Commercially sensitive opportunities

Understanding when the disclosure exemption may apply

(This article was published on 22 November 2022 and updated on 31 August 2023)

Highlights

Helena Watson

Sustainability Technical Associate Partner

KPMG International

What’s the issue?

Information about sustainability-related opportunities helps investors to understand a company’s transition plans, strategy and prospects. In addition to information about sustainability-related risks, the standards1 require companies to disclose information about how they identify, assess and manage sustainability-related opportunities, and also how these opportunities are governed, how they impact strategy and the business model, their financial effects and related metrics and targets. This information could be deemed to be commercially sensitive.

An exemption in the general standard allows companies to exclude commercially sensitive information about sustainability-related opportunities in limited circumstances – requiring useful disclosure for investors while protecting the company’s information.

What are the requirements?

The standards include a narrow-scope exemption from providing commercially sensitive information about sustainability-related opportunities, even if the information is material. There is no similar exemption relating to sustainability-related risks.

The exemption is available only when:

  • the company has a competitive advantage because the information is not publicly available – e.g. via investor presentations or marketing materials; and
  • it would be impossible to disclose the information without seriously prejudicing the economic benefits a company could otherwise realise from an opportunity. 

When companies are considering taking the exemption, they need to determine if they could resolve the issue by disclosing it in a different way – e.g. providing less granular information.

If this cannot be achieved, then a company can exclude a specific piece of information provided that it:

  • discloses that it has taken the exemption for that piece of information; and
  • reassesses at each reporting date whether the exemption remains appropriate.

What’s the impact?

This exemption protects companies’ commercially sensitive information about sustainability-related opportunities. At the same time, it provides investors with information about opportunities to understand how they impact the company’s prospects.

Companies will need to set up a process to assess what information meets the exemption criteria and to consider whether they can otherwise disclose the content at an aggregated level.

The exemption relates to opportunities only – no exemption is allowed for information about sustainability-related risks. Companies will need to structure disclosures carefully, for example where:

  • this creates a disconnect between information on sustainability-related risks and any related opportunities; or
  • information on a specific risk is required in sustainability-related financial information but not in the financial statements.

Actions for management

    • Read our guide to familiarise yourself with the requirements for disclosing information about opportunities.
    • Consider the process needed on an ongoing basis to identify, review and assess pieces of information that are commercially sensitive and relate to opportunities.
    • Identify instances where commercially-sensitive opportunities are connected to relevant risks. Consider how to disclose information about these risks.

    1 IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures (together 'the standards').