IFRS Foundation and GRI publish summary of interoperability considerations for GHG emissions

Summary:

• GRI (Global Reporting Initiative) 305: Emissions 2016
• GRI 305 requires organizations to report their greenhouse gas(GHG) emissions in terms of Scope 1, Scope 2, and, if applicable, Scope 3 emissions.
• scope 1 are those direct emissions that are owned or controlled by a company, whereas scope 2 and 3 (indirect emissions) are consequences of the activities of the company but occur from sources not owned or controlled by it.

Areas where GRI 305 and IFRS S2 Climate-related Disclosures are aligned through:

• They use the same consolidation or measurement approaches (equity share, operational control, and financial control) outlined in the Greenhouse Gas Protocol Corporate Standard. Both standards require companies to transparently disclose how they measure greenhouse gas emissions, including their approach, methodologies, inputs, and assumptions.
• Disclosure of gross Scope 1, Scope 2 and Scope 3 emissions in metric tonnes of carbon dioxide equivalent (CO₂e)
• Disclosure of location-based emissions for Scope 2
• Disclosure of the categories included in measuring Scope 3 emissions
• Coverage of the same greenhouse gases including carbon dioxide (CO₂e), methane (CH₄), nitrous oxide (N₂O), hydrofluorocarbons (HFCs),perfluorocarbons(PFCs),Sulphur hexafluoride (SF6) and nitrogen trifluoride (NF₃)

The alignment of additional disclosures required in GRI 305 and IFRS S2 depends on the choices made by a company when implementing these standards. For e.g. GRI 305 suggests using the latest IPCC (Intergovernmental Panel on Climate Change) assessment’s global warming potential (GWP) rates. In contrast, IFRS S2 mandates companies to utilize the GWP values from the latest IPCC assessment available at the reporting date. To align its disclosures with the requirements in both Standards, a company would thus elect to use the GWP rates from the latest IPCC assessment.

GRI 305 disclosures not explicitly required by IFRS S2:

GRI 305 includes particular disclosure obligations that are not expressly outlined in IFRS S2, but which nevertheless may be required by other general requirements in IFRS S2. These include disclosure of:

• Gross market-based Scope 2 GHG emissions in metric tonnes of CO₂e, if applicable
• Scope 1 and Scope 3 biogenic CO₂ emissions separation from the overall gross emissions
• The gases included in calculations for working out Scope 1, Scope 2 and Scope 3 emissions, including disaggregation by sector if applicable
• Details of Scope 3 activities included in measurement of Scope 3 emissions, information about the tools used in calculation, and specifies about the calculation of base year
• Sector disclosures and recommendations from GRI Topic Standards.

IFRS S2 disclosures not explicitly required by GRI 305:

These include disclosure of:

• Disaggregation of Scope 1 and Scope 2 emissions between the consolidated accounting group and other investees.
• The IFRS S2 requirement to consider disclosing industry-based metrics.
• Information about contractual instruments that would inform investors’ understanding of Scope 2 emissions.
• Entities participating in financial activities associated with asset management, commercial banking or insurance – additional information about financed emissions associated with these activities as part of Scope 3 emissions
• Clarification of the rationale behind the entity’s choice of the measurement approach and how this approach aligns with its disclosure objectives.
• IFRS S2 includes various rules on measuring GHG emissions, covering reassessing the value chain scope, using different reporting periods, and choosing emission factors that best represent the company’s activities.

Thus, we can say, the GRI standards require a company to disclose information about its most significant impacts and the information covered by IFRS-S2 can be used for the purpose of GRI reporting. So, both of these go hand-in hand.

Swati Suman, Audit Associate, SW