Scope 3 requirements confirmed in latest ISSB standards decision

The International Sustainability Standards Board (ISSB) of the IFRS Foundation has voted unanimously to require company disclosures on Scope 1, Scope 2 and Scope 3 greenhouse gas (GHG) emissions, applying the current version of the GHG Protocol Corporate Standard.

The ISSB added that it will "develop relief provisions to help companies apply the Scope 3 requirements."

"This relief will be decided at a future meeting and could include giving companies more time to provide Scope 3 disclosures and working with jurisdictions on so-called ‘safe harbour' provisions."

Scope 1 covers direct emissions from a company; Scope 2 covers indirect emissions from electricity purchased and used; and Scope 3 covers all other indirect emissions from the value chain.

The ISSB further has confirmed that its requirements will focus on meeting the information needs of investors, including:

• It has decided to modify language in the proposals that was not clearly understood, including removing the term ‘enterprise value' from the objective and the assessment of materiality and removing the term ‘significant' to describe which sustainability risks and opportunities to disclose. The ISSB will have further discussions to refine its articulation of these concepts.
• The ISSB has also confirmed it will use the same definition of material as is used in IFRS Accounting Standards and will discuss at a future meeting the need for further guidance on how to determine what is material information.

The work of the ISSB is being closely tracked by the G20, and its member countries' finance ministers and central bank governors. As their recent meeting in Washington, DC, on 12-13 October, the members stated: "We look forward to the finalisation of standards by the International Sustainability Standards Board in support of globally consistent, comparable and reliable climate-related financial disclosures, and its work beyond climate, and we welcome the efforts to achieve interoperability across disclosure frameworks."

Similarly, the work is being tracked by the G7. Its members have noted recently that they "welcome the global baseline of sustainability reporting standards currently under development by the International Sustainability Standards Board."

"Support for the global baseline has the potential to improve information and thus mobilise finance for the needed investments, particularly in emerging and developing economies, and we ask the ISSB to work closely with regional standard setters and any relevant local stakeholders and to provide advisory and capacity support."

The ISSB plans are building on the SASB Standards (Sustainable Accounting Standards Board - a non profit organisation that is now also part of the IFRS Foundation). Feedback to its proposals for standards are being considered as it aims to complete its proposed standards for the end of 2022, with a view to issuing the final standards in early 2023.

IFRS Accounting Standards and IFRS Sustainability Disclosure Standards are developed by the International Accounting Standards Board (IASB) and the International Sustainability Standards Board (ISSB). The boards are overseen by the IFRS Foundation Trustees, who in turn are accountable to the IFRS Foundation Monitoring Board of public authorities with responsibility for corporate reporting.

IFRS Accounting Standards, set by the IASB, are required in more than 140 jurisdictions.