#191 Understanding ESG Reporting – ISSB S2

Businesses are coming under increasing pressure to monitor, report and reduce their energy use and carbon emissions to meet net zero targets. As a result, we’re seeing an increase in both mandatory and voluntary regulations that require carbon emissions reporting to verify your net zero claims. In this episode, Mel continues the ESG Reporting Disclosures series by explaining what The International Sustainability Standards Board Climate-related Disclosures (ISSB S2) are, the emissions reporting and verification requirements and who qualifies for ISSB S2. You’ll learn ·      What is ISSB S2? ·      What is the scope of ISSB S2 ·      What are the emissions reporting requirements for ISSB S2? ·      Emissions verification requirements ·      Who qualifies for ISSB S2?   Resources ·      Carbonology ·      ISSB S2     In this episode, we talk about: [00:30] Join the isologyhub – To get access to a suite of ISO related tools, training and templates. Simply head on over to isologyhub.com to either sign-up or book a demo. [02:10] Episode summary: Over the course of September, Mel will be exploring the latest climate change regulations that may affect your organisation. In this episode she dives into The International Sustainability Standards Board Climate-related Disclosures (ISSB S2). [03:20] What is ISSB S2? – The International Sustainability Standards Board Climate-related Disclosures (ISSB S2) is a new global standard that mandates entities to provide comprehensive information about climate-related risks and opportunities. The ISSB S2 was issued by the International Sustainability Standards Board on the 26th of June 2023 and is effective for annual reporting periods beginning on or after the 1st January 2024. The new standard ensures that companies disclose physical and transition risks and their potential impact on the move towards a low carbon economy. [04:20] Further learning with Carbonology: Carbonology have created a half-day course which walks you through all of the various carbon reporting disclosures and sustainability disclosure reporting requirements. If you would like to learn more, get in touch with Carbonology. [07:00] What does ‘Acute and Chronic Physical risks’ mean in the context of ISSB S2? Climate related physical risks are risks resulting from climate change that could be event driven, so an example of an acute physical risk could arise from weather related events like storms, floods and heatwaves, which are increasing in frequency. These could have a knock-on effect to businesses, taking a heat wave as the example, you will need to consider: ·      Can your IT systems and datacentres cope with it? ·      Have you got resilience built in to your operations to be able to deal with that sort of disruption to your organisation? Chronic physical risks arise from longer term shifts in climatic patterns, including changes in precipitation and temperature, which could lead to sea level rises and reduced water availability and changes in soil productivity. These risks could carry a weighty financial burden either through direct damage to assets, or indirectly through supply chain disruption. [09:35] Join the isologyhub and get access to limitless ISO resources – From as little as £99 a month, you can have unlimited access to hundreds of online training courses and achieve certification for completion of courses along the way, which will take you from learner to practitioner to leader in no time. Simply head on over to the isologyhub to sign-up or book a demo. [11:43] What does ‘Transition risk’ mean in the context of ISSB S2? This is looking for a climate related transition plan, which should include targets, actions and resources for the transition towards a lower carbon economy. This would include actions such as reducing greenhouse gas emissions. [12:30] What is the scope of ISSB S2? This Standard applies to: ·      climate-related risks to which the organisation is exposed, which are: ·      climate-related physical risks; and (ii) climate-related transition risks; and ·      climate-related opportunities available to the entity. Climate-related risks and opportunities that could not reasonably be expected to affect an organisation’s prospects are outside the scope of this Standard. ·      The Standard covers:- ·      Governance ·      Strategy ·      Climate related risks and opportunities ·      Business Model and Value Chain ·      Financial position, financial performance and cash flows ·      Climate resilience ·      Risk Management [14:10] What are the emissions reporting requirements for ISSB S2? -  Under ISSB S2, companies are required to measure and disclose their greenhouse gas (GHG) emissions across three scopes: ·      Scope 1 Emissions: Direct emissions from owned or controlled sources. For example, emissions from combustion in owned or controlled boilers, furnaces, vehicles, etc. ·      Scope 2 Emissions: Indirect emissions from the generation of purchased energy. This includes emissions from the production of electricity, steam, heating, and cooling consumed by the company.   ·      Scope 3 greenhouse gas emissions: Indirect greenhouse gas emissions (not included in Scope 2 greenhouse gas emissions) that occur in the value chain of an entity, including both upstream and downstream emissions. Scope 3 greenhouse gas emissions include the Scope 3 categories in the Greenhouse Gas Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011). [16:20] Emissions verification requirements -  Under ISSB S2, companies are required to have their reported greenhouse gas (GHG) emissions data verified. Verification can provide users of financial reports confidence that the information is complete, neutral and accurate. Disclosure of inputs to Scope 3 greenhouse gas emissions needs to disclose information about the measurement approach, inputs and assumptions it uses. [18:30] Who qualifies for ISSB S2? - ISSB S2 applies to all entities that are required by law, regulation, or administrative provision to prepare financial statements. This includes, but is not limited to: ·      Publicly listed companies ·      Large private companies ·      Financial institutions such as banks and insurance companies ·      State-owned enterprises Entities are encouraged to adopt the ISSB S2 voluntarily, even if they are not mandated by law or regulation. Early adoption is permitted and encouraged to enhance transparency and accountability in climate-related disclosures.   If you would like some help with your carbon emissions reporting, please get in touch with Carbonology. We’d love to hear your views and comments about the ISO Show, here’s how: ●     Share the ISO Show on Twitter or Linkedin ●     Leave an honest review on iTunes or Soundcloud. Your ratings and reviews really help and we read each one. 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