What firms must do as Kenya shifts to tighter sustainability reporting

For years, organisations have been disclosing sustainability often through corporate social responsibility stories and environmental, social, governance narratives in glossy reports. However, the recent Sustainability Communiqué by the Institute of Certified Public Accountants of Kenya (ICPAK) draws a firm line between the old era and what comes next.

Sustainability disclosures are moving into the core of corporate reporting, judged by the same standards of governance, discipline, and assurance that investors expect from audited financial information.

The new rules reset the conversation from “good intentions” to “financial consequences”, disclosing how sustainability-related risks and opportunities affect an organisation’s value, including cash flows, access to finance, and cost of capital.

ICPAK’s new element in its guidance is not the existence of IFRS S1 and S2, but rather a shift from adoption timelines to enforced readiness and quality expectations. The national roadmap remains on course. Mandatory adoption for Public Interest Entities (PIEs) begins for accounting periods starting on or after 1 January 2027, with voluntary adoption already open to all organisations.

To eliminate ambiguity, ICPAK provides a wide PIE scope, covering NSE-listed companies, CBK‑regulated banks and non‑bank financial institutions, IRA‑regulated insurers, RBA‑regulated pension schemes, CMA‑regulated fund managers and collective investment schemes, Sasra‑regulated deposit‑taking Saccos and large state corporations/government‑controlled entities reporting on IFRS.

Large non-PIEs are defined using the MSME Policy, 2025, as issued by the State Department for Micro, Small and Medium Enterprises thresholds, specifically if it exceeds two of the following: an annual turnover above Sh100 million, total assets above Sh250 million, or employees exceeding 250.

For large non-PIEs, they will be expected to adopt the IFRS S1 and S2 for accounting periods starting on or after 1 January 2028. SMEs will be expected to adopt these standards for accounting periods starting on or after 1 January 2029. The definition of SMEs has been adopted from the Micro and Small Enterprise Act of 2012. The Act classifies MSMEs by either their annual turnover, the number of employees engaged, or by their total financial investment.

According to the Act, a micro enterprise is any firm with an annual turnover not exceeding Sh500,000 and employing (or rather engaging) 1 to 9 people. The total assets and financial investment or the registered capital of the enterprise does not exceed Sh10 million in the manufacturing sector and does not exceed Sh5 million in the service and farming sector.