20 December 2022 (Updated 24 January 2023)

Global IFRS Institute | ISSB - Sustainability reporting resource centre

What’s the issue?

Scope 3 emissions measurement is more complex and significantly less mature than Scope 1 and 2 measurements. The International Sustainability Standards Board (ISSB) analysis of feedback showed support, particularly from investors, for disclosing Scope 3 emissions. However, many companies highlighted significant challenges in obtaining data from the value chain to enable reporting at the same time as the financial statements.

Although GHG emissions disclosures are a fundamental part of sustainability reporting, the accounting for Scope 3 emissions in a company’s value chain can be a real challenge in terms of data quality and availability. The ISSB decisions are pragmatic – reflecting an acknowledgement of these difficulties.

Richard Lin
Partner, Carbon Management and EU Green Deal,
KPMG China

Richard Lin
Partner, Carbon Management and EU Green Deal
KPMG China

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What was proposed?

The climate proposal1 would require disclosure of absolute Scope 1, 2 and 3 greenhouse gas (GHG) emissions and emissions intensities as one of the seven cross-industry metric categories.

For Scope 3 emissions, companies would need to disclose which of the 15 categories of emissions are included in its calculation. This would require disclosing emissions from both upstream and downstream activities in tonnes of carbon dioxide equivalent (CO2e).

The proposal would require companies to use the GHG Protocol Corporate Standard2 to measure these emissions. However, it does not reference the GHG Protocol Corporate Value Chain Standard2, which provides guidance for calculating Scope 3 emissions.

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

What’s the ISSB’s latest thinking?

Despite the challenges, the ISSB agreed that Scope 3 emissions disclosures would be required because of their importance to investor understanding of transition risk.

Companies would need to follow guidance in the GHG Protocol Standards2 to disclose material categories of Scope 3 emissions. Financial institutions would be required to give specific disclosures on financed emissions3.

However, in an acknowledgement of companies’ practical concerns, the ISSB agreed the following ways to support better data quality and availability.

scope diagram

What’s the impact?

Companies will need to provide Scope 3 emissions disclosures. Despite initial transition reliefs, companies will need to ensure they are prepared and have the appropriate data, processes, systems and controls in place to meet the reporting requirements.

The ISSB plans to provide support through implementation guidance, potential scalability measures and a framework for measurement. But it is important for companies to start preparing now as reporting may be an iterative process, with Scope 3 disclosures improving over time.

Actions for management

  • Take stock of your GHG inventory and understand your value chain as a starting point. The ISSB plans to produce guidance on this topic; however, existing guidance is available from the GHG Protocol, as well as CDP and SASB4 in the interim.
  • Identify potential sources of data, making use of primary data where appropriate.
  • Assess whether any existing systems, processes and controls are sufficient to support quality Scope 3 emissions disclosures.
  • For financial institutions, monitor developments around financed and facilitated emissions, a key component of Scope 3 emissions for these companies.
  • For companies that are also in the scope of EU or US requirements, monitor whether those requirements will align with the ISSB’s agreed approach.

How did we get here?


Document version Reference
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) discussed 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

AP4b: Scope 3 greenhouse gas emissions

Meeting summary

The ISSB agreed to a later effective date for reporting on Scope 3 emissions and reporting cycle reliefs
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 and the GHG Protocol Corporate Value Chain (Scope 3) Standard (together, ‘GHG Protocol Standards’)

3 Emissions that banks, asset managers and insurance companies finance through loans and investments are referred to as ‘financed emissions’. See our article on financed and facilitated emissions for further insight.

4 Sustainability Accounting Standards Board (SASB)

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