Mandatory sustainability reporting is gaining momentum in South Africa, creating an important opportunity for organisations to strengthen resilience, improve access to finance and maintain competitiveness. The establishment of the Adoption Readiness Working Group (ARWG) marks a significant step towards assessing how internationally aligned sustainability reporting could be implemented in practice locally.

South Africa is considering a move towards formal sustainability reporting, with growing support for the International Sustainability Standards Board (ISSB) IFRS S1 and S2 standards. Supported by the Companies and Intellectual Property Commission (CIPC) and the Department of Trade, Industry and Competition (DTIC), the newly established ARWG will assess the country's readiness for adoption and explore key implementation considerations, including materiality, assurance, and market preparedness. The final policy position, scope and timeline are still being developed, and any mandatory requirements would ultimately need to be introduced through legislation.

The potential benefits extend beyond compliance. More consistent sustainability disclosure can strengthen investor confidence, improve access to capital and help South African businesses meet the growing expectations of investors, lenders, customers and regulators. 

This potential shift towards mandatory reporting offers organisations a critical window to prepare. Effective sustainability reporting goes beyond disclosure, helping organisations identify risks earlier, strengthen resilience and improve performance. Because credible reporting depends on sound governance, risk management, data systems, and internal capabilities, organisations that start preparing now can build lasting value while positioning themselves for future reporting requirements.
 

Reporting is a means to stronger business performance

Alignment with IFRS S2 requires organisations to identify climate-related risks and opportunities that could affect their prospects, assess resilience under different climate scenarios and explain how climate considerations affect governance, strategy, risk management and financial performance. They also need credible emissions data, metrics, and targets, meaning much of the work happens long before a report is drafted.

The measures put in place to support reporting alignment can deliver value well beyond disclosure. They can help organisations make better business decisions, from reducing exposure to high and volatile energy costs through renewable energy adoption, to strengthening resilience against geopolitical and commodity price shocks. It can also help organisations meet investor expectations and maintain access to markets that increasingly require transparent sustainability information and lower carbon products. Reporting is not the end goal, but a foundation for cost savings, resilience and future growth. 

Reporting frameworks may define what to disclose, but organisations need to have the governance structures, data, controls, and accountability in place to produce that information reliably. This requires coordination across business functions, rather than a reporting team working in isolation. 
 

Organisations are supportive of the potential move, but readiness remains a challenge

Recent market research indicates strong support for sustainability reporting among South African stakeholders  Current discussions joint to phased implementation focused on larger, more publicly accountable entities, with support strongest for initial adoption by listed companies, state-owned companies, major retirement funds, private companies, and entities with higher Public Interest Scores. More than 70% of participants supported some form of mandatory reporting, yet only 28% considered their organisations ready or fully ready for future requirements.

This gap highlights the scale of organisational change that implementation may require. For many organisations, climate risk assessment and scenario analysis are likely to be among the most demanding aspects of the transition. These activities require input from finance, risk, sustainability, strategy and operations, and should inform investment decisions, capital allocation, enterprise risk management and long-term planning. For many organisations, this represents a significant shift in how risks and opportunities are identified and evaluated. However, it can also reveal emerging business risks and sources of value that may otherwise remain overlooked. While often viewed as reporting requirements, their real value lies in helping organisations better understand future risks and opportunities, strengthen resilience and make more informed business decisions.
 

South Africa is not starting from scratch

South Africa already has a strong foundation in integrated reporting, corporate governance and sustainability disclosure. Many organisations report against established frameworks such as King V, the Integrated Reporting Framework, the Global Reporting Initiative (GRI) Standards and the Johannesburg Stock Exchange (JSE) Sustainability and Climate Disclosure Guidance. In addition, existing environmental, emissions and social reporting requirements mean that many organisations already collect and manage relevant sustainability information.

Research found that 68% of respondents already disclose sustainability information publicly, while more than half report against multiple frameworks. However, existing disclosure does not necessarily mean organisations are ready for the more rigorous governance, data, financial connectivity and assurance requirements that could accompany future mandatory reporting.

The move towards mandatory sustainability reporting is part of a broader global effort to align reporting requirements and improve interoperability between frameworks. While the ISSB Standards focus on sustainability related risks and opportunities that affect financial performance, frameworks such as GRI should continue to play an important complementary role by addressing broader economic, environmental and social impacts.

Future requirements are therefore likely to build on, rather than replace, existing reporting practices. For many organisations, the priority is not starting from scratch, but assessing whether current disclosures are supported by reliable data, appropriate governance and the information needed to meet IFRS S1 and IFRS S2 expectations.
 

What should organisations be doing now?

Organisations do not need to predict the final regulatory outcome to begin preparing. A focused readiness assessment can establish what is already in place, where the most material gaps sit and which improvements will require the longest lead time.

Key questions include:

• Do we understand which sustainability and climate-related risks and opportunities are financially material to our business?
• Are climate-related risks integrated into enterprise risk management processes?
• Do we have reliable data, controls and ownership structures for sustainability information?
• Are boards and management equipped to oversee sustainability-related risks and opportunities?

Addressing these questions early can help organisations identify gaps, clarify responsibilities and prioritise investment. Organisations that wait until requirements are finalised may find the biggest gaps relate not to disclosure itself, but to the underlying governance, data and risk management capabilities that take time to develop.