The International Sustainability Standards Board (ISSB) has tentatively agreed to grant companies a temporary exemption of at least one year from the obligation to report on their greenhouse gas (GHG) emissions, relating to Protocol Scope 3 emissions.

In a statement, the board said the concession was intended to “give time for companies to implement their processes”.

ISSB joint vice chair Sue Lloyd subsequently told delegates to the COP 15 biodiversity conference that the board was aware “companies need help, as best practice continues to develop, in measuring Scope 3 emissions”.

She added: ”The ISSB believes the reliefs and guidance agreed [last] week will provide companies with the time to get their processes in place, and the guidance to support this disclosure.”

The board is currently redeliberating the draft sustainability reporting standard, IFRS S2 climate-related disclosures to issue the final standard early next year.

It confirmed during its October meeting round that it would require entities to report on their Scope 3 emissions, but instructed staff to put in more work to operationalise the proposals.

Also during its 14 December meeting, the ISSB tentatively approved a staff proposal to introduce a framework for entities to report on how they measure their Scope 3 GHG emissions.

The framework as currently drafted requires entities to disclose the extent to which their Scope 3 GHG emissions disclosure is estimated using inputs from specific activities within their value chain (‘primary data’), and that are verified.

However, if entities conclude that it is impracticable to estimate their Scope 3 GHG emissions, the board wants them to disclose how they are managing or ‘thinking about’ them.

The impracticability test was not without controversy, however, with Lloyd saying she was troubled by the message it sent to the outside world.

She said: “I think that there is a risk people are going to start looking for the reasons why it’s impracticable. And I just worry that we’re going to create behaviours which are contrary to what type of behaviour we are trying to encourage.”

The ISSB S3 discussion follows its tentative agreement decision at its 20 October meeting to require businesses applying its climate reporting standard to include Scope 3 emissions in their disclosures.

The GHG Protocol guidelines are the result of a collaboration between governments, industry, and others with the World Resources Institute and the World Business Council for Sustainable Development.

They specify three scopes for measuring 15 different emissions categories within the Corporate Value Chain standard:

  • Scope 1: direct emissions from business operations;
  • Scope 2: power plant emissions from a business’s energy requirements such as power or heating; and
  • Scope 3: indirect emissions from upstream (supply chain) and downstream (consumer and waste stream emissions) activities or products.

IFRS S2 proposed that an entity should disclose its full Scope 1, Scope 2, and Scope 3 as metric tonnes of CO2 equivalent.

However, feedback on the exposure draft revealed that some preparers were concerned they would struggle to account for Scope 3 emissions while others thought the proposals conflicted with the Protocol.

Investors, however, argued that poor disclosure of Scope 1, 2, and 3 emissions left them unable to understand how entities plan to transition to a low-carbon economy.

Meanwhile, also during the 14 December meeting, the ISSB:

  • dropped the requirement to disclose GHG emission intensity;
  • confirmed there is no “explicit” requirement to disaggregate GHG disclosures by type of gas;
  • required use of the global warming potential values in the latest assessment by the Intergovernmental Panel on Climate Change (IPCC) over a 100-year timeline;
  • introduced a requirement to disclose the inputs and rationale behind greenhouse gas disclosures; and
  • amended the proposals in IFRS S2 such that entities must disclose Scope 2 GHG emissions using a so-called location-based method that reflects the average emissions intensity of the entity’s local energy grid, together with information about contractual instruments related to managing the energy it has purchased.

One notable opponent of the board’s approach to GHG emission disaggregation was ISSB member Richard Barker. He told the meeting that the disclosure of methane – a notably potent greenhouse gas – was ”woeful” and said it ”would be a mistake for us not to require disaggregation”.

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