Financial reporting expert and columnist, Aina Gbolahan, speaks to The Guardian’s Ifeanyi Ibeh about balancing global ESG mandates with local realities as ESG reporting enters a new era.
With the SEC’s recent guidelines and the global shift toward ESG disclosures, how would you describe the current state of ESG reporting in Nigeria? Are we still largely in the voluntary phase, or is the shift toward mandatory reporting gaining momentum?
I’d describe the current state as being in a critical transition. While many companies have engaged in ESG reporting voluntarily, often driven by stakeholder pressure, access to international capital, or simply a commitment to sustainability, the regulatory landscape is becoming increasingly assertive. The SEC’s guidelines have already provided a framework, and crucially, the Federal Reporting Council’s proactive move to adopt global standards like ISSB IFRS S1 and S2 clearly indicates a strategic shift towards mandatory disclosures. We have a phased approach planned, meaning that while not every company is mandated to report on ESG, larger public interest entities will face mandatory requirements in the very near future. The voluntary phase is certainly still present for some, but the tide is definitely turning towards compulsion
The IFRS S1 and S2 standards are poised to redefine ESG disclosures globally. In your view, what are the practical implications of these standards for Nigerian businesses, particularly in sectors like oil, banking, and manufacturing?
The imminent adoption of IFRS S1 and S2 standards will fundamentally transform ESG reporting in Nigeria, shifting it from largely voluntary to mandatory, globally comparable, and investor-focused disclosures. This requires Nigerian businesses to significantly upgrade data collection systems and integrate ESG fully into their core strategy and risk management, crucial for proactively addressing climate and sustainability risks. Practically, for the oil sector, this means granular emissions reporting and decarbonization plans; for banks, it’s about quantifying “financed emissions” and integrating climate risk into lending; and for manufacturers, it extends to supply chain sustainability, resource efficiency, and product lifecycle disclosures. Ultimately, compliance with these standards is becoming paramount for accessing international capital and enhancing overall competitiveness in the global economy, making them a catalyst for strategic transformation, not just a reporting burden.
Many Nigerian companies struggle with aligning global ESG expectations with local operational realities. How can organisations balance these global standards with domestic limitations such as data availability, infrastructure, and regulatory capacity?
Balancing global ESG expectations with Nigeria’s operational realities, like data scarcity and infrastructure gaps, demands a pragmatic, localized strategy. Companies must start with a materiality assessment, focusing on the most relevant ESG issues for their specific Nigerian context. This means building internal capacity and leveraging technology for foundational data collection, even if it starts simply, and innovating around local challenges for instance, adopting solar solutions for both power reliability and emission reduction. Crucially, actively engaging with local regulators and industry bodies will help foster a realistic and supportive framework. It’s about integrating ESG strategically, driving resilience and local impact, rather than just blind global compliance
How are listed companies and multinationals operating in Nigeria responding to the rising pressure for ESG transparency? Are you seeing genuine integration of ESG into core strategy or is it still largely performative?
The rising tide of ESG pressure is certainly impacting listed companies and multinationals in Nigeria, leading to a notable increase in reporting. However, whether this translates to genuine integration into core strategy or remains largely performative is still a mixed bag. While some leading players, particularly those with international mandates or forward-thinking boards, are truly embedding ESG into their risk management, capital allocation, and even executive compensation, showcasing true strategic shifts like banks analysing financed emissions or manufacturers optimising for cleaner production others still lean towards PR-driven CSR or reporting only easily quantifiable, positive metrics. The journey from ‘checking boxes’ to a fundamental, verifiable commitment is ongoing, but the accelerating global investor demand and evolving local regulations are increasingly making genuine ESG integration not just a reputational advantage, but a necessity for long-term resilience and access to critical capital
The cost of ESG compliance is often a major concern, especially for small and medium-sized enterprises. What low-cost or phased approaches can Nigerian businesses adopt to begin aligning with global ESG frameworks without overwhelming their resources?
The cost of ESG compliance is a real hurdle for Nigerian SMEs, but alignment doesn’t require massive budgets. The key is a phased, materiality-driven approach. Start with a simple materiality assessment to pinpoint 3-5 most relevant ESG issues for businesses, focusing resources there. Leverage existing operational improvements that naturally align with ESG, like adopting energy-efficient practices to cut costs and emissions, or refining HR policies. Utilise free or low-cost tools like spreadsheets for data, NGX simplified guidelines, and local industry workshops. Finally, be transparent about their journey and collaborate more. This pragmatic path demonstrates genuine intent, unlocks opportunities, and builds resilience without overwhelming resources
Given the growing demand from investors and regulators, do you foresee ESG assurance becoming a standard part of corporate audits in Nigeria? If so, how prepared are our audit and assurance professionals to take on this evolving responsibility?
Yes, I absolutely foresee ESG assurance becoming a standard part of corporate audits in Nigeria.
ESG assurance is poised to become a standard part of Nigerian corporate audits, driven by global investor demand and the FRC’s push for ISSB standards, crucial for data reliability and combating greenwashing. While larger audit firms are developing specialised ESG capabilities, the broader professional landscape faces challenges, including a skills gap in non-financial data assurance and the need for standardised local frameworks. Despite these hurdles, ongoing training initiatives and emerging local expertise signal a proactive effort to build the necessary capacity, making this an evolving but inevitable transition.
Finally, looking ahead, what critical steps must Nigerian regulators and business leaders take to build an ESG reporting culture that is not only compliant but impactful and locally relevant?
To cultivate an ESG reporting culture in Nigeria that’s both compliant and genuinely impactful, regulators must provide clear, phased, and contextualised guidance, harmonising global standards with local realities while building their own monitoring capacity. Simultaneously, business leaders must fundamentally shift their perception of ESG from a burden to a strategic imperative. This means embedding it at the board level, prioritising materiality assessments for local relevance (like job creation and community impact), investing in robust data systems, and fostering an internal culture of sustainability. This collaborative, foresight-driven approach is vital for unlocking long-term value, attracting investment, and ensuring Nigeria’s sustainable development.
