South Africa is moving toward mandatory environmental, social, and governance (ESG) reporting, with legislation expected within 18 months. Experts caution that businesses may face challenges in implementing these requirements due to a lack of skilled personnel.

Currently, certain companies in South Africa must submit financial statements using the extensible business reporting language (XBRL) system. This applies to public, state-owned, and private entities meeting criteria such as a high public interest score or fiduciary assets exceeding R5 million ($279,000).

The Companies Amendment Bill, introduced in August 2023, proposes significant updates to the Companies Act, including new ESG-related provisions. In October 2024, the Companies and Intellectual Property Commission (CIPC) updated its XBRL taxonomy to include a sustainability disclosures module aligned with the International Sustainability Standards Board’s (ISSB) IFRS S1 and IFRS S2 standards. While the module is currently voluntary, future mandatory implementation is anticipated.

The shift toward mandatory ESG reporting aligns with existing frameworks such as the King Code on Corporate Governance and the Johannesburg Stock Exchange’s (JSE) sustainability disclosure guidelines. These frameworks emphasize ethical practices, transparency, and effective leadership. JSE-listed companies have been following sustainability disclosure guidance since 2022.

Although mandatory ESG reporting is unlikely for the 2025–26 fiscal year, experts predict it will be enacted soon. The African National Congress and Democratic Alliance coalition government is expected to support the legislation.

This move will bring South Africa closer to international ESG standards, including the EU’s Corporate Sustainability Reporting Directive. Climate-related disclosures are likely to be the initial focus, supported by government guidance on climate governance and risk management.

These efforts mark a significant step in South Africa’s carbon-neutral strategy, improving the quality and comparability of ESG data and positioning the nation as a leader in sustainability reporting.

Sources:

https://www.sustainableviews.com/south-africa-gears-up-for-mandatory-sustainability-reporting-88e26a16/

https://br-ag.eu/2024/10/25/south-africa-launched-digital-sustainability-reporting/

https://blog.masterdata.co.za/2024/04/09/demystifying-esg-south-africas-growing-focus-on-sustainability-reporting/

https://www.ul.com/news/why-carbon-reporting-south-africa-matters