21 October 2022

ISSB confirm Scope 3 emissions in IFRS S2

The International Sustainability Standards Board (ISSB) has voted unanimously to require companies to disclose Scope 1,2 and 3 emissions by applying the current version of the GHG Protocol Corporate Standard at its meeting in Montreal yesterday (20 October).

The board stated their support for the inclusion of Scope 3, with Richard Barker saying that it is "important for determining whether an entity's business model is sustainable or not".

The biggest concerns raised were from Ndidi Nnoli-Edozien who said she supported Scope 3 in theory but was "struggling" with the proposals due to the different capacities of companies and jurisdictions and the difficulties some companies may have in collecting Scope 3 data from their value chains.

Vice-chair, Sue Lloyd, acknowledged this concern and said that the board needed to work to accommodate entities who may find it difficult to collect Scope 3 data by allowing for flexibility in the reporting of this data.

"If we put some effort into filling those gaps with really practical things that acknowledge the spectrum of situations people are going to be in, that would really help us get as complete and high-quality Scope 3 measurements as we possibly can".

The approach of supporting entities as they build their capacities for reporting on Scope 3 was echoed by many in the board, such as Barker and chair, Emmanuel Faber, who both said that reporting estimates on Scope 3, if material, would still be beneficial for investors and for entities to understand the sustainability of their businesses.

Therefore, the ISSB 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 – which give companies protection from, or reduces, liability on information disclosed to investors and other capital market participants.