ICPAK Sustainability Readiness Assessment: What Kenyan Businesses Need to Know

Why ICPAK's readiness tool matters right now

The Institute of Certified Public Accountants of Kenya (ICPAK) launched its Sustainability Readiness Assessment tool following the release of its Roadmap for Adoption of the IFRS Sustainability Disclosure Standards (IFRS S1 and S2) in November 2024. The tool is designed to help organisations evaluate their preparedness against the requirements of IFRS S1 (General Requirements for Disclosure of Sustainability-related Financial Information) and IFRS S2 (Climate-related Disclosures), issued by the International Sustainability Standards Board (ISSB) in June 2023.

For Kenyan businesses, this is not an academic exercise. The Capital Markets Authority (CMA) is finalising a binding ESG Code for Issuers aligned with IFRS S1 and S2. The Central Bank of Kenya (CBK) has already embedded TCFD-aligned climate risk disclosure requirements into its Guidance on Climate-Related Risk Management, and the Kenya Green Finance Taxonomy issued in April 2025 will become mandatory for banks within 18 months. ICPAK's assessment is the profession's early-warning system — a structured way for organisations to understand where they stand before regulators make standing still a compliance failure.

What IFRS S1 and S2 actually require

Before unpacking the assessment, it helps to understand what these standards demand in practice.

IFRS S1 establishes general requirements for how entities identify, measure, and disclose material sustainability-related risks and opportunities across all sustainability topics. It introduces the concept of Sustainability-Related Risks and Opportunities (SrROs) — any sustainability factor that could reasonably affect the entity's cash flows, access to finance, or cost of capital over the short, medium, or long term. IFRS S1 is intentionally broad: it requires organisations to have a systematic process for identifying what matters, not just to report what they have already measured.

IFRS S2 is climate-specific and builds directly on the TCFD framework, requiring disclosure across four pillars: governance of climate-related risks and opportunities, strategy (including scenario analysis and assessment of climate resilience), risk management processes, and metrics and targets including Scope 1, 2, and 3 greenhouse gas emissions. IFRS S2 goes further than most current voluntary climate reporting in Kenya by making scenario analysis — modelling how the business performs under different climate pathways — an explicit requirement, not a best practice.

Together, these standards represent the highest level of sustainability disclosure specificity that Kenyan businesses have ever faced from a mainstream accounting body.

What the ICPAK Sustainability Readiness Assessment covers

The ICPAK tool functions as a structured gap analysis across four core areas that directly mirror the architecture of IFRS S1 and S2.

1. Current sustainability reporting practices. This section assesses whether the organisation currently produces any sustainability or ESG disclosures, what frameworks those disclosures reference (GRI, TCFD, SASB, or none), and whether those disclosures have been externally assured. For many Kenyan organisations, this section will confirm that existing reporting falls significantly short of IFRS S1 requirements.

2. Governance, strategy, and risk management. This section evaluates whether sustainability-related risks and opportunities are integrated into board governance, whether the organisation has a formal process for identifying material SrROs, and whether sustainability considerations are embedded in strategic planning. It also assesses climate scenario analysis capability — which is likely to be the single largest gap for most non-financial sector businesses.

3. Measurement of sustainability issues. This section examines data collection processes for sustainability metrics, including GHG emissions data across scopes, water usage, social metrics, and governance indicators. It assesses the quality, completeness, and auditability of that data — factors that determine whether disclosures will withstand third-party assurance.

4. Integration of SrROs into financial disclosures. This is the most technically demanding section: it assesses whether sustainability-related risks and opportunities are reflected in the organisation's financial statements and forward-looking disclosures, including their effect on financial planning assumptions, capital allocation, and asset valuations.

The tool generates a score across sections and produces a gap report and implementation roadmap identifying where development effort is needed before an organisation's first IFRS S1/S2 disclosure.

Who needs to complete the assessment

ICPAK's roadmap targets Public Interest Entities (PIEs) as the primary compliance audience. In Kenya, PIEs include:

• All companies listed on the Nairobi Securities Exchange
• Licensed commercial banks and mortgage finance companies regulated by the CBK
• Insurance companies regulated by the Insurance Regulatory Authority (IRA)
• Pension funds regulated by the Retirement Benefits Authority (RBA)
• State corporations and public entities whose accounts are subject to audit by the Auditor General
• Large private companies that exceed statutory size thresholds

If your organisation falls into any of these categories and has not yet evaluated its IFRS S1/S2 readiness, you are already behind the preparation curve relative to where the CMA's forthcoming ESG Code will place the compliance floor.

The gaps most organisations will find

Based on our advisory work across listed companies, banks, and DFI-funded projects in Kenya and East Africa, the most consistent gaps organisations discover when assessed against IFRS S1 and S2 requirements are:

Climate scenario analysis. Very few Kenyan organisations have conducted quantitative scenario analysis that models financial performance under 1.5°C, 2°C, and above-2°C warming pathways. IFRS S2 makes this a disclosure requirement, not a recommendation.

Scope 3 GHG data. Most organisations have partial Scope 1 and 2 emissions data but have never attempted a Scope 3 inventory covering value chain emissions. IFRS S2 requires disclosure of Scope 3 emissions where material — and for most sectors with significant supply chains or financed emissions, they are material by default.

Board-level sustainability governance. IFRS S1 requires disclosure of how the board oversees sustainability-related risks and opportunities, including which committee has explicit sustainability oversight and how frequently sustainability is discussed at board level. Many Kenyan organisations have informal sustainability governance that cannot be evidenced in the way the standard requires.

Data auditability. Sustainability data collected through email, spreadsheets, and informal processes cannot readily support third-party assurance — which IFRS S1 anticipates will become standard as the standards mature. Building an auditable data trail now is essential infrastructure for future compliance.

What to do with a low readiness score

A low score on the ICPAK assessment is not a failure — it is a baseline. The purpose of the tool is precisely to surface gaps while organisations still have time to close them before mandatory disclosure requirements apply. The appropriate response is a structured implementation roadmap.

A credible readiness roadmap typically proceeds in three phases.

Phase 1 — Foundation (3–6 months): Establish governance structures, assign sustainability oversight at board and management level, conduct a materiality assessment to identify the SrROs relevant to your business, and begin systematic GHG data collection across Scope 1 and 2.

Phase 2 — Gap closure (6–12 months): Develop policies and procedures for the sustainability topics identified as material, conduct climate scenario analysis, extend GHG measurement to priority Scope 3 categories, and begin drafting disclosures against an IFRS S1/S2 content checklist.

Phase 3 — Disclosure readiness (12–18 months): Finalise the full disclosure document, engage an external assurance provider to review data quality and disclosure completeness, publish as part of the annual integrated report or as a standalone sustainability report, and establish the ongoing monitoring and reporting cycle.

3 critical questions Kenyan businesses should answer now

1. Has your organisation completed the ICPAK Sustainability Readiness Assessment and does your leadership team understand the score and what it means for your compliance trajectory?

2. Do you have the data infrastructure to support IFRS S2 disclosure — specifically GHG emissions data for Scope 1, 2, and material Scope 3 categories, with an audit trail that will support third-party assurance?

3. Is sustainability integrated into your board governance and strategic planning in a way that can be evidenced in writing, or is oversight informal and undocumented?

*Ardena Consulting provides IFRS S1 and S2 readiness assessments, gap analysis, and implementation support for Kenyan and East African organisations. Contact us to understand your readiness score and build a realistic path to compliant disclosure.*