Scope 3 emissions included in new ISSB standards

Starting from next year, new ISSB standards will require companies to disclose on Scope 1, 2, and 3. Reporting Scope 3 is an important step for companies looking to meet net zero and decarbonisation goals. 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 will also be developing “relief provisions” to help companies apply the Scope 3 requirements. These will be decided at a future meeting but could include giving companies more time to report on Scope 3 and working with jurisdictions on ‘safe-harbour’ provisions. This decision is a mark of significant progress as the ISSB and IFRS Foundation refine their two proposed sustainability-related disclosure standards, with an ultimate goal of bringing “transparency, accountability and efficiency to financial markets around the world.” Other key decisions taken during the October meeting include modifying unclear language in the proposal. The term ‘enterprise value’ was removed from the objective and the assessment of materiality, and the term ‘significant’ was removed to describe which sustainability risks and opportunities to disclose. Feedback from asset managers indicates that the disclosures on Scope 3 will help financial investors obtain a complete picture of climate-related risks and opportunities, as well as improve disclosing methodologies for Scope 3. Others felt Scope 3 should only be disclosed “in certain circumstances,” or phased in over time. As next steps, the ISSB will also:

• Provide supporting materials and developing a digital taxonomy to enable digital reporting in the future
• Enhance Sustainability Accounting Standards Board standards by making targeted improvements to make them more internationally applicable
• Coordinate work with the International Accounting Standards Board to support connectivity in the two boards’ requirements and considering operability with the work of others

Moving forward, the ISSB is carefully considering feedback on its proposals, while aiming to complete the standards for early 2023.