Beyond Compliance: Unlocking Value Through Sustainability Reporting in Tanzania

Tanzania is on the cusp of a significant shift in its corporate landscape, propelled by the formal adoption of the IFRS Sustainability Reporting Standards (IFRS S1 and IFRS S2) in 2023 by the National Board of Accountants and Auditors (NBAA). With an effective date of January 1, 2025 (for all Public Interest Entities), this move marks a pivotal moment, transforming sustainability reporting from a voluntary endeavour into a cornerstone of corporate accountability. But why is this so crucial for Tanzanian businesses now?

The answer lies at the intersection of global imperatives and national aspirations. Tanzania, as a signatory to the 2015 Paris Agreement and committed to the 2030 Sustainable Development Goals (SDGs), recognizes that government efforts alone are insufficient, the private sector must also actively contribute. SDG 12 (Responsible Consumption and Production) explicitly calls upon organizations to integrate sustainability information into their reporting cycles.

For the past years, the focus on financial information has often overshadowed the broader value-creation impact of businesses. Consequently, businesses have been trapped in reporting cycles that are short-term focused, backward-looking, have a compliance box-ticking mentality, and a fragmented approach. This has led to reports that are too long and complex without telling a holistic story; burdening businesses and leaving investors with little or no crucial information needed for decision making.

The new IFRS Sustainability Reporting Standards, coupled with the rising prominence of integrated reporting, offer a powerful antidote. Integrated reporting, a strategic and future-oriented communication tool, helps organizations understand how they create value over time by utilizing various "capitals" – financial, manufactured, intellectual, human, social & relationship, and natural. This holistic view enables better decision-making, risk management, and the identification of new opportunities.

The implications of this to investors in Tanzania are impactful. With robust and standardized sustainability data, investors will be able to understand an organization and its prospects better so they can manage investment risks, validate decisions, and assess an organization's forward-looking information. This facilitates a system of capital allocation that's better aligned to the long-term goals of business and society, moving away from the short-term focus that has often characterized investment decisions.

Other key players:

The Bank of Tanzania (BOT) has also been proactive in this evolving landscape. Through its 2025 Guidelines on Reporting Climate-Related Financial Risks and Sustainability-Related Risks and Opportunities, it mandates sustainability reporting for banks and financial institutions. The guidelines require integration of these risks into governance, risk management, and public disclosures, aligning with the IFRS Sustainability Reporting Standards. This strengthens financial sector resilience, promotes green financing, and contributes to Tanzania's sustainable development.

It's also worth noting the potential role played by the Dar es Salaam Stock Exchange (DSE) in integrating sustainability considerations into its operations. As a member of the United Nations Sustainable Stock Exchanges initiative since 2016, the DSE actively promotes sustainability through awards, encouraging listed entities to embrace Environmental, Social, and Governance (ESG) practices. This commitment aligns with the national drive towards sustainability reporting and enhances the attractiveness of the Tanzanian market to responsible investors.

Tanzanian businesses now have a clear mandate and a robust framework to report on their Environmental, Social, and Governance (ESG) impact. This isn't just about compliance; it's about embracing a future where businesses are not only profitable but also powerful agents of sustainable development, contributing directly to Tanzania's journey towards the 2030 SDGs. This begs the question, are Tanzanian businesses ready to unlock the full value embedded within sustainability reporting?

Disclaimer:

This article is co-authored by John Kitwika, an Audit Senior and Eric-Alex Hamissi an Audit Associate, both with Deloitte & Touche. The views presented are their own and not necessarily those of Deloitte. John can be reached at jkitwika@deloitte.co.tz and Eric-Alex at ehamissi@deloitte.co.tz