Scope 3 emission disclosure plays a pivotal role in the realm of emission disclosure standards, where the focus is on comprehensive sustainability reporting. Scope 3 emissions disclosure extends beyond a business’s direct operations (Scope 1) and indirect emissions from energy expenditures (Scope 2). It broadens the field of corporate responsibility, encompassing emissions throughout the entire value chain.
In today’s landscape, corporate sustainability reporting requires a thorough Scope 3 emissions disclosure that complies with standards, supports sustainable supply chain practices, and aligns with global sustainability goals.
Current emission disclosure standards, while varying in effectiveness, form the basis for accurate disclosure of Scope 3 emissions. However, the precision of Scope 3 emissions reports relies on an organization’s dedication to data quality, data sharing, verification, and stakeholder engagement. These standards consistently refine their guidance on Scope 3 emissions to align with effective reporting guidelines. Robust data collection, active involvement of suppliers and partners, and sustainability measures to minimize emissions across the value chain are essential for achieving precision in Scope 3 emissions disclosure.
The International Sustainability Standards Board (ISSB) was established on November 3, 2021, at COP26 in Glasgow as part of the International Financial Reporting Standards (IFRS). Addressing the public interest in establishing a global baseline for sustainability disclosure standards, ISSB focuses on the needs of investors and financial markets. With sustainability increasingly influencing investment decisions, organizations must provide precise and globally comparable data on sustainability disclosures. ISSB aims to bridge this gap by offering reporting standards that are market-informed, useful, and cost-effective.
The International Sustainability Standards Board (ISSB) published the first two IFRS sustainability disclosure standards, S1 and S2, on June 26, 2023. These standards guide organizations in disclosing material information about sustainability-related risks and opportunities, aligning with recommendations from the Task Force on Climate-related Financial Disclosures (TCFD) and incorporating industry-based disclosure requirements from SASB Standards.
IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information requires an entity to disclose all information about the sustainability-related risks and opportunities that can be potentially expected to affect its revenue, capacity to acquire investments, or expense of capital over any period of time (short-term or long-term).
Entities following IFRS S1 guidelines must disclose information on strategies for managing sustainability-related risks and opportunities, governance mechanisms, evaluations, and procedures for monitoring these aspects, as well as performance in relation to sustainability goals.
IFRS S2 Climate-related Disclosures outlines guidelines for entities to disclose information regarding climate-related risks and opportunities. It requires disclosure of information impacting the entity’s cash flows throughout its value chain.
Entities following IFRS S2 must provide disclosures on strategies for managing climate-related risks and opportunities, governance mechanisms, evaluations, procedures for recognizing, evaluating, ranking, and tracking climate-related risks and opportunities, and performance in relation to climate-related risks and opportunities.
Both IFRS S1 and S2 become effective for annual reporting periods starting on or after January 1, 2024.
An organization’s commitment to sustainability extends through the value chain with Scope 3 emissions disclosure, recognizing indirect environmental impact. Stakeholders, including investors, demand transparency and accountability. Comprehensive disclosure meets expectations, enhancing trust, aiding in emissions reduction, goal-setting, compliance, and risk assessment. Scope 3 emissions significantly influence investor decisions.
ISSB’s IFRS S2 mandates disclosure of climate-related risks and opportunities, allowing organizations to track their Product Carbon Footprint (PCF) and strategize toward net zero emissions, aligning with the global 1.5ዐ C goal. ISSB’s IFRS S2 is a global milestone, the first to mandate scope 3 emissions reporting.
Carboledger is committed to aiding companies in decarbonizing their supply chain by providing supplier-specific data that adheres to global standards. Our secure network facilitates seamless real-time sharing and access to audit-grade product carbon footprint data among enterprises. Through a single platform, businesses can manage data requests from multiple customers while retaining full ownership of the information.
Every data point added to the Carboledger network undergoes rigorous standardization, verification, and rating by our expert team. Our dashboards serve as your centralized source of truth, allowing you to monitor the progress of ongoing PCF calculations, assign tasks to team members, and track turnaround times for PCF requests from customers.
Schedule a demo with us today or write to us at scope3@carboledger.com
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