ESG Disclosure Requirements for CSE-Listed Companies in Sri Lanka

The Colombo Stock Exchange (CSE) has been progressively tightening its expectations around sustainability reporting for listed companies. If your company is listed — or preparing for a listing — understanding the current ESG disclosure landscape in Sri Lanka is no longer optional. This guide covers what is currently required, what is coming, and what you should be doing now to stay ahead.

The Current Regulatory Landscape

Sri Lanka's ESG disclosure requirements for listed companies are shaped by two overlapping frameworks: the CSE's Listing Rules and the SEC's Corporate Governance Code. Both have been updated in recent years to introduce stronger sustainability reporting expectations.

The CSE's revised Listing Rules introduced requirements for listed entities to include sustainability reporting in their Annual Reports. The initial requirements focused on disclosure of a company's approach to material sustainability topics — a narrative-led requirement that many companies interpreted broadly. The direction of travel, however, is clearly toward structured, quantitative, and SLFRS-aligned disclosures.

With the adoption of SLFRS S1 and S2 — Sri Lanka's version of the ISSB's global sustainability disclosure standards — the requirements are expected to become significantly more specific, requiring quantified data across governance, strategy, risk management, and climate-related metrics.

What CSE-Listed Companies Are Expected to Disclose

While the exact requirements will evolve as SLFRS S1 and S2 are phased in, listed companies in Sri Lanka are currently expected to address the following in their Annual Reports:

• Material sustainability topics — An identification of the ESG topics that are material to the company's business, determined through a materiality assessment process.
• Governance of sustainability — How the board and senior management oversee sustainability risks and opportunities, including board-level roles, committees, and oversight mechanisms.
• Sustainability strategy — How identified sustainability risks and opportunities are integrated into business strategy and financial planning.
• Risk management processes — How sustainability risks are identified, assessed, and managed within the company's overall risk management framework.
• Key performance indicators — Quantitative data on sustainability performance, which increasingly includes GHG emissions (Scope 1 and 2 at minimum), energy consumption, water usage, and social indicators such as workforce diversity and health and safety data.
• Targets and progress — Stated sustainability targets and evidence of progress against them across reporting periods.

The Gap Between Current Practice and SLFRS Requirements

Most CSE-listed companies currently produce some form of sustainability content in their Annual Reports. The challenge is that the quality, structure, and completeness of this content varies significantly — and what was acceptable two years ago is increasingly insufficient.

The most common gaps we see in practice include:

• Materiality assessments that are not documented or defensible. Many companies list sustainability topics without a clear methodology for how those topics were determined to be material. SLFRS S1 requires a structured materiality process that considers both financial materiality (the double materiality concept) and stakeholder perspectives.
• Narrative-only disclosures with no quantified data. Describing what the company does for sustainability without providing measured data — emissions, energy, water, waste, turnover, injury rates — does not meet current or emerging expectations.
• Isolated sustainability sections with no connection to financial planning. SLFRS S1 requires sustainability risks and opportunities to be connected to financial impacts. A sustainability section that exists separately from the financial discussion does not satisfy this requirement.
• No climate scenario analysis. SLFRS S2 requires companies to assess their resilience under at least two climate scenarios — one aligned with the Paris Agreement (typically 1.5°C) and one representing a higher warming pathway. Very few Sri Lankan companies have conducted this analysis.
• Incomplete or estimated Scope 3 emissions. While Scope 1 and 2 GHG emissions are often the starting point, SLFRS S2 requires Scope 3 disclosure for companies where it is material — which in many industries includes supply chain and customer use-phase emissions.

Timelines: When Does This Become Mandatory?

The SEC and CSE have signalled a phased approach to mandatory SLFRS S1 and S2 compliance. While definitive timelines are subject to regulatory confirmation, the expected trajectory is:

• Near term (2025–2026): Large listed companies and those in high-impact sectors expected to begin SLFRS-aligned reporting, with initial disclosures likely applying to financial years ending in 2026.
• Medium term (2026–2028): Mandatory requirements extended to broader groups of listed companies, with full SLFRS S2 compliance (including climate scenario analysis and Scope 3 emissions) phased in.
• Longer term: Assurance requirements — third-party verification of sustainability disclosures — expected to follow initial mandatory reporting requirements.

Companies that wait for final regulatory confirmation before beginning preparation will find themselves under significant time pressure. The data collection, governance strengthening, and disclosure drafting process typically takes 8–16 weeks for an organisation starting from scratch.

Common Pitfalls to Avoid

Based on our work with listed companies in Sri Lanka, here are the pitfalls that most commonly undermine ESG disclosure quality:

• Treating ESG reporting as a communications exercise. Sustainability disclosures under SLFRS are financial reporting artefacts — they sit alongside the financial statements and are expected to meet a similar standard of accuracy, completeness, and verifiability. Treating the ESG section as a brand-building narrative rather than a regulated disclosure is a significant risk.
• Starting data collection too late. Annual Report preparation timelines are tight. ESG data collection — particularly GHG emissions calculations, which require supplier data and emissions factor selection — needs to begin months before the reporting deadline.
• Assigning ESG reporting to a single person without board involvement. SLFRS requires board-level governance of sustainability. If the board has not discussed and approved the company's sustainability strategy, risk assessment, and material topics, the governance section of the disclosure cannot be completed compliantly.
• Copying disclosures from peer companies. A common shortcut is to adapt another company's ESG section. Beyond the integrity issues, this approach fails because SLFRS disclosures are entity-specific — they must reflect your company's actual governance, risks, data, and targets.

Getting Ready

The most effective preparation for SLFRS compliance starts with understanding your current state honestly. A structured gap analysis — comparing what you currently disclose against what SLFRS S1 and S2 require — gives you a clear picture of the distance to travel and the work required.

From there, a practical roadmap and the right writing support make the difference between a compliant, credible disclosure and a report that does not hold up to scrutiny.

Learn how FireCircle BY G supports CSE-listed companies with end-to-end ESG reporting — from gap analysis through to Annual Report disclosure writing.