Scope 3 GHG emissions will be included in global standards

The ISSB unanimously confirms that Scope 3 disclosures will be required in the IFRS Foundation’s pending global sustainability standards.

The International Sustainability Standards Board (ISSB) has decided to include Scope 3 greenhouse gas (GHG) emissions in its first global sustainability-related disclosure standards.

During IFRS Foundation meetings that concluded Friday, the ISSB unanimously confirmed that Scope 3 GHG emissions, along with Scopes 1 and 2, will be among the required disclosures in IFRS S1: General Requirements for Disclosure of Sustainability-Related Financial Information and IFRS S2: Climate-Related Disclosures. The IFRS Foundation said its first two global sustainability standards will be published as early as possible in 2023.

The ISSB — a board within the IFRS Foundation — made the decision during the process of reviewing feedback on exposure drafts of the standards.

In July, the Association of International Certified Professional Accountants, representing AICPA & CIMA, asked the IFRS Foundation in a comment letter to consider providing exemptions and supporting good-faith efforts related to disclosure of Scope 3 GHG emissions. Scope 3 covers GHG emissions that are a part of an organisation's supply chain or service footprint. Scope 1 covers direct emissions, and Scope 2 covers indirect emissions from, for example, an organisation's utilities.

In announcing its decision, the ISSB said it would develop relief provisions for Scope 3 reporting, deciding whether to allow more time and whether to include "safe harbour" provisions that would protect organisations from some liability concerns.

The ISSB also:

  • Confirmed the use of the Task Force on Climate-related Financial Disclosures (TCFD) as the basis for its standards. The Association comment letter supported the use of a framework such as the TCFD to create a global sustainability standard that will enable production of "consistent, comparable, reliable and therefore decision-useful information."
  • Removed, for the sake of clarity, the terms "enterprise value" and "significant" as descriptors of what sustainability information should be disclosed. The Association comment letter asked for clarity around both terms.

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