The International Sustainability Standards Board (ISSB) has released new educational guidance to help companies understand the requirements for disclosing their greenhouse gas (GHG) emissions under International Financial Reporting Standard S2 (IFRS S2), Climate-related Disclosures.
The guidance is part of the board’s commitment to support the implementation of its new sustainability reporting literature.
The board noted in its press notice that the guidance “does not add or otherwise change the requirements in IFRS S2”.
The guidance, presented in a question-and-answer format, aims to clarify why the emissions reporting requirements exist, how to use the Greenhouse Gas Protocol Standards (2004 and 2011) alongside IFRS S2, as well as other specific details of the disclosure mandates.
Background
IFRS S2 mandates the disclosure of all GHG emissions (Scope 1, 2, and 3) to help investors assess a company’s exposure to climate-related risks, particularly those linked to transitioning to a lower-carbon economy.
The ISSB chose this approach to ensure investors receive comparable information about transition risks regardless of a company’s organisational structure, chosen measurement methods, or industry.
IFRS S2 breaks down its GHG emissions requirements into two distinct areas: how emissions are measured and how they are disclosed. The educational guidance mirrors this approach, the board explained, so as to help users grasp the requirements more easily.
Measurement
In relation to measurement, the guidance clarifies that GHG measurement boundaries – while distinct from financial reporting boundaries – must be compatible.
It supports the use of the Greenhouse Gas Protocol, allowing either the equity share or control approach, while for Scope 3 emissions, it provides a framework to promote consistent measurement.
Finally, it also offers practical suggestions for handling differences in reporting periods across the value chain and clarifies that although IFRS S2 does not prescribe a specific method for financed emissions, entities must disclose whichever approach they use.
Disclosure challenges
On the topic of disclosure, companies are advised to disclose their chosen GHG measurement method and the reasoning behind it to aid comparability.
It proposes that Scope 1 and 2 emissions should be disaggregated between consolidated entities and other investees, while for Scope 3, companies are required to include details on data quality and data sources where applicable.
The guidance also recommends reporting on emissions targets – clearly stating their scope and any use of carbon credits – and notes that restating prior-year emissions due to structural changes is not required, although contextual explanations may be useful.
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