The International Sustainability Standards Board (ISSB) has announced a series of guidelines and reliefs to help companies report their Scope 3 greenhouse gas emissions within the Climate-related Disclosures Standard (S2). These guidelines also aim to improve the processes of measuring and disclosing Scope 3 emissions. At its October meeting, the International Sustainability Standards Board (ISSB) unanimously voted that companies must report their Scope 1, 2, and 3 greenhouse gas emissions from next year. The ISSB decided to lay out a framework in S2 for the measurement of Scope 3 GHG emissions at its meeting in December 2022. This framework will call for the use of reasonable and supportable information that is readily accessible without an excessive amount of expense or effort and will include the use of estimation. Investors would be given disclosures along with a company’s adoption of this framework so they could comprehend the methodology used to measure Scope 3 emissions. Reliefs also include a minimum one-year exemption following the effective date of S2 in order for companies to have time to implement their processes. A company will also be able to include information that is not aligned with its reporting period, when that information is obtained from companies in its value chain with a different reporting cycle. Scope 2 emissions will be required to be disclosed using the location-based method (reflecting the average emissions intensity of its local grid), with relevant information about contractual instruments in relation to managing energy it has purchased.

Investment portfolio emissions

To assist preparers in the financial industry with the measurement and disclosure of emissions linked with their portfolios, the ISSB also agreed to confirm and improve proposed rules for financed emissions. As necessary application guidance related to the disclosure of Scope 3 emissions in Category 15, the board authorised modified financed emissions reports for activities connected to three industries: Asset Management & Custody Activities, Commercial Banks, and Insurance. Sue Lloyd, Vice-Chair of the ISSB, stated, “We recognise that companies need help, as best practice continues to develop, in measuring Scope 3 GHG emissions. The ISSB believes the reliefs and guidance agreed this week will provide companies with the time to get their processes in place, and the guidance to support this disclosure.”

Operating with biodiversity in mind

The ISSB meeting also coincided with the COP15 biodiversity conference, which the ISSB took note of and plans to consult on priorities beyond its initial two standards. Feedback from investors and other market participants prompted the ISSB to propose four projects for prioritisation in its upcoming consultation on agenda priorities:
  1. biodiversity, ecosystems and ecosystem services
  2. human capital
  3. human rights
  4. connectivity in reporting with the IASB
Emmanuel Faber, Chair of the ISSB, commented on the projects: “Biodiversity underpins all human activities, including business, and as such has substantial implications for market participants. As we work relentlessly to deliver a global baseline of sustainability-related disclosures that meet capital markets needs, comprehensive biodiversity disclosure will be key.”
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