IFRS S1 and S2 Compliance is becoming a critical priority for Deposit-Taking Savings and Credit Cooperative Organisations (SACCOs) in Kenya as the country prepares for mandatory sustainability reporting for applicable public interest entities from accounting periods beginning on or after 1 January 2027.

With the Institute of Certified Public Accountants of Kenya (ICPAK) and the Sacco Societies Regulatory Authority (SASRA) highlighting sustainability reporting readiness, SACCO boards and management teams must understand the requirements, identify existing reporting gaps and establish the systems needed to prepare reliable disclosures.

The ICPAK Sustainability Reporting Readiness Assessment portal closed on 17 October 2026. SACCOs should therefore establish their current assessment status, confirm any outstanding obligations with the relevant authorities and continue preparing for the applicable reporting requirements.

For SACCOs, IFRS S1 and S2 Compliance goes beyond producing a sustainability report. It involves strengthening governance, integrating material sustainability-related risks into strategic decision-making, improving data collection and establishing reliable reporting processes.

This guide explains what IFRS S1 and IFRS S2 require, why compliance matters to Kenyan SACCOs, the four key pillars of sustainability reporting and the practical steps institutions can take to prepare for implementation.

What Is IFRS S1 and S2 Compliance?

IFRS S1 and S2 Compliance refers to meeting the applicable requirements of the International Sustainability Standards Board’s sustainability disclosure standards.

IFRS S1: General Requirements for Disclosure of Sustainability-related Financial Information establishes the general framework for disclosing sustainability-related risks and opportunities that could reasonably be expected to affect an organisation’s prospects.

IFRS S2: Climate-related Disclosures focuses specifically on climate-related risks and opportunities that could reasonably be expected to affect an organisation’s prospects.

Together, the standards require organisations to disclose relevant information concerning governance, strategy, risk management, and metrics and targets. This information helps investors and other users of general-purpose financial reports understand how sustainability-related risks and opportunities could influence an organisation’s financial prospects.

For Kenyan SACCOs, IFRS S1 and S2 Compliance means assessing which sustainability-related matters are relevant to their operations, lending activities, investments and long-term financial resilience.

Why IFRS S1 and S2 Compliance Matters to Kenyan SACCOs

SACCOs play an important role in financial inclusion, savings mobilisation, credit access and economic development. Their sustainability reporting responsibilities are therefore closely connected to effective governance, risk management and institutional resilience.

1. Meeting Sustainability Reporting Requirements

Under Kenya’s sustainability reporting adoption roadmap, applicable public interest entities, including Deposit-Taking SACCOs, are expected to apply the standards to annual reporting periods beginning on or after 1 January 2027.

IFRS S1 and S2 Compliance requires institutions to understand the applicable disclosure requirements, establish reporting responsibilities and prepare the information needed to support their disclosures.

SACCOs should also confirm their specific obligations and any outstanding readiness assessment requirements directly with ICPAK and SASRA.

2. Strengthening Corporate Governance

Effective sustainability reporting starts with strong governance.

Boards and senior management must understand their responsibilities in overseeing material sustainability-related risks and opportunities. This may involve reviewing board committee mandates, assigning responsibilities, updating relevant policies and establishing clear reporting lines.

IFRS S1 and S2 Compliance should therefore be integrated into the SACCO’s governance framework rather than treated solely as a finance department assignment.

3. Improving Risk Management

Sustainability-related developments can affect borrowers, lending portfolios, operational infrastructure and business continuity.

For example, a SACCO serving agricultural communities may face increased credit risk if drought or flooding affects members’ incomes and repayment capacity.

By incorporating material sustainability-related considerations into existing risk management processes, SACCOs can improve their ability to identify emerging exposures, assess potential financial implications and make informed decisions.

4. Building Stakeholder Confidence

Reliable sustainability disclosures can help members, regulators, lenders and other stakeholders understand how a SACCO identifies risks, monitors performance and plans for the future.

IFRS S1 and S2 Compliance encourages institutions to support their disclosures with consistent information, documented processes and appropriate internal controls.

Credible reporting is not simply about demonstrating commitment to sustainability. It is about explaining relevant risks and opportunities and showing how they are managed.

The Four Pillars of IFRS S1 and S2 Compliance

The standards organise sustainability-related disclosures around four interconnected areas: governance, strategy, risk management, and metrics and targets.

1. Governance: Establishing Accountability

SACCOs should determine whether their governance arrangements provide appropriate oversight of material sustainability-related risks and opportunities.

Key considerations include:

• Defining the board’s oversight responsibilities.
• Assigning reporting responsibilities to appropriate management teams and committees.
• Establishing clear internal reporting and escalation procedures.
• Providing relevant training to directors and employees.
• Ensuring that sustainability disclosures are supported by appropriate documentation and controls.

A clear governance framework helps ensure that reporting responsibilities are understood and that sustainability-related matters receive appropriate attention at board and management level.

2. Strategy: Understanding Financial Implications

IFRS S1 and S2 Compliance requires SACCOs to consider how material sustainability-related risks and opportunities could affect their strategies and financial prospects over the short, medium and long term.

For example, institutions with significant lending exposure to climate-sensitive sectors may need to assess how climate-related events could affect borrowers, loan performance and portfolio risk.

Management should evaluate relevant exposures, consider their potential implications and determine whether changes to business strategy, resource allocation or operational planning are necessary.

The assessment should reflect the institution’s specific circumstances rather than assume that every sustainability issue is equally material.

3. Risk Management: Identifying and Monitoring Exposures

SACCOs should review how they identify, assess, prioritise and monitor material sustainability-related risks.

This may involve integrating relevant considerations into enterprise risk management frameworks, credit assessment procedures, business continuity planning and existing risk reporting processes.

Where appropriate, institutions should document how climate-related risks are identified and assessed, how significant exposures are escalated and how mitigation measures are monitored.

Integrating these activities into existing processes helps make sustainability reporting part of institutional risk management rather than a separate annual exercise.

4. Metrics and Targets: Strengthening Data Quality

Reliable data is essential for effective sustainability reporting.

SACCOs should identify the metrics and targets relevant to their material sustainability-related risks and opportunities and establish processes for collecting, validating and reporting the required information.

Depending on the institution’s circumstances and applicable requirements, this may include climate-related exposure indicators, greenhouse gas emissions, resource consumption and progress against relevant targets.

Management should document data sources, calculation methodologies, reporting responsibilities and review procedures.

Where information is incomplete, the institution should identify the gaps and establish a time-bound plan to improve data quality and reporting capability.

Common IFRS S1 and S2 Compliance Gaps SACCOs Should Address

Although each institution’s circumstances differ, several areas warrant attention during a sustainability reporting readiness review.

Unclear governance responsibilities: Board, management and operational responsibilities may not be sufficiently defined.

Limited climate-risk assessment: Existing risk frameworks may not adequately consider material climate-related exposures affecting lending portfolios or operations.

Inadequate sustainability data: Required information may be scattered across departments, inconsistently recorded or unsupported by reliable controls.

Weak documentation: Relevant policies and processes may exist without sufficient evidence to support the required disclosures.

Limited integration with financial reporting: Sustainability information may be prepared separately from financial planning, risk management and strategic decision-making.

Insufficient technical capacity: Directors, finance teams, risk officers and other employees may require additional training to understand and implement the standards.

Identifying these potential gaps is an important step towards IFRS S1 and S2 Compliance. However, SACCOs should base their implementation priorities on an assessment of their actual circumstances and applicable disclosure requirements.

How SACCOs Can Prepare for IFRS S1 and S2 Compliance

With the ICPAK readiness assessment deadline of 17 October 2026 now passed, institutions should focus on establishing their current position and progressing with implementation.

Step 1: Confirm Your Assessment Status

SACCOs that completed the ICPAK assessment should review their results and determine the corrective measures required.

Institutions that missed the deadline should contact ICPAK and SASRA to clarify their position and establish the appropriate next steps. They should not assume that the deadline has been extended or that an alternative submission route is available.

Step 2: Conduct a Detailed Gap Analysis

Review existing governance arrangements, policies, strategies, risk management processes, data systems and reporting procedures against the applicable requirements of IFRS S1 and IFRS S2.

The review should identify existing capabilities, outstanding gaps and the improvements required to support reliable disclosures.

Step 3: Develop a Board-Approved Action Plan

Translate the findings into a documented implementation roadmap.

The plan should identify priority actions, responsible teams, required resources, milestones and timelines. Board approval helps establish accountability and ensures that implementation receives appropriate oversight.

Step 4: Improve Data Collection and Internal Controls

Determine what information is needed for material disclosures, where the data will come from and how it will be validated.

Establish appropriate documentation and review procedures to support consistency, accuracy and reliability.

Step 5: Train the Board and Management

Provide targeted training to directors, senior management, finance teams, risk officers and other relevant employees.

Training should address the requirements of the standards, the institution’s identified gaps and the responsibilities of each team in the reporting process.

Step 6: Integrate Sustainability Into Existing Processes

Incorporate relevant sustainability-related considerations into strategic planning, risk management, financial reporting and board oversight.

This helps ensure that disclosures reflect how the SACCO actually operates and makes decisions.

Step 7: Test Reporting Readiness

Before preparing formal disclosures, review the proposed reporting process, supporting evidence, internal controls and approval arrangements.

A trial reporting exercise can help identify unresolved issues early enough for management to address them before the applicable reporting deadlines.

How Ronalds LLP Can Support IFRS S1 and S2 Compliance

Preparing for sustainability reporting requires coordination across governance, finance, strategy, risk management and data systems.

Ronalds LLP supports organisations in strengthening their reporting capabilities, governance frameworks and readiness for evolving professional and regulatory requirements.

Our support can include:

Sustainability reporting readiness assessments: Evaluating existing capabilities and helping institutions establish their current state of preparedness.

IFRS S1 and S2 gap analysis: Reviewing governance, strategy, risk management, metrics, targets and disclosure processes to identify areas requiring improvement.

Implementation roadmaps: Helping management translate identified gaps into prioritised, time-bound action plans with clear responsibilities and milestones.

Governance and risk management advisory: Supporting reviews of relevant oversight arrangements, policies, reporting responsibilities and risk management processes.

Data and reporting process improvement: Advising on documentation, reporting systems and internal controls needed to support reliable sustainability disclosures.

Training and capacity building: Helping boards, management and relevant employees understand the standards and their implementation responsibilities.

The scope of support can be tailored to each institution’s circumstances, existing capabilities and applicable requirements.

Where Ronalds LLP is also the institution’s external auditor, any additional advisory engagement must be evaluated against applicable independence, ethical and professional requirements before the scope of work is agreed.

Conclusion: Preparing for Effective Sustainability Reporting

IFRS S1 and S2 Compliance represents an important development in Kenya’s financial reporting landscape.

For Deposit-Taking SACCOs, preparation requires more than awareness of new disclosure requirements. It calls for effective governance, an understanding of material sustainability-related risks and opportunities, reliable data, appropriate internal controls and a structured implementation plan.

SACCOs that have completed the ICPAK readiness assessment should use their findings to address outstanding gaps. Those that missed the deadline should seek guidance from the relevant authorities while continuing to strengthen their reporting capabilities.

Ultimately, effective sustainability reporting can help institutions improve transparency, strengthen risk oversight and make better-informed strategic decisions.

Is your SACCO prepared for IFRS S1 and S2 Compliance?

Ronalds LLP can help your institution assess its readiness, identify reporting gaps and develop a practical roadmap towards sustainability disclosure compliance.

Contact Ronalds LLP to discuss your sustainability reporting readiness and implementation requirements.

Disclaimer: This article provides general information and does not constitute legal, regulatory or accounting advice. SACCOs should confirm their specific obligations with ICPAK and SASRA and consult the applicable standards and regulatory guidance.

WRITTEN BY Ronalds llp