Adopting IFRS S1 & IFRS S2: A Corporate Readiness Guide

The Indonesian Institute of Accountants (IAI) officially issued PSPK 1 and PSPK 2 on 1 July 2025, marking a new chapter in sustainability reporting practices in Indonesia. These standards are adaptations of IFRS S1 and IFRS S2 issued by the ISSB. With this new approach, sustainability reporting is no longer merely a compliance document, but a source of information relevant to assessing a company’s performance, risks, and financial prospects.

Implementation of IFRS S1 and S2 in Indonesia

In Indonesia, sustainability reporting (SR) practices began to strengthen following the issuance of Financial Services Authority Regulation No. 51 of 2017. This regulation requires public companies to disclose sustainability information in a dedicated report. Prior to this requirement, some companies had already published sustainability reports voluntarily, generally referring to the Global Reporting Initiative (GRI) guidelines.

Global developments have accelerated changes in reporting practices. In June 2023, the International Sustainability Standards Board (ISSB) launched IFRS S1 and IFRS S2, creating a global framework for sustainability disclosures that are directly linked to financial reporting.

IFRS S1 sets out general disclosure requirements related to governance, strategy, risk management, as well as sustainability-related metrics and targets that have financial implications.
IFRS S2 focuses on climate-related risks and opportunities, including the impact of transition and physical risks on business models, value chains, and the resilience of corporate strategies.

In response to these developments, Indonesia adopted the standards through the issuance of the Sustainability Disclosure Standards (SPK), consisting of PSPK 1 and PSPK 2, on 1 July 2025. These standards will become effective on 1 January 2027, marking a significant shift in sustainability reporting practices in Indonesia.

Differences Between IFRS S1 and S2 and GRI

During the transition toward the implementation of PSPK 1 and PSPK 2, companies in Indonesia need to adjust reporting practices that have largely been based on GRI. Understanding the differences between the two frameworks is essential to ensure reports remain aligned with new regulations while meeting stakeholder expectations.

Materiality

GRI adopts a double materiality approach, requiring companies to report both their environmental and social impacts as well as the financial implications of sustainability issues. In contrast, IFRS S1 and S2 focus on financial materiality, prioritizing information relevant to investors and capital markets. In this context, climate risk disclosures, for example, are required when they have a financial impact on company performance.

Audience and Purpose

GRI targets multiple stakeholders, from regulators to the public, with a focus on social accountability. Meanwhile, IFRS S1 and S2 emphasize investors and capital markets, providing information to support financial decision-making.

Structure and Methodology

GRI is sector-agnostic and provides universal indicators for broad impact reporting. IFRS S2 uses industry-specific metrics derived from SASB, focusing on financially material factors. During the transition, issues such as Scope 3 emissions and human rights disclosures illustrate the differences between the frameworks. GRI requires comprehensive disclosure, while IFRS S2 requires disclosure only when financially material. Companies need to adjust internal processes to integrate both approaches efficiently.

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Implementation Challenges and Transition Readiness

With PSPK 1 and PSPK 2 taking effect on 1 January 2027, companies in Indonesia face a relatively short transition period. Public companies and large entities need to prepare reporting systems, governance structures, and internal capabilities. Key initial steps include developing a roadmap, establishing sustainability governance structures, and conducting a gap analysis between current reporting practices and new standard requirements.

At the same time, companies face complex technical challenges. Measuring and disclosing Scope 3 greenhouse gas emissions is among the most difficult aspects, as it involves data from supply chains and business partners. Other challenges include inconsistent sustainability data quality, fragmented information systems, and limited internal capacity for climate risk analysis.

During the transition, the right advisory support can help companies develop structured action plans, strengthen governance, build ESG data architecture, and integrate sustainability information with financial reporting. This approach enables companies not only to meet regulatory requirements but also to leverage sustainability reporting as a strategic decision-making tool.

Beyond preparing reports, companies also need a consistent and integrated sustainability communication strategy. Sustainability information should not only be disclosed through annual or sustainability reports, but also across various communication channels. These include corporate websites, investor presentations, newsletters, campaigns, and other corporate communications. Structured communication ensures that sustainability messages are clearly delivered to stakeholders while strengthening transparency and trust in the company’s performance and long-term commitments.

PT Synergy Ultima Nobilus as a Sustainability Consultant

As a consulting firm combining management and accounting expertise, PT Synergy Ultima Nobilus (PT SUN) supports companies in preparing and strengthening structured sustainability practices. Drawing on its experience as an accounting services firm, we help clients integrate existing data, processes, and prior work into more strategic and decision-useful information.

Our approach positions sustainability reporting as part of governance strengthening and decision-making, rather than merely fulfilling administrative requirements. Our sustainability advisory services include:

Preparing Sustainability Reports

PT SUN assists companies in preparing sustainability reports in a structured and systematic manner, from data mapping and identifying relevant indicators to drafting reports aligned with management and stakeholder needs. This approach ensures the report is consistent, decision-useful, and effective as a business communication tool.

Processing Sustainability

Reports For companies that already have internal data or existing reports, we help organize and refine the information to improve clarity and analytical value. Proper processing enables the report to reflect company performance more comprehensively while supporting evaluation and forward planning.

Supervision of Sustainability Reports

PT SUN also provides review and supervision services for sustainability reports that have been prepared internally. Through a structured assessment of the report’s framework, data, and narrative, we deliver recommendations to strengthen credibility, accuracy, and readiness for strategic use.