

Businesses worldwide have made bold net-zero pledges in recent years, promising to cut or offset their greenhouse gas (GHG) emissions by a given date. These commitments seek to align companies with international climate targets, such as the 1.5°C global warming target outlined in the Paris Agreement. These promises have brought up an important question, though: Are businesses accomplishing their sustainability objectives, or are they just "greenwashing" to improve their reputation?
As Oman strives towards its Vision 2040, which strongly emphasizes sustainability and economic diversification, this question becomes even more pertinent. Measures like the new ESG criteria from the Muscat Stock Exchange are increasing the need to ensure that sustainability pledges are impactful and believable. The International Sustainability Standards Board (ISSB) introduced two ground-breaking frameworks, IFRS S1 and IFRS S2, which offer a critical lens through which to assess whether net-zero pledges are progress or just fancy words.
IFRS S1 and S2's Function in Promoting Transparency
General Requirements for Financial Disclosures Associated with Sustainability (IFRS S1): A thorough framework for disclosing sustainability-related risks and opportunities is established by IFRS S1. Its main goal is to make sure that these disclosures are pertinent, consistent with financial reporting, and in line with the requirements of investors. With a focus on governance, strategy, risk management, and analytics, IFRS S1 gives businesses a solid basis on which to show how their net-zero pledges complement their overarching business goals.

IFRS S2: Disclosures Concerning the Climate
Particularly, climate-related risks and opportunities are covered by IFRS S2. Building on the Task Force on Climate-related Financial Disclosures (TCFD) guidelines, it mandates that businesses reveal:
• GHG emissions in scopes 1, 2, and 3: These offer a thorough understanding of a business's direct and indirect emissions.
• Scenario analysis: Showing how companies are getting ready for various climate futures.
• Goals and metrics: Showing advancement towards objectives for reducing emissions.
By ensuring that businesses report on their net-zero efforts accurately and credibly, these standards lower the possibility of greenwashing.
Real Progress vs. Greenwashing: How Greenwashing Takes Place?
The practice of inflating or creating fake sustainability initiatives to improve a company's image is known as "greenwashing." Typical strategies include:
• Writing sustainability reports ambiguously or deceptively.
• Ignoring severe environmental effects in favour of trivial projects.
• Aiming for net-zero goals without a well-defined plan or quantifiable indicators.
Applying IFRS Guidelines to Stop Greenwashing
IFRS S1 and S2 offer resources to deal with these problems by:
1. Requiring Governance and Oversight: o Businesses must reveal how their boards manage opportunities and risks associated with sustainability, guaranteeing responsibility at the highest level.
2. Demanding Data Integrity and Comparability: Standardised reporting on climate risks and GHG emissions enables stakeholders to evaluate the performance of various businesses and sectors.
3. Emphasising Materiality: o Businesses must reveal information that is significant to their operations in order to make sure that their net-zero pledges are in line with their key competencies and financial results.
Oman's Contribution to ESG Advancement
Sustainability is emphasised as a key component of national development in Oman's Vision 2040. One important step in encouraging businesses to incorporate international standards like IFRS S1 and S2 into their reporting procedures is the Muscat Stock Exchange's (MSX) recent implementation of ESG reporting requirements. By doing this, Oman can:
• Draw in Foreign Investment: Open ESG reporting meets the demands of international investors and makes Oman a more desirable location for sustainable investments.
• Encourage Accountability: IFRS standards make sure Omani businesses support their sustainability pledges with quantifiable results.
• Boost Global Competitiveness: By implementing IFRS S1 and S2, Omani businesses are positioned as leaders in sustainable business practices, as ESG becomes an increasingly important issue in global markets.
Examples of Advancements and Difficulties
Shell is a good example. Shell offers comprehensive disclosures on emissions objectives and progress in its sustainability reports, which are in line with GRI and increasing IFRS requirements. Shell exhibits a dedication to accountability and openness by including climate-related risks in their financial reporting.
Lessons for Businesses in Oman
Omani companies can adapt their ESG strategy to local settings while taking inspiration from world leaders. Businesses should make sure that their net-zero pledges are believable and in line with Oman's Vision 2040 objectives by using IFRS S1 and S2. Although IFRS S1 and S2 provide strong frameworks, there are certain difficulties in putting them into practice:
1. Data Collection: Since Scope 3 emissions tracking entails tracking emissions across the value chain, obtaining precise Scope 3 emissions data can be challenging.
2. Integration with Financial Reporting: Organisations need to coordinate across departments to match sustainability disclosures with financial reporting.
3. Balancing Costs and Benefits: While adhering to these standards may come with hefty up-front expenses, doing so will eventually boost investor confidence and reduce risk.
The capacity of IFRS S1 and S2 to foster stakeholder trust is one of its main advantages. These standards, which offer a precise and uniform framework, help investors evaluate the veracity of net-zero pledges; assist NGOs and regulators in holding businesses responsible for their sustainability claims; and promote innovation by incentivising businesses to implement best practices in emissions reduction.
Addressing the global climate catastrophe requires net-zero promises, but their legitimacy rests on accurate and open reporting. The instruments provided by IFRS S1 and S2 guarantee that businesses go beyond greenwashing to make significant strides. By implementing these standards, Oman will have the chance to improve its competitiveness internationally and align with the sustainability objectives of Vision 2040.
Oman's dedication to ESG reporting using IFRS S1 and S2 will not only improve its reputation but also open the door for a robust and sustainable economy as the world expects more accountability from companies. Omani businesses may show leadership in sustainability and guarantee long-term value generation for all stakeholders by adopting these criteria.
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