Page 27 - CMA Journal (Nov-Dec 2025)

Focus Section

Promote Diversity, Equity and Inclusion (DE&I): The SECP, through its order dated December 31, 2024,
has made it mandatory for listed companies to adopt
• Implement policies for diversity, equity
these standards, and financial statements must reflect
and inclusion.
these disclosures. As per SECP directives, this adoption
• Encourage gender equality and the participation of will be in the following three phases.
women at all levels.
Phase 1 P Phase 2 Phase 3
Risk Management: Period begining on or a er Period begining on or a er Period bbegining on or a er
July 1,, 2025 Julyy 1, 2026 JJuly 1, 2027
• Address principal and emerging
a
s
sustainability risks, including • Listed Companies • Listed Companies ring Turnover g reater •All Listed Companies
d
other than those falling
v v
ha
g
climate-related risks. having Turnover greater than 12.5 billion in last (in Phase 1 and Phase 2)
a
2
than 25 billion in last two consecu ve and non-listed Public
P
o
two consecu ve
• Assess financial and operational financcial years as per financial years as pper companies registered
a
s
e
impacts. their financial their financial with SECP
f
statements, or
statements, or
m
•No. of Employees
f
• Implement management and •No. of Employees (peermanent and
m
(permanent and
n
mitigation strategies. contractual) greater contractual) greateer
a
a
1
than 1,000, or than 500, or
t
Monitoring and Review: •Total assets greater than •Total assets greateer than
h
Rs. 122.5 bilion Rs. 6.25 bilion
• Periodically review and monitor
sustainability and DE&I strategies,
priorities, targets and performance against these Listed companies fulfilling any two criteria shall comply
targets. with the sustainability disclosure standards. The first
reporting may be made within nine months from the
Sustainability Committee:
close of the financial year. Thereafter, the auditor shall
• The board may establish a dedicated committee give assurance from the second year.
with at least one female director or assign
1.3. Investor and Capital-Market Pressure
responsibilities to an existing committee.
Sustainability-related risks such as climate change,
• Monitor sustainability risks and opportunities.
resource scarcity, supply-chain disruption, social unrest,
• Ensure DE&I practices and compliance with relevant and regulatory changes can materially affect cash flows,
laws. cost of capital, and enterprise value. Therefore, in today’s
• Report annually to the board on sustainability world, investors, lenders, and creditors not only assess a
integration into organization’s strategy. company’s financial statements but also assess its
environmental and social risks, governance practices and
Directors’ Report:
long-term sustainability.
• Disclose assessment and management of
1.4. Stakeholder Expectations and License to Operate
sustainability risks.
In current business scenarios, employees, communities,
• Report on measures taken to promote DE&I.
civil society, customers, and shareholders expect
1.2. International Financial Reporting Standards responsible business behavior from the companies.
(IFRS S1 and S2) Therefore, sustainability and ESG reporting helps
companies demonstrate their commitment, build trust
In June 2023, the ISSB released IFRS S1 (General
and safeguard their social license to operate.
Requirements for Disclosure of Sustainability-related
Financial Information) and IFRS S2 (Climate-related 1.5. Long-Term Value Creation
Disclosures). These standards are the first globally Sustainable business practices, including efficient energy
applicable baseline for sustainability reporting. As per usage, waste reduction, water consumption, fair labor
IFRS S1, companies must disclose general practices and good governance, lead to cost savings and
sustainability-related risks and opportunities that could improve brand reputation. They also enhance
reasonably be expected to affect the entity’s cash flows, stakeholder relationships, thereby contributing to
its access to finance or the cost of capital over the short, long-term value creation.
medium or long term. Whereas IFRS S2 is designed to be
Given these factors, sustainability reporting has evolved
used alongside IFRS S1. IFRS S2 addresses climate-related
from a voluntary CSR-style activity to a mainstream
disclosures covering governance, strategy, risk
mandatory requirement for responsible forward-looking
management and metrics/targets for climate-related
companies.
risks and opportunities.
ICMA’s Chartered Management Accountant, Nov-Dec 2025 25