Accountable for the environment

This world shelters more than 8 billion people but is also home to nonillions of other lifeforms, forming countless ecosystems. Humans, with the power to think and reason, have evolved into the dominant species. We rose above others by breaking natural food chains, using our brains to learn, create tools, and pass down knowledge across generations. This transformed survival into civilisation, culture, and control over nature.

With this control came resource extraction, and then the economy, introducing trade, structure, and the pursuit of wealth. Over millennia, this drive has led to unsustainable exploitation of natural resources, pushing ecosystems close to collapse. Scientists are sounding the alarm. It is time for everyone to act with responsibility.

In June 2023, the International Sustainability Standards Board (ISSB), under the IFRS Foundation, introduced two new reporting standards, IFRS S1 and IFRS S2. These help companies disclose sustainability and climate-related issues in ways that matter to investors. The aim is to show how such issues can affect financial performance, cash flow, and long-term business value.

These standards apply to annual reports starting on or after January 1, 2024, though early adoption is encouraged. While not mandatory worldwide, countries such as the UK, Canada, and Nigeria are moving towards adoption. Initially, they will apply to listed companies, large public-interest entities, and firms raising capital from markets. As more regulators adopt them, these may become the global benchmark for sustainability reporting.

IFRS S1 offers a framework for reporting all sustainability-related risks and opportunities, focusing on what could affect a company's financial value. It is structured into four parts. First is governance, requiring companies to explain how their board and management oversee these risks. Second is strategy, where businesses show how sustainability issues affect their plans and long-term goals. Third is risk management, which outlines how such risks are identified and handled. Lastly, metrics and targets cover the data and goals companies use to track progress, such as energy use, water consumption, or worker safety. Only financially material information needs to be reported.

IFRS S2 focuses specifically on climate-related matters. These include physical risks such as floods and storms, as well as transition risks like carbon regulations, emerging technologies, or shifts in consumer behaviour. It follows the same four-part structure. Under governance, companies must identify who is responsible for climate oversight. In strategy, they must explain how climate change affects their business, using scenarios such as 1.5°C or 2°C warming. Risk management explores how threats are addressed. In metrics and targets, companies disclose greenhouse gas emissions in three scopes: direct emissions (Scope 1), emissions from purchased electricity (Scope 2), and significant indirect emissions from suppliers or customers (Scope 3). Any climate targets and action plans must also be disclosed.

In Bangladesh, these standards are not yet compulsory. However, organisations such as the ICAB, FRC, and BSEC are reviewing them. BSEC has already issued ESG guidelines for listed firms, which may eventually align with IFRS S1 and S2. For now, adoption is voluntary. Still, companies would do well to prepare early, as a gradual shift towards full adoption seems likely.

Bangladesh is in the grip of a severe environmental crisis. The air is among the most polluted in the world. Rivers around the capital, like the Buriganga, are choked with industrial waste. Millions are affected by arsenic in groundwater. While population pressure plays a part, irresponsible business practices are a major cause. Many industries pollute without treating waste or enforcing controls.

It is no longer enough to blame the system. Businesses must accept responsibility. The environment is reaching its breaking point. The time to act is now -- for nature and the future of this country.

The writer is co-founder and CEO of Accfintax