Evidence from the field of implementation shows that the lack of clarity in materiality assessment among implementing entities in Nigeria lies in deciding what constitutes material SRRO, which entities should prioritise. The confusion arises because entities in Nigeria which previously engaged in sustainability reporting did so from the perspective of corporate social responsibility (CSR), in which the motivation is giving back to the society and sharing prosperity.
In the implementation of IFRS S1 and S2, one of the documents required by Financial Reporting Council (FRC) of Nigeria during the Phase Two of the implementation (see the Revised Roadmap for Implementation of IFRS S1 & S2 in Nigeria), is the identification and materiality assessment of Sustainability Related Risks and Opportunities (SRRO). As S2 is the only standard that deals with a sustainability topic (climate related risks and opportunities), it means that International Sustainability Standard (ISSB) has no standards dealing with other sustainability topics apart from climate risks.
Reporting entities therefore need a lot of guidance in the identification and materiality assessment of SRRO. In my last piece, (i.e. Part 2), I provided guidance on the identification of SRRO by those adopting IFRS S1 and S2, given the confusion that arises when a sustainability topic is not covered by IFRS Sustainability Standards. IFRS S1 requires an entity to refer to a hierarchy which technically limits the reference to sustainability standards that prioritise investors information needs. Today, I want to provide further guidance on another aspect of the identification of SRRO, which is the materiality assessment.
