted IFRS S1 and IFRS S2 as Sustainability Disclosure Standards (SPK) 1 and SPK 2, effective from January 1, 2027. Nevertheless, many companies have already begun preparing for implementation through gap assessments and the refinement of reporting systems.
  • Do companies that already have a sustainability report still need to implement IFRS S1 and IFRS S2?
    An initial evaluation is required. While a sustainability report can serve as a solid foundation, it may not necessarily meet all disclosure requirements under ISSB standards. Many companies already possess adequate ESG data, yet adjustments are still needed to ensure the information is relevant to investors and linked to financial aspects.
  • How long does the implementation of IFRS S1 and IFRS S2 take?
    Implementation duration varies by company. Influencing factors include organizational complexity, the number of operational locations, the quality of ESG data, and the maturity level of sustainability governance. Therefore, implementation typically begins with a gap assessment to determine the scope of work and development priorities.
  • Why do companies need to engage IFRS S1 and IFRS S2 consultants?
    The IFRS S1 and IFRS S2 standards encompass various aspects, ranging from governance, risk management, and climate change to sustainability-related financial disclosures. Consultant support helps companies understand the standards’ requirements, develop an implementation roadmap, and ensure that the reporting process operates more effectively and in alignment with prevailing practices.

Prepare for IFRS S1 and IFRS S2 Implementation Now!

Adopting IFRS S1 and IFRS S2 goes beyond merely meeting reporting requirements. These standards help companies prepare sustainability information that is more structured, consistent, and relevant to investors and capital providers. Early preparation also allows companies time to strengthen governance, improve ESG data quality, and align reporting processes with business needs. If your company is currently evaluating its readiness to adopt IFRS S1 and IFRS S2, or requires implementation support, the Actia team is ready to assist—from the initial stages through to the preparation of sustainability disclosures that comply with ISSB standards. Discuss your company’s needs with the Actia team. We are ready to help develop an implementation strategy tailored to your industry characteristics, organizational readiness, and business objectives.
Consult Now