The Readiness of Indonesian Companies in Adopting IFRS Sustainability Standards (S2)

TY - BOOK

T1 - The Readiness of Indonesian Companies in Adopting IFRS Sustainability Standards (S2)

AU - Tri Wahyuni, Ersa

AU - Sihotang, Parulian

AU - Aryanto, Yohanes Handoko

PY - 2024/12/14

Y1 - 2024/12/14

N2 - Many jurisdictions are considering adopting IFRS Sustainability Standards issued by the International Sustainability Standard Board (ISSB), including Indonesia. Since the launching of IFRS S1 and S2 in June 2023, the national standard setter in Indonesia has shown a strong interest in adopting the standard in the country. However, the current practice of sustainability reporting in Indonesia requires more challenging disclosures than the IFRS sustainability standard. This study aims to analyse the gap for Indonesian companies should they want to adopt IFRS S2. This study analyses 89 sample companies from energy, chemical, and construction materials, the three industries that use significant natural resources. We map the 2022 sustainability reports of the companies to the IFRS S2 requirements. The study reveals that the gap between current practice and IFRS S2 requirements is significantly wide for Indonesian companies, with less than 40% overall means of disclosures. As ISSB developed the IFRS S2 standard using the TCFD framework, we found it is highly unpopular in Indonesia, with only 3% of the companies using it. We also found a lack of evidence for the linkage between the climate transition strategy and the company’s financial figure, as required by IFRS S2. The study also found that companies in the energy sectors have smaller gaps than the chemical and construction material sectors in IFRS S2 compliance.

AB - Many jurisdictions are considering adopting IFRS Sustainability Standards issued by the International Sustainability Standard Board (ISSB), including Indonesia. Since the launching of IFRS S1 and S2 in June 2023, the national standard setter in Indonesia has shown a strong interest in adopting the standard in the country. However, the current practice of sustainability reporting in Indonesia requires more challenging disclosures than the IFRS sustainability standard. This study aims to analyse the gap for Indonesian companies should they want to adopt IFRS S2. This study analyses 89 sample companies from energy, chemical, and construction materials, the three industries that use significant natural resources. We map the 2022 sustainability reports of the companies to the IFRS S2 requirements. The study reveals that the gap between current practice and IFRS S2 requirements is significantly wide for Indonesian companies, with less than 40% overall means of disclosures. As ISSB developed the IFRS S2 standard using the TCFD framework, we found it is highly unpopular in Indonesia, with only 3% of the companies using it. We also found a lack of evidence for the linkage between the climate transition strategy and the company’s financial figure, as required by IFRS S2. The study also found that companies in the energy sectors have smaller gaps than the chemical and construction material sectors in IFRS S2 compliance.

UR - https://www.iamiglobal.or.id/berita/iami-report-on-the-study-of-the-readiness-of-indonesian-companies-in-adopting-ifrs-sustainability-standards--ifrs-s2-.html

M3 - Commissioned report

BT - The Readiness of Indonesian Companies in Adopting IFRS Sustainability Standards (S2)

PB - The Indonesian Institute of Management Accountants (IAMI)

CY - Indonesia

ER -