ADVISORY ON TIMELINES AND READINESS REQUIREMENTS FOR KENYAN ENTITIES REPORTING ON THE IFRS SUSTAINABILITY DISCLOSURE STANDARDS (IFRS S1 – GENERAL REQUIREMENTS FOR DISCLOSURE OF SUSTAINABILITY-RELATED FINANCIAL INFORMATION AND IFRS S2 – CLIMATE-RELATED DISCLOSURES)
The Institute of Certified Public Accountants of Kenya (ICPAK) is a statutory body of Accountants established under the Accountants Act CAP 531, with the mandate to develop and regulate the Accountancy Profession in Kenya. The Institute is also a member of the Pan Africa Federation of Accountants (PAFA) and the International Federation of Accountants (IFAC), the global umbrella body for the accountancy profession.
In line with The Accountants Act, one of the key functions of the Institute is to promote standards of professional competence and practice amongst members. As a member of IFAC, the Institute ensures compliance to all the statements of member obligations and as such promoting compliance to standards within the practice of members and the country at large. The Institute participates actively in the standards setting process by actively commenting on exposure drafts thus contributing to setting high quality international standards that enhance the competence of professional accountants while strengthening the worldwide accountancy profession and contributing to strengthened public trust.
The Institute wishes to remind organisations operating in Kenya that the transition toward the mandatory adoption of the IFRS Sustainability Disclosure Standards (IFRS S1– General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 – Climate-related Disclosures) remains on course in accordance with the national adoption roadmap announced in October 2024.
| Phase | Timelines (Accounting period beginning on or after) | Organisations Involved |
| Phase 1 – Voluntary Adopters | 1 January 2024 | All organisations |
| Phase 2 – Mandatory Adoption | 1 January 2027 | Public Interest Entities (PIEs) |
| 1 January 2028 | Non-PIEs (Large Enterprises) | |
| 1 January 2029 | Non-PIEs (SMEs) | |
| Phase 3 – Government Organisations | 1 July 2028 | Government organisations reporting on IPSAS as per the IPSASB SRS 1- Climate-related Disclosures |
With one year remaining before the first mandatory reporting phase, ICPAK calls on organisations to accelerate their preparedness efforts to ensure that sustainability disclosures are robust, decision-useful and capable of withstanding investor and regulatory scrutiny.
The IFRS Sustainability Disclosure Standards establish a global baseline for sustainability-related financial disclosures, enabling organisations to communicate how sustainability-related risks and opportunities affect enterprise value, including impacts on cash flows, access to finance and cost of capital.
- Entities Subject to the First Phase of Mandatory Adoption
Under the national roadmap, Public Interest Entities (PIEs) will be required to publish sustainability disclosures aligned with IFRS S1 and IFRS S2 for accounting periods beginning on or after 1 January 2027.
In Kenya, PIEs include entities whose activities have a significant impact on the public and financial markets. These include:
- Companies listed on the Nairobi Securities Exchange (NSE)
- Commercial banks regulated by the Central Bank of Kenya (CBK)
- Insurance companies regulated by the Insurance Regulatory Authority (IRA)
- Retirement benefit schemes and pension funds regulated by the Retirement Benefits Authority (RBA)
- Fund managers and collective investment schemes regulated by the Capital Markets Authority (CMA)
- Deposit-taking SACCOs regulated by the Sacco Societies Regulatory Authority (SASRA)
- Large state corporations and government-controlled entities with significant public accountability reporting in accordance with IFRS Accounting Standards.
Boards and management are responsible for ensuring that sustainability is embedded in the core purpose and long-term strategy. Therefore, Boards and management of these entities are expected to ensure that adequate governance, compliance building, data systems and internal controls are in place ahead of the first reporting cycle.
- Definition of Large Non-Public Interest Entities
For purposes of the sustainability reporting adoption roadmap, Large Non-Public Interest Entities (Large Non-PIEs) refer to organizations that are not classified as Public Interest Entities but exceed the Medium Company thresholds defined under the MSME Policy, 2025 as issued by the State Department for Micro, Small and Medium Enterprises.
An entity may therefore be considered a Large Non-PIE where it exceeds two of the following thresholds:
- Annual turnover exceeding KES 100 million
- Total assets exceeding KES 250 million
- More than 250 employees
Such entities will be expected to adopt IFRS Sustainability Disclosure Standards for accounting periods beginning on or after 1 January 2028.
Entities with turnover exceeding KES 1.3 billion, consistent with large taxpayer classifications in Kenya, are strongly encouraged to begin preparations earlier due to the scale and public visibility of their operations.
- Mandatory Readiness Assessment
In preparation for the first year of mandatory reporting, all PIEs will be required to undertake and submit a Sustainability Reporting Readiness Assessment to ICPAK prior to publishing their first sustainability disclosures.
The readiness assessment should evaluate the organisation’s preparedness across the four core disclosure pillars under IFRS S1 and IFRS S2:
- Governance: Board oversight and management responsibility for sustainability-related risks and opportunities
- Strategy: Integration of sustainability considerations into business strategy and resilience planning
- Risk Management: Processes for identifying, assessing and managing sustainability-related risks
- Metrics and Targets: Systems for measuring and monitoring sustainability performance
Completed readiness assessments should be submitted electronically to ICPAK through the email address technicalservices@icpak.com. Readiness assessment reports should be submitted 6 months prior to the mandatory reporting timeline of 1 January 2027 or earlier for entities planning to publish their first report in compliance to the Standards in 2026.
This process will enable the Institute to support entities in identifying implementation gaps early and strengthening the quality of first-year disclosures.
- Assurance Requirements
Sustainability disclosures will be subject to independent assurance under a phased approach. Entities should note that:
- Limited assurance will be required in the initial years of reporting
- A transition toward reasonable assurance is expected in subsequent years
- Assurance engagements must be performed by ICPAK-licensed practitioners with appropriate sustainability reporting competence
Organisations are encouraged to begin strengthening internal controls and documentation systems to support the assurance process.
| Phase | Timelines (Accounting period beginning on or after) | Entities Involved | Limited Assurance | Reasonable Assuranceexcluding Scope 3 emissions | Reasonable Assurance |
| Phase 1 – Voluntary Adopters | 1 January 2024 | All organisations | 1 January 2025 | 1 January 2026 | 1 January 2027 |
| Phase 2 – Mandatory Adoption | 1 January 2027 | PIEs | 1 January 2028 | 1 January 2029 | 1 January 2030 |
| 1 January 2028 | Non-PIEs (Large Enterprises) | 1 January 2029 | 1 January 2030 | 1 January 2031 | |
| 1 January 2029 | Non-PIEs (SMEs) | 1 January 2030 | 1 January 2031 | 1 January 2032 | |
| Phase 3 – Government Organisations | 1 July 2028 | Government organisations | 1 July 2030 | 1 July 2031 | 1 July 2032 |
Sustainability disclosures should be assured by a licensed assurance provider, holding either a Category A (Audit and Assurance License) or Category C (Composite) License and must possess relevant sustainability accreditation as required by ICPAK.
The assurance provider shall be independent of the organisation being audited in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics.
Organisations are encouraged to engage their assurance provider early; ideally by 30 June 2026 for PIEs to allow sufficient time for scoping, data review and first-year assurance planning.
- Greenhouse Gas Emissions Measurement
IFRS S2 requires disclosure of Scope 1, Scope 2 and Scope 3 greenhouse gas emissions, calculated in accordance with internationally recognised methodologies.
Entities are encouraged to utilise globally recognised emission factor sources, including:
- Intergovernmental Panel on Climate Change (IPCC) Guidelines for National Greenhouse Gas Inventories
- International Energy Agency (IEA)
- UK Department for Environment Food and Rural Affairs (DEFRA) emission factor databases
- Recognised sector-specific emission factor repositories
Where local emission factors are unavailable, entities may apply internationally recognised factors with appropriate disclosure of the methodology used.
Organisations are expected to establish credible emissions inventories and develop internal processes to ensure that emissions data is accurate, consistent and auditable.
- Sources of Guidance for Identifying Sustainability Metrics
In identifying appropriate sustainability-related metrics and disclosures, entities should apply the requirements of IFRS S1, which require organisations to disclose information about sustainability-related risks and opportunities that could reasonably be expected to affect enterprise value.
Where specific disclosure guidance is not directly specified within IFRS Sustainability Disclosure Standards, IFRS S1 permits entities to consider relevant sources of guidance to inform the identification of decision-useful metrics.
In this regard, organisations shall consider industry-based guidance such as the Sustainability Accounting Standards Board (SASB) Standards, which provide free sector-specific metrics that may assist entities in identifying sustainability topics and performance indicators relevant to their industry. Where certain metrics or topics from SASB are determined to be not applicable, entities should clearly disclose this and provide a brief explanation. Further, SASB codes should be included for all metrics reported.
Other sources of guidance may also be considered as guided by the Standard. Where such guidance is considered, entities should exercise judgement to ensure that the metrics disclosed are material to their business model and operating context.
- Expectations on Targets, Reporting Quality and National alignment
ICPAK emphasises that sustainability disclosures should be concise, decision-useful and grounded in credible data.
Entities are encouraged to ensure that:
- Sustainability targets are realistic, measurable and supported by implementation plans
- Disclosures are linked to enterprise value and financial performance
- Reports avoid excessive length and boiler-plate sustainability statements
- Information presented is consistent with financial statements and management commentary
High-quality sustainability reporting should enable investors, regulators and other stakeholders to clearly understand how sustainability-related risks and opportunities affect the organisation’s short, medium and long-term financial prospects.
Where relevant, organisations should consider aligning their targets with Kenya’s international sustainability and climate commitments, including national climate and sustainable development objectives. Targets should be supported by credible implementation plans and measurable indicators to enable users of financial reports to assess progress over time.
ICPAK emphasises that sustainability targets should be decision-useful and achievable, rather than aspirational commitments without clear implementation pathways.
- Connectivity with Financial Reporting
In accordance with the principles of IFRS S1, organisations are expected to ensure connectivity between sustainability disclosures and financial reporting.
This includes demonstrating how sustainability-related risks and opportunities influence:
- Business strategy and capital allocation
- Financial position and performance
- Risk management processes
- Forward-looking assumptions used in financial planning
Entities should ensure that sustainability disclosures are consistent with information presented in the financial statements, management commentary and other general-purpose reports thereby enabling users to understand how sustainability considerations affect enterprise value.
- Public Sector Considerations
For the avoidance of doubt, the adoption roadmap referenced in this communication applies primarily to corporate reporting entities.
For the public sector, sustainability and climate-related reporting developments are currently being considered through the Professional Standards Committee (PSC) of ICPAK, The National Multistakeholder Sustainability and Climate Change Committee comprising key regulators and institutions including, The National Treasury and the Public Sector Accounting Standards Board (PSASB). This committee will provide guidance on the application and potential adoption of relevant public sector sustainability reporting standards.
Entities within the public sector should note that the International Public Sector Accounting Standards Board (IPSASB) has issued SRS 1 – Climate-related Disclosures, which provides guidance on reporting climate-related risks and opportunities in the public sector context.
Further guidance on the application of sustainability-related reporting in the Kenyan public sector will be issued through the appropriate multistakeholder coordination framework.
- Sustainability Content Index
To enhance usability and accessibility of sustainability disclosures, organisations are encouraged to include a Sustainability Content Index within their reports.
The index should clearly indicate where the organisation has addressed the disclosure requirements of IFRS S1 and IFRS S2, allowing users of the report to easily navigate relevant sections. Where additional frameworks or guidance sources are referenced, such as industry-based guidance or other sustainability reporting standards, the index should also indicate the relevant sections of the report where these disclosures are located.
- Compliance and Enforcement
ICPAK will work with sector regulators including the Capital Markets Authority (CMA), Central Bank of Kenya (CBK), Insurance Regulatory Authority (IRA), Sacco Societies Regulatory Authority (SASRA) and Retirement Benefits Authority (RBA) among other regulators to coordinate oversight and enforcement.
ICPAK expects boards and audit committees to take direct accountability for the quality and timeliness of sustainability disclosures. Board sign-off on first-year disclosures will be a key governance indicator in ICPAK’s review process.
- ICPAK’s Continued Support
ICPAK remains committed to supporting the successful implementation of sustainability disclosure standards in Kenya through:
- Capacity building programmes for preparers and assurance providers
- Technical guidance and implementation tools
- Industry engagement forums
- Collaboration with regulators and professional bodies
Organisations are encouraged to begin implementation efforts early in order to ensure credible, high-quality disclosures in the first reporting year.
Contact Information
For further enquiries on financial reporting, adoption of standards and other related technical matters please reach out to the Standards & Technical Services Directorate and the Professional Standards Committee of ICPAK on technicalservices@icpak.com or through ceo@icpak.com
CPA DR. GRACE KAMAU
CHIEF EXECUTIVE OFFICER
