Greenhouse gas emissions

Using the GHG Protocol to provide Scope 1, 2 and 3 emissions disclosures

20 December 2022 (Updated 24 January 2023)

Global IFRS Institute | ISSB - Sustainability reporting resource centre

What’s the issue?

Greenhouse gas emissions disclosures are a key indicator of a company’s impact on the environment and its exposure to transition risk.

The International Sustainability Standards Board (ISSB) analysis of feedback showed that almost all stakeholders broadly agreed that companies should be required to disclose Scope 1 and 2 emissions. There is also support, particularly from investors, for disclosing Scope 3 emissions.

The feedback also showed the need for additional clarity and guidance on some of the practical elements of the climate proposal¹. For example, there were mixed views on disclosures that are designed to connect emissions reporting to the financial statements.

Having previously decided to require the disclosure of Scope 1, 2 and 3 greenhouse gas emissions, the ISSB has now drilled down and clarified what the requirements would be. All types of companies will need to get ready for reporting clear and consistent data.

Patrick Chu
Head of ESG Reporting and Assurance
KPMG China

Patrick Chu
Head of ESG Reporting and Assurance
KPMG China

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What was proposed?

The climate proposal would require disclosure of absolute greenhouse gas (GHG) emissions, expressed as metric tonnes of carbon dioxide (CO2) equivalent and calculated using the GHG Protocol². The disclosure would be classified as Scope 1, 2 and 3. Emissions intensity for each scope would be required as one of the seven cross-industry metric categories.

In addition, separate reporting of Scope 1 and 2 emissions from the consolidated group (the parent and subsidiaries), and from unconsolidated investees (associates, joint ventures, affiliates and unconsolidated subsidiaries) would be required. The intent is to connect emissions disclosures under the different methodologies permitted by the GHG Protocol to the financial statements.

The climate proposal is not explicit on which version of the GHG Protocol companies should use, or whether there would be any relief for those companies required by their jurisdiction to use measurement standards that are not aligned with the GHG Protocol. It also does not specify the basis of Scope 2 GHG emissions – e.g. whether companies would be required to disclose using a market-based approach, a location-based approach or both³.

Read our guide for further details on the proposed disclosure requirements.

What’s the ISSB’s latest thinking?

To address stakeholders’ feedback, the ISSB confirmed, clarified and agreed to amend the following areas of the climate proposal.

For further detail on reporting of Scope 3 emissions, including transition reliefs, see our separate article.

What’s the impact?

The ISSB has clarified what would be required for Scope 1, 2 and 3 emissions disclosures. It aims to balance achieving comparability with providing relevant disclosure and to ensure that the measurement requirements are practical for all types of company. For example:

using consistent GWP values would support comparability and help companies aggregate absolute GHG data collated from across the value chain;
allowing companies to use the most appropriate emission factors (rather than specifying what to use) would help companies provide relevant information; and
retaining references to the GHG Protocol Standards would mean that companies could continue using any of the three organisational boundary methods defined in the GHG Protocol Standards; this differs from the current proposals from the EU and US.

Actions for management

Familarise yourself with the GHG Protocol Standards’ measurement requirements.
Review your Scope 2 measurement approach and determine if additional data is required.
Assess whether any existing systems, processes and controls are sufficient to support quality emissions reporting at the same time as your financial statements, subject to transition relief set out in this article.
For companies that are also in the scope of the EU or US requirements, monitor whether those requirements will align with the ISSB’s agreed approach.

How did we get here?

Document version	Reference	Note
Proposed IFRS S2	ED/2022/S2	Published 31 March 2022
ISSB Board meeting: 20–23 September 2022; Frankfurt	AP4a: Summary of comments AP4d: Financed and Facilitated Emissions	The ISSB identified topics for further analysis
ISSB Board meeting: 17–21 October 2022; Montreal	AP4a: Scope 1 and Scope 2 greenhouse gas emissions AP4b: Scope 3 greenhouse gas emissions AP4c: Greenhouse gas emissions measurement methods	The ISSB: a) discuss ways to support data quality and availability concerns for Scope 3 disclosures; and b) provide additional clarification and guidance
ISSB Board meeting: 13–15 December 2022; Montreal	AP4a: Greenhouse gas emissions Meeting summary	The ISSB confirmed, clarified and amended specific areas of the climate proposal
ISSB Board meeting: 17-19 January 2023; Frankfurt	AP4b: Greenhouse gas emissions-reporting period relief Meeting summary	The ISSB agreed that reporting cycle relief will be extended to include Scope 1 and 2 emissions

¹ Proposed IFRS S2 Climate-related Disclosures

² The GHG Protocol Corporate Accounting and Reporting Standard.

³ A ‘market-based’ approach uses emission factors from contractual arrangements, which therefore reflects the purchasing decisions of management. A ‘location-based’ approach reflects the average emissions intensity of grids on which energy consumption occurs using mostly grid-average emission factor data.