Are you aware of the major changes happening in the world of sustainability reporting?
At the end of last month, the International Financial Reporting Standards Foundation announced new standards that will require businesses to report their sustainability metrics and risks in more detail, including Scope 3 emissions.
These changes will undoubtedly affect businesses of all sizes, as much more rigorous reporting requirements for larger entities trickle down to the economy at large. In this blog post, we'll explore what these new standards mean for your business and how CarbonTrail can help ensure compliance. But before we dive into the details, let's start with the basics.
Who is behind these standards?
The new standards were announced by IFRS, The International Financial Reporting Standards Foundation. The IFRS creates accounting and sustainability disclosure standards that are accepted — and enforced — worldwide.
It is important to pay attention to the ISSB's work because it has received significant support from investors, companies, policymakers, market regulators, and other organisations worldwide, including the International Organisation of Securities Commissions (IOSCO), the Financial Stability Board, the G20, and the G7 Leaders. This means it’s very likely to become the de-facto reporting standard for the jurisdictions represented by these groups.
What are the ISSB standards?
ISSB stands for IFRS Sustainability Disclosure Standards, and they set the scene for some pretty major changes to how business will be required to report their sustainability metrics and risks.
Right now, these standards, along with New Zealand’s own XRB, are focused on the larger end of town — such as banks, insurers, and asset lenders. The Carbon Neutral Government Programme already affects public entities, and the new standards will almost certainly trickle down the economy. This means that your customers will begin to ask you for more information, if they aren’t already doing so.
The most important change for SMEs is the requirement to report on Scope 3 emissions in as much fidelity as possible, including clearly describing how the result was calculated, and any uncertainty in the calculation.
This is a significant change. Currently, the state of the art does not mandate this, meaning until now a "best effort" approach has been acceptable. This will no longer be the case.
What does this mean for me?
This means that, moving forward, it is very likely you will fall into scope for more detailed reporting. This is because your customers (starting with the larger ones) will be required to be much more specific about the emissions in the products and services required to operate their own business.
Luckily, this is what we’ve been building towards at CarbonTrail since its inception — and we’ve got you! Here is what your customers will have to do, how it will affect you, and how CarbonTrail has your back:
Disclose full Scope 1, 2 and 3 Emissions
What the standards say: Your customers will be required to report their Scope 1, 2 and 3 emissions in as much fidelity as they can. They must also clearly show when this information was based on estimates or primary data. The data should also be verified if possible.
What this means for you: If you are deemed to be a significant source of emissions for your customers, you will need to provide data they can use as part of their own inventory.
How we’ve got your back: With CarbonTrail, you can export a GHG-compatible report that shows your data. We can also connect you with verification partners who will be able to audit your inventory to meet the new ISSB standards.
The source of factors used and the uncertainty in your inventory
What the standards say: You must provide sufficient information in your report to enable readers to understand the main uncertainties in your footprint.
What this means for you: You may be asked to provide information about how you arrived at your number.
How we’ve got your back: Our Greenhouse Gas Inventory contains the emissions factors used to arrive at the calculation, which have any uncertainties baked into them. This will be made available to any auditor who wants to verify your inventory too.
How you measured your emissions, and why
What the standards say: You have to disclose the measurement approach used under the GHG Protocol and the reason. There are two main approaches — equity and control based.
What this means for you: You will need to provide this information to your customer if requested.
How we’ve got your back: CarbonTrail will be rolling out functionality to help you confidently assess this for your organisation, and then make this information available to those who ask for it.
Data from your own supply chain
What the standards say: Your own measurement must include as much primary or high-fidelity data as possible from your own supply chain.
What this means for you: You need to use as much specific data as possible in your reports.
How we’ve got your back: CarbonTrail already supports activity capture for many different categories, including air travel, electricity, and more. This information will be made available for any verification activities requested.
While these new standards are complex and perhaps daunting, CarbonTrail has done the hard yards to get the tool ready to give your customers the information they need.
Interested in finding out more about the CarbonTrail tool and what it could do for your business? Schedule a virtual tour with our Founder and CEO, Tom, here.