Indonesia’s standard setter - the Institute of Indonesia Chartered Accountants (IICA) - has proposed several modifications to IFRS S1 and IFRS S2 in its draft jurisdictional sustainability reporting standards, which are expected to take effect from 2027.
Last month, the IICA’s Sustainability Standards Board (DSK) ratified exposure drafts for two ISSB-aligned standards (PSPK 1 and 2). It launched a public consultation on both draft standards today (20 January), which will run until 31 March.
PSPK 1 is adapted from S1 and sets out the general requirements for sustainability disclosures. PSPK 2 is adapted from S2 and contains specific requirements for disclosing climate-related information.
According to the exposure drafts, the standards will be mandatory for reporting periods beginning on or after 1 January 2027, with the first reports published in 2028.
The DSK explained that this timeline will allow companies, accountancy professionals and the country’s regulatory bodies to “build readiness”. It also said it will conduct a review of the implementation of the standards and the country’s sustainability reporting ecosystem between 2027 and 2029.
The standard-setter has proposed several alterations to the transitional reporting reliefs provided in the ISSB standards.
Firstly, it has removed the S1 provision on the timing of disclosures. Under the IICA’s proposal, Indonesian companies would therefore be required to publish their sustainability disclosures at the same time as their related financial statements, once PSPK 1 takes effect.
Secondly, the exposure draft for PSPK 1 allows companies for the first three years of reporting to only disclose risks and opportunities that relate to climate–IFRS S1 provides only a one-year relief from reporting non-climate risks opportunities. In addition, the draft standard permits companies to exclude comparative information on sustainability risks and opportunities that is not related to climate in the fourth year of reporting.
Additionally, two of the transitional reliefs in S2 have been extended in the PSPK 2 draft standard.
In-scope companies would not be required to disclose their Scope 3 GHG emissions or financed emissions for the first three years of reporting under PSPK 2. They would also be permitted to use a method for measuring their emissions other than the GHG Protocol’s Corporate Accounting and Reporting Standard for this initial three-year period.
Under the country’s current regulatory framework, financial institutions and public companies are required to submit an annual sustainability report to the Financial Services Authority (OJK) and to make this report publicly available. These reports are required to include a description of the actions taken by the entity as part of its social and environmental responsibilities.
In its ‘roadmap’ on sustainability standards, published at the end of last year, the DSK proposed that the OJK endorse PSPK 1 and 2 and update its reporting requirements to refer to both standards.
The OJK, in collaboration with the national government, is responsible for determining which entities are required to comply with the standards and the provisions for assurance on sustainability-related information.