Kenya is revising plans to introduce public interest entity-specific mandatory sustainability reporting beginning January 1, 2027, pursuant to efforts that seek corporate transparency and in keeping with global standards. Supported by the Institute of Certified Public Accountants of Kenya (ICPAK), this initiative seeks to provide a framework on which the Environmental, Social, and Governance (ESG) disclosures are applied to be more accountable to organisations and stakeholders. A four-phased Implementation strategy has been set for ICPAK to facilitate a smooth transition of organisations at different scales and capabilities.

Understanding the implementation strategy

Phase One (January 2024 to December 2026) 

Beginning in January 2024, organisations were all pushed by the Joint Declaration of the Invitation to voluntarily switch to IFRS S2 sustainability disclosure. This is for entities to get used to the reporting standards and start putting their thoughts into operation where ESG is concerned.

Phase Two (January 1, 2027: mandatory PIEs only)

 All public interest entities (PIEs) will report on sustainability. PIEs are defined as organisations that have a significant public or economic influence on the size, complexity, or nature of their operations. These companies are thus heavily regulated and subject to strict disclosure norms due to the systemic impact they can have on financial markets, as well as broad stakeholder populations.

Phase Three (to begin January 1, 2028) 

Mandatory sustainability reporting standards will take effect for large non-PIEs going into 2028, which gives them one extra year to get ready and harmonise their reporting processes.

Phase 4 (commencing January 1, 2029) 

Mandatory onboarding of Small and Micro Enterprises (non-public interest entities) starts on January 1, 2029. This additional window is due to resource limitations that may impact smaller organisations and ensure adequate capacity building.

Preparation and capacity building

All organisations must undergo readiness assessments for publishing their first sustainability disclosures for an easy transition, ICPAK argues. This is aimed at assessing an entity’s readiness in terms of data availability, the internal workings of the enterprise and its conformity with the IFRS Standard S2, which guides intangible assets.

Further, ICPAK has ambitions to guide and support entities – big or small – in this changeover to ensure that they comply with the reporting norms. ICPAK CEO Grace Kamau affirmed that they would be providing investors, regulators and other stakeholders with more food for thought to make better-informed decisions on the current and future sustainability information.

Anticipated benefits

We can expect a number of benefits from the implementation of mandatory sustainability reporting.

• Stakeholders will receive standardised ESG communications, driving trust and accountability.
• Investors and regulators can have accurate data to make better evaluations based on organisational performance and risk.
• By being IFRS S2 compliant, Kenyan companies are in step with global standards and enhance prospects to attract global investors.

The sequential introduction of mandatory sustainability reporting in Kenya is a pro-fashion strategy to strike a balance between more corporate transparency and the widespread capabilities of the Kenyan business community. In readiness for the end of 2027, organisations need to act now in capacity-building and will be better prepared to deal with the impending reporting requirements and add to a sustainable and transparent corporate landscape.