The issuance of Sustainability Disclosure Standards 1 (PSPK 1) and PSPK 2 marks a strengthening of sustainability reporting in Indonesia. Approved on 1 July 2025 and effective for annual reporting periods beginning on or after 1 January 2027, the two standards refer to IFRS S1 and IFRS S2. This article discusses PSPK 1 as the general foundation for disclosures of sustainability-related financial information and PSPK 2 as the specific standard for climate-related disclosures. The discussion covers materiality, sustainability-related risks and opportunities, governance, strategy, risk management, metrics and targets, as well as climate-related physical and transition risks. The application of both standards requires connectivity between sustainability information, strategy, risk management, capital allocation decisions, and financial statements. Accordingly, companies need to prepare their governance, data quality, methodologies, internal controls, and reporting processes before the effective date.
Pernyataan Standar Pengungkapan Keberlanjutan 1 (PSPK 1) and PSPK 2 are the two standards included in Indonesia’s Sustainability Disclosure Standards (SPK). Both standards were approved by the Sustainability Standards Board of the Indonesian Institute of Accountants (DSK IAI) on 1 July 2025 and are effective for annual reporting periods beginning on or after 1 January 2027. PSPK 1 sets out the General Requirements for Disclosure of Sustainability-related Financial Information, while PSPK 2 sets out Climate-related Disclosures. Both standards refer to IFRS S1 and IFRS S2.
The issuance of PSPK 1 and PSPK 2 indicates that sustainability information is no longer viewed merely as a supplement to annual reports or as a means of communicating corporate social responsibility activities. Instead, such information is now intended to form an important part of general purposes reporting that can assist investors, lenders, and other creditors in assessing a company’s prospects. The primary focus is on how sustainability-related risks and opportunities may affect a company’s cash flows, access to finance, and cost of capital over the short, medium, and long term.
Sustainability information is increasingly influencing assessments of the resilience of a company’s business model. Floods, droughts, changes in energy prices, carbon taxes, customer requirements, low-carbon technologies, occupational safety, value chain quality, or data security can affect operating costs, demand, asset values, investment requirements, and the ability to obtain financing. PSPK places these issues within a reporting framework focused on providing information that is useful for making economic decisions.
PSPK 1 serves as the general “guidance.” It sets out requirements relating to objectives, materiality, the reporting entity, connectivity of information, sources of guidance, location and timing of reporting, comparative information, judgements, measurement uncertainty, correction of errors, and statements of compliance. PSPK 2 subsequently applies this guidance specifically to climate-related matters. Therefore, PSPK 2 is not a separate, stand-alone report; it is applied together with PSPK 1.
Within general purposes financial reporting, sustainability disclosures and financial statements are two complementary components. Financial statements primarily capture transactions and financial positions in accordance with applicable accounting standards, while PSPK explains sustainability-related risks and opportunities that may affect an entity’s prospects. Connectivity means that users should be able to follow the link from risks and strategic responses to operational targets and, ultimately, to financial consequences that affect the amounts reported in the financial statements.
| Aspect | PSPK 1 | PSPK 2 |
| Title | General Requirements for Disclosure of Sustainability-related Financial Information | Climate-related Disclosures |
| Reference | IFRS S1 | IFRS S2 |
| Scope | Material sustainability-related risks and opportunities | Climate-related physical risks, transition risks, and opportunities |
| Core Content | Governance, strategy, risk management, metrics and targets | The same four core content areas, applied specifically to climate |
| Effective Date | 1 January 2027 | 1 January 2027 |
Key Principles of PSPK 1
PSPK 1 requires companies to disclose information about sustainability-related risks and opportunities that is useful to users of general purposes financial reporting in making decisions relating to providing resources to the company.
Companies are required to disclose information about all sustainability-related risks and opportunities that could reasonably be expected to affect the company’s cash flows and its access to finance or cost of capital over the short, medium, or long term.
The standard establishes general requirements for the content and presentation of disclosures so that the information provided is useful to users in making decisions relating to providing resources to the company.
Materiality serves as the basis for determining which information should be disclosed. Companies are not required to disclose every topic, every indicator, or every sustainability activity; only material information needs to be disclosed. Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions made by the primary users. This assessment is specific to the company’s circumstances. A topic that is material to a mining company may not necessarily be material to a software company.
Information must also be connected and consistent. The strategy narrative should not contradict the company’s targets, metrics, or capital allocation. Financial effects disclosed under PSPK should be consistent with the assumptions used, for example, in impairment assessments, asset useful lives, provisions, cash flow projections, or capital expenditure commitments reflected in the financial statements.
Key Principles of PSPK 2
This standard requires companies to disclose information about climate-related risks and opportunities that is useful to users of general purposes financial reporting in making decisions relating to providing resources to the company.
The standard also requires companies to disclose information about climate-related risks and opportunities that could reasonably be expected to affect the company’s cash flows and its access to finance or cost of capital over the short, medium, or long term.
The scope of PSPK 2 covers climate-related risks and opportunities and categorises climate-related risks into two categories: physical risks and transition risks.
Climate-related physical risks are risks arising from climate change, either from an event (acute physical risks) or from longer-term shifts in climate patterns (chronic physical risks). Acute physical risks arise from weather-related events such as storms, floods, droughts, or heatwaves. Chronic physical risks arise from long-term changes in climate patterns, including changes in rainfall and temperature that may result in sea-level rise, reduced water availability, biodiversity loss, and changes in land productivity. Financial implications for companies may include costs arising from direct damage to assets or indirect impacts resulting from supply chain disruptions. For example, an earthquake may damage buildings, disrupt company operations, temporarily halt factory operations, and interfere with the supply chain.
Climate-related transition risks are risks arising from efforts to transition to a lower-carbon economy. These include policy, legal, technology, market, and reputational risks. Such risks may have financial implications for companies, such as increased operating costs or declines in asset values resulting from applicable climate-related regulations.
Climate-related opportunities may include energy efficiency, low-carbon products, access to new markets, alternative energy sources, and operational resilience.
PSPK 2 requires companies to explain the resilience of their strategies and business models to climate-related changes, developments, and uncertainties. Climate-related scenario analysis is used to assess this resilience. The objective is to test whether the company’s strategy remains viable under various possible conditions.
Climate-related metrics are a particularly prominent component of the standard. Companies are required to disclose Scope 1, Scope 2, and Scope 3 greenhouse gas (GHG) emissions in accordance with the applicable requirements, together with the measurement approach, inputs, assumptions, and changes in methodology. Scope 1 refers to direct emissions from sources owned or controlled by the company; Scope 2 refers to emissions associated with purchased energy; and Scope 3 covers other indirect emissions throughout the value chain. In addition to emissions, cross-industry metrics are required, including assets or activities vulnerable to physical and transition risks, climate-related opportunities, capital deployment, internal carbon pricing where used, and the linkage between management remuneration and climate-related considerations, where relevant.
Core Content of PSPK 1 and PSPK 2
The four core content areas under both PSPK standards can be summarised as follows:
| Core Content | PSPK 1 | PSPK 2 |
| Governance | Who is responsible for, and how the company oversees, sustainability-related risks and opportunities | Who is responsible for, and how the company oversees, climate-related risks and opportunities |
| Strategy | How sustainability-related risks and opportunities affect the business model, strategy, and prospects | How climate-related risks and opportunities affect the business model, strategy, and prospects |
| Risk Management | How sustainability-related risks and opportunities are identified, assessed, prioritised, and monitored | How climate-related risks and opportunities are identified, assessed, prioritised, and monitored |
| Metrics and Targets | How performance in relation to sustainability-related risks and opportunities is measured and monitored through metrics and targets | How climate-related performance is measured through metrics and targets, including GHG emissions |
PSPK 1 and PSPK 2 mark an advancement in the discipline of sustainability reporting in Indonesia. PSPK 1 provides the foundation for identifying and presenting financial information related to all material sustainability-related risks and opportunities. PSPK 2 builds on that foundation specifically for climate-related matters, including physical and transition risks, opportunities, scenario analysis, greenhouse gas emissions, transition plans, metrics, and targets. Both standards are effective from 1 January 2027.
The practical message for companies is to start with connectivity, rather than simply focusing on preparing the report. Companies should be able to demonstrate the links between board oversight, material risks, strategy, risk management processes, targets, operational data, capital allocation decisions, and the figures presented in the financial statements. The best readiness is built through clear governance, traceable data, consistent methodologies, effective internal controls, and reporting preparation before the effective period.
