EABL group CFO Risper Genga Ohaga and ICEA Lion General Insurance CFO Zipporah Mungai Chege recently participated in a multistakeholder committee to develop a roadmap for the adoption of the IFRS Sustainability Disclosure Standards in Kenya.
The committee established by the Institute of Certified Public Accountants of Kenya (ICPAK) brought together industry players, regulators, development partners and other stakeholders to ensure preparedness towards implementation of IFRS S1 (general requirements for disclosure of sustainability-related financial information) and S2 (climate-related disclosures), which were released by the International Sustainability Standards Board (ISSB) in 2023.
CFO East Africa caught up with Risper and Zipporah to learn more about their perspectives on mandatory sustainability disclosures.
According to Zippporah, the most challenging aspect of the process was scoping the progress various organisations had made on their sustainability journeys, in both the public or private sectors. To this end, the committee conducted a survey that informed its decision to set different dates for mandatory adoption. Public interest entities will be required to implement the standards from 1 January 2027, while large enterprises will be expected to do so by 1 January 2028. Mandatory adoption for small and medium enterprises will begin on 1 January 2029.
The survey showed that only 14.7 percent of the respondents had the tools to measure sustainability outcomes, a common challenge for finance leaders. She encouraged ICPAK and other regulators to create tools to support the development of sustainability metrics with the aim of ensuring organisations can adopt and execute such measures.
“From a sector demographics perspective, we did have 95 participants. 73 percent of those were from the private sector and 27 percent of those were from the public sector. In terms of commencement of the sustainability journey, the question we asked here was ‘has your organisation commenced the sustainability journey?’ 51.6 percent said ‘yes’ and more than 40 percent said either ‘no’ or they were actually thinking about it,” she said.
Since 2021, EABL has been releasing standalone sustainability reports using the framework developed by the Task Force on Climate-related Financial Disclosures, which has since disbanded. Risper revealed that the company has set up processes to measure and validate the sustainability outcomes it attains against the goals it has set and internal validation checks to ensure the accuracy of reported information.
“In preparation for implementation of S1 and S2, we are in the process of formalising a cross-functional working team that will midwife the implementation of S1 and S2, starting with a readiness assessment to identify any gaps that may exist between where our reporting under TCFD is and what will need to be in place for S1 and S2 implementation. We will then work through closing the gaps, and thereafter obtaining independent assurance over our proposed reporting,” she said.
Risper lauded the move to adopt IFRS S1 and S2 in Kenya, saying it would ensure consistency in reporting and ensure organisations whose operations impact the environment integrate sustainability measures.
“I've been known to complain about the cost of compliance, but I think it's really important that we make sure we are ready as we get into 1 January 2027, that we have processes and procedures to ensure that our transparency and disclosure are evidenced. And finally assurance processes, making sure that what we put out to the public is credible, it's transparent, it's consistent, and it's user-friendly. So for us, this is just another step forward for sustainability. It's critical to our strategy,” she said.
She also highlighted the role of regulation in supporting smaller manufacturing entities through policies that incentivise sustainability such as tax breaks, financial support, and other resources that could enable compliance and reduce related costs.
Material disclosures
Notably, the survey showed that most organisations were at formative stages of their sustainability journey and were plagued by limited resources and a lack of knowledge about what it would take to reach sustainability maturity. However, Zipporah pointed out that there was a general willingness to adopt sustainability measures despite the barriers faced
Citing the Nairobi Declaration on Sustainable Insurance, which is intended to mobilise the insurance industry in Africa to support the achievement of the UN Sustainable Development Goals, Zipporah raised the question of how to drive policy, regulatory and engagement in the insurance industry to entrench thinking and practices around sustainability in the way businesses are run.
“A famous statement says that sustainability pays for itself. Once an organisation properly scopes material issues and what aspects of the business matters from a sustainability angle, the sustainability strategy can be aligned to the organisational strategy. As a result, the pursuit of strategy becomes embedded in the most important cogs of the business strategy, making sustainability pursuit not a separate agenda but one that drives overall organisational strategy. The secret to this is a proper materiality assessment. If this is not done well sustainability becomes a separate agenda that can easily appear as burdensome to follow through,” she said.
Board buy-in
Zipporah highlighted the importance of ensuring sustainability is anchored at governance level, challenging attendees to consider the extent to which organisations foster the sustainability agenda across their value chains. She also noted that buy-in at the board level was crucial to the push for sustainability.
“Most importantly, when you think about insurance and the extent to which customers in our country are actually able to adopt or uptake insurance, what is our role as the insurance industry in ensuring that we are also offering coverage of risk to the less privileged?” she questioned.
According to Zipporah, the primary barrier to securing buy-in is linking sustainability to overall organisational strategy and demonstrating to the board how the pursuit of sustainability will grow the overall organisational value.
“Once the investment and return of sustainability pursuit is clearly demonstrated, buy-in by the board becomes very easy. To transition to true stewards the board must see the value organisations get or drive by pursuing sustainability. For the CFO, our responsibilities have broadened from just pursuing financial objectives to how we drive value within the organisation. We will need to change perspectives from CFO to CVO. CVO represents a chief value officer. We need to pursue value across all aspects both financial and non-financial,” she said.
Bringing staff on board has also been key to integrating sustainability into EABL’s organisational strategy. The company has navigated this by ensuring every employee fully understands its sustainability strategy known as ‘Society 2030: Spirit of Progress’, a process Risper revealed took four years.
“Understanding the areas in which our business can impact the environment and the ways in which we can address these through the pillars we defined was very critical to getting their buy-in and participation. We did this through a combination of training courses, discussions, leadership conversations and even videos demonstrating leaders playing their role in sustainability. Each senior leader was then required to attend a six-month programme on sustainability and submit a project demonstrating how they would implement sustainability in their area. We also started to measure sustainability outcomes as part of performance reviews in the same way as we do financial results,” she said.
