Sustainability reporting is moving closer to the standards applied to financial information as companies across global markets prepare for the growing adoption of the International Sustainability Standards Board’s IFRS S1 and S2, increasing pressure on businesses to produce data that is accurate, traceable and capable of supporting investment decisions. The shift, highlighted in a September 3 analysis by SAP Sustainability Chief Product Officer Gunther Rothermel, has implications for African companies seeking international capital, particularly as more than 40 jurisdictions representing about 60% of global GDP have adopted or are moving to adopt the IFRS Sustainability Disclosure Standards.
The change represents a broader evolution in the role of sustainability information. Environmental, social and governance data was historically often collected by sustainability teams and published separately from mainstream financial reporting. Increasingly, investors, lenders, regulators and boards are treating information on climate exposure, emissions, resource use and other material sustainability issues as part of the information required to assess enterprise risk and long-term value.
According to the SAP analysis, more than 70% of investors surveyed by PwC said sustainability should be integrated into corporate strategy, while EY’s 2024 Global Corporate Reporting Survey found that 96% of finance leaders had concerns about the integrity and reliability of non-financial data. The figures illustrate a problem that extends beyond reporting compliance: companies cannot make credible sustainability disclosures if the underlying data is fragmented, inconsistent or difficult to verify.
For African businesses, that issue is becoming increasingly relevant as companies seek to access international debt and equity markets, development finance and cross-border investment. Investors assessing an African company may need to understand its exposure to climate-related physical risks, transition costs, energy prices, water availability, supply-chain disruption and regulatory change alongside conventional financial indicators.
This is particularly important for sectors that underpin African economic activity. Mining companies face growing scrutiny over energy use, water consumption, land impacts and community relations. Banks and insurers are increasingly exposed to climate-related credit and underwriting risks. Agricultural businesses operate amid changing rainfall patterns and increasing resource constraints, while manufacturers face pressure to manage energy consumption and emissions as international markets introduce more stringent environmental requirements.
The implementation of IFRS S1 and S2 is designed to make such information more useful to capital providers. IFRS S1 establishes general requirements for sustainability-related financial disclosures, while IFRS S2 focuses specifically on climate-related risks and opportunities. The standards are built around information that could reasonably be expected to influence decisions by investors, lenders and other creditors.
For companies operating in Africa, this introduces an important governance challenge. Sustainability information needs to move through the same organisational systems that support financial and operational decision-making. Finance, risk, procurement, operations and sustainability functions increasingly need consistent data rather than maintaining separate reporting processes.
The challenge is particularly pronounced in companies operating across multiple African jurisdictions. Regulatory requirements, data availability and reporting practices can differ considerably between markets. A group with subsidiaries in several countries may therefore face different disclosure requirements while attempting to maintain consistent information for investors and lenders.
The cost and complexity of producing reliable data also matter for smaller companies. Large listed businesses may have the financial and technical resources to establish dedicated sustainability teams and data systems, while smaller enterprises can face substantial difficulties collecting emissions, workforce, supply-chain and environmental information. Yet many smaller businesses form part of the value chains of larger companies and may increasingly be asked to provide sustainability information to customers, banks and investors.
This creates a potential knock-on effect across African supply chains. A manufacturer seeking to demonstrate the environmental performance of its exports may require emissions and energy information from local suppliers. A bank assessing climate-related credit risks may need information from borrowers whose internal reporting systems remain relatively basic. An international investor may require comparable information from portfolio companies operating in different African markets.
Read also: https://news.sap.com/2026/09/sustainability-data-finance-grade-rigor-ifrs/
The resulting pressure is not necessarily limited to the introduction of new reporting rules. It also concerns the quality of corporate controls. Sustainability information that cannot be traced to an underlying transaction, operational record or documented methodology can be difficult to assure and potentially less useful to investors.
That distinction is increasingly important as sustainability assurance develops. The movement towards finance-grade sustainability information means companies are likely to face greater scrutiny over the processes used to collect, calculate and validate reported figures, rather than simply the appearance of the final report.
The implications extend to the cost of capital. Sustainability disclosure does not automatically lower borrowing costs or attract investment, but reliable information can reduce some of the uncertainty investors face when assessing material risks. Conversely, weak or inconsistent data can make it more difficult to distinguish between companies with effective risk-management systems and those whose sustainability claims are difficult to substantiate.
For African economies, where the cost of external finance is already a major constraint on infrastructure and private-sector investment, the quality of information can therefore become part of a wider financing equation. Companies seeking international capital may increasingly need to demonstrate not only financial performance but also how climate and other sustainability-related risks could affect revenues, assets, operating costs and future investment requirements.
Climate disclosure is especially significant. IFRS S2 requires companies to consider areas including governance, strategy, risk management and metrics and targets relating to climate-related risks and opportunities. For an African business exposed to drought, flooding, extreme heat, water scarcity or unreliable energy supply, climate information can have direct operational and financial relevance.
The same applies to transition risks. Governments, trading partners and financial institutions are gradually changing policies and capital-allocation decisions around carbon-intensive activities. African exporters can therefore face commercial consequences from international climate policies even where domestic regulations remain less stringent.
The development of carbon markets, renewable-energy investment and green industrial projects further increases the importance of reliable data. Financial institutions financing these activities need information capable of demonstrating environmental performance, while investors require confidence that sustainability-linked commitments are supported by measurable indicators.
Africa’s reporting landscape is already shaped by multiple frameworks. Companies may need to navigate IFRS Sustainability Disclosure Standards alongside the Global Reporting Initiative and, where relevant, European Sustainability Reporting Standards. The SAP analysis argues that maintaining separate processes for every framework can increase cost and complexity and highlights the potential value of a common data foundation.
For African companies, however, the central issue is not the adoption of a particular technology platform. It is whether sustainability information is integrated into corporate systems strongly enough to support both reporting and management. Technology can help consolidate information, but governance, internal controls, data ownership and accountability remain fundamental.
This is also where boards have a growing role. If sustainability information can influence assessments of enterprise value, financing conditions and operational risk, responsibility for its quality cannot rest exclusively with sustainability departments. Boards and senior executives increasingly need to understand how climate and other material ESG factors affect strategy, capital allocation and risk management.
The transition towards more rigorous sustainability information could also strengthen corporate decision-making where the data is used beyond compliance. Energy and emissions information can help companies identify operational inefficiencies; climate-risk assessments can inform infrastructure planning; workforce information can highlight retention and skills risks; and supply-chain data can reveal vulnerabilities that may not be visible through conventional financial reporting.
For governments and regulators, the challenge is to develop disclosure requirements that improve market information without imposing disproportionate costs on businesses with limited reporting capacity. Consistency with international standards can support access to global capital, but implementation will require attention to local market conditions, data infrastructure and institutional capacity.
The African financial sector will be particularly important in this transition. Banks, insurers, pension funds and development-finance institutions sit between capital providers and businesses and can influence the quality of sustainability information entering the financial system. As climate-related risks become more relevant to lending, investment and insurance decisions, financial institutions will need reliable information from their counterparties.
The broader shift therefore concerns the relationship between sustainability and finance. The objective is not simply to produce longer corporate reports but to establish information systems capable of connecting environmental and social conditions with financial consequences.
For Africa, this distinction matters because sustainability risks are already economic realities. Water stress can affect mining and agriculture, extreme weather can damage infrastructure, unreliable energy can raise operating costs, and changes in global trade rules can affect exporters. Treating these issues as separate from financial management can leave companies less prepared to quantify risks that investors increasingly need to understand.
The move towards IFRS S1 and S2 consequently presents both a compliance challenge and a test of corporate governance. Companies that establish reliable sustainability data systems may be better positioned to respond to investors, regulators and lenders, while those relying on fragmented or manually assembled information could face increasing difficulty as disclosure expectations become more demanding.
The wider implication for African capital markets is that sustainability information is becoming part of the infrastructure through which capital is allocated. As investors seek comparable evidence on climate exposure, resilience and governance, the quality of corporate data can influence how effectively businesses communicate risk and opportunity.
For African companies, the immediate task is therefore not simply to prepare for another reporting framework. It is to determine whether the information used to describe sustainability performance is sufficiently robust to withstand financial scrutiny and inform decisions about investment, risk and long-term growth. The credibility of ESG reporting will increasingly depend on what happens behind the report: the systems, controls, data and governance that connect sustainability performance to the financial realities of the business.
