Kenyan companies have until January 2027 to begin mandatory sustainability reporting, but a recent assessment by the Institute of Certified Public Accountants of Kenya (ICPAK) indicates that many are ill-prepared to meet the new requirements.
From January 1, 2027, Public Interest Entities (PIEs), including listed companies, commercial banks and major state agencies, will be required to prepare sustainability disclosures in accordance with International Financial Reporting Standards (IFRS) S1 and S2.
The standards require companies to disclose sustainability-related financial risks and opportunities, including their exposure to climate change, greenhouse gas emissions and measures taken to manage these risks. The disclosures must be published alongside annual financial statements.
However, findings from ICPAK’s recently concluded mandatory readiness assessment reveal significant gaps in corporate preparedness.
Kenyan firms recorded an average readiness score of 1.51 out of 4, raising concerns about their capacity to comply with the reporting requirements.
While many organisations have established board committees to oversee sustainability matters, their capacity to measure and monitor environmental performance remains weak. The assessment recorded a score of just 1.22 out of 4 for environmental targets and measurement.
The findings suggest that corporate governance structures are developing faster than the systems needed to collect, verify and report sustainability data.
For affected companies, compliance will require investment in data collection systems, internal reporting processes and technical expertise to measure environmental and climate-related risks.
The reporting requirements also come as the Capital Markets Authority (CMA) moves to strengthen environmental, social and governance oversight through a proposed ESG Code. The framework seeks to improve corporate accountability and disclosure, including provisions linking executive remuneration to sustainability performance.
With the deadline approaching, companies will need to establish reliable reporting systems ahead of the 2027 financial year to ensure they can capture the data required under the new standards.
Failure to comply could expose affected organisations to regulatory action while weakening their ability to attract international investors increasingly demanding credible sustainability disclosures.
