Nigerian firms confused on SRRO materiality under IFRS S1/S2; focus on financial impact, not CSR impact
Nigerian entities implementing IFRS S1 and S2 sustainability reporting standards are confused about what constitutes material Sustainability Related Risks and Opportunities (SRRO), often confusing financial materiality with the impact materiality focus of their previous CSR reporting.
Under IFRS S1 and S2, only SRRO that could reasonably affect a company's cash flows, access to finance, or cost of capital are material for reporting—this is financial materiality. Impact materiality (social and environmental effects) is not the reporting focus, leading some firms to produce non-compliant reports by continuing CSR-style impact reporting instead of disclosing financially relevant sustainability risks and opportunities. The confusion stems from companies' CSR background where reporting focused on giving back to society.
To comply, entities must assess SRRO based on financial materiality, considering how sustainability issues influence the six capitals of integrated reporting (financial, manufactured, natural, human, intellectual, social and relationship capital) throughout the value chain. This integrated approach, as explained by Innocent Okwuosa (past NIRC chair and ICAN president), makes the separate 'double materiality' concept obsolete. Ensure your sustainability reports prioritize financial implications to meet FRC requirements.