Is your company ready for 2026 reporting?

For many companies in Indonesia, sustainability reporting has traditionally been viewed as a communication exercise: an opportunity to highlight environmental and social initiatives through annual ESG or sustainability reports.

However, this approach may soon change.

Indonesia is preparing to adopt sustainability disclosure standards aligned with IFRS S1 and IFRS S2, developed by the International Sustainability Standards Board (ISSB). Under the Indonesian framework, these standards are expected to be issued as SPK 1 and SPK 2, with a planned effective date of 1 January 2027.

While this may seem distant, the first reporting period would likely begin 1 January 2026, meaning companies must start preparing now to ensure readiness for disclosures as of 31 December 2026.

The standards are currently being adopted by Ikatan Akuntan Indonesia (IAI), working closely with regulators, including Otoritas Jasa Keuangan (OJK) and other stakeholders. As sustainability reporting evolves globally, Indonesia may also revisit existing reporting requirements such as POJK 51/2017, potentially aligning them with global sustainability disclosure standards such as IFRS 1 and IFRS 2.

For Indonesian businesses, the message is clear: sustainability reporting is entering a new era of investor-focused disclosures.

From ESG storytelling to investor-grade disclosure

Unlike many existing sustainability reporting frameworks, IFRS S1 and IFRS S2 are designed to provide decision making information for investors.

The standards require companies to explain how sustainability risks and opportunities affect: 
Corporate strategy, financial performance, risk management processes and long-term resilience.

Specifically, SPK 1 will address general sustainability-related financial disclosures, while SPK 2 focuses on climate-related disclosures. Company may need to disclose:

• Climate governance structures
• Climate-related risks and opportunities
• Transition strategies and resilience
• Greenhouse gas emissions (Scope 1, 2 and, where relevant, Scope 3)
• Climate metrics and targets.

This represents a significant shift. Sustainability disclosure will no longer be limited to narrative reporting, it will require robust data, clear governance and financial relevance.

As Ni Nyoman Sri Amandari, ESG Taskforce Lead and ESG Advisory Senior Manager at BDO in Indonesia, observes:
“SPK 1 and SPK 2 signal a move towards accountability. Companies will need to demonstrate not only their sustainability initiatives, but also how climate and sustainability risks directly influence financial performance and long-term enterprise value.”

Why waiting until the end of 2026 may be too late

Although the standards will become effective in 2027, companies that delay preparation may face several challenges as many organisations may need to:

• Establish reliable emissions data collection
• Prepare a specific team with standards expertise 
• Conduct climate risk assessments
• Integrate sustainability considerations into enterprise risk management
• Strengthen internal governance around sustainability data.

These changes often require collaboration across finance, sustainability, operations and risk management teams. Companies that begin preparation early will likely find the transition far more manageable.

A practical case: BDO in Indonesia’s experience adopting IFRS S1 and IFRS S2
In 2025, BDO in Indonesia began aligning its internal ESG reporting with IFRS S1 and IFRS S2 principles as part of its sustainability journey. The process provided valuable insights into the practical challenges companies may face when adopting the standards. 

One of the first challenges involved data availability and quality. While operational data such as electricity consumption could be collected relatively easily, gathering Scope 3 emissions data across the value chain required stronger data mapping and internal coordination. Another challenge was linking sustainability risks to financial implications. IFRS S1 requires companies to demonstrate how sustainability issues may influence financial performance and strategy, something that many organisations are still developing internally.

Through this process, several practical lessons emerged:

1. Start with a baseline assessment: Companies should first understand their current sustainability disclosures and identify gaps against IFRS S1 and S2 requirements
2. Strengthen data governance early: Reliable sustainability reporting requires clear ownership of data across departments
3. Integrate sustainability with risk management: Climate and sustainability risks should be embedded into enterprise risk management processes
4. Build cross-functional collaboration: Successful implementation requires involvement from finance, sustainability, strategy and operational teams.

These early preparations can significantly reduce the complexity of implementation when the standards become mandatory.

The bigger question for Indonesian companies
As sustainability reporting becomes increasingly integrated with financial disclosures, companies may need to rethink their approach to ESG Reporting.

The key question is no longer simply:
“Do we publish a sustainability report this year?”

Instead, it is becoming:
“Does your company have the necessary data, procedures, people in charge and governance structures to demonstrate how sustainability risks and climate transitions will affect its financial future?”

How BDO can support your readiness
As sustainability disclosure requirements evolve, many organisations are reassessing their ESG frameworks, emissions methodologies and governance structures. BDO in Indonesia supports companies in navigating sustainability reporting transformation in a practical and business-focused manner, helping to ensure alignment with emerging global standards while strengthening long-term resilience.

Please feel free to reach out to our experts for further information.