The educational material published by the IFRS Foundation in May 2025, "Greenhouse Gas Emissions Disclosure Requirements Applying IFRS S2 Climate-related Disclosures", provides key clarifications on the requirements for reporting greenhouse gas (GHG) emissions under IFRS S2. Structured in the form of 13 questions and answers, the document assists entities in understanding and correctly applying the requirements for measuring and reporting GHG emissions.

Questions and answers from the IFRS Foundation:

1. Why does IFRS S2 include greenhouse gas emissions disclosure requirements, including those in Scope 3?

IFRS S2 requires entities to disclose information about GHG emissions to provide key users with relevant information on climate-related risks and opportunities that may affect cash flows, access to finance or the cost of capital. This information helps to assess an entity's exposure to the transitional and physical risks associated with climate change.

2. Which GHG Protocol standards are referred to in IFRS S2 and for what purpose?

IFRS S2 refers to two GHG Protocol standards:

"GHG Protocol: A Corporate Accounting and Reporting Standard (2004)" for the measurement of GHG emissions from Goals 1, 2 and 3

"GHG Protocol Corporate Value Chain (Scope 3) Accounting and Reporting Standard (2011)" for the categorisation of Scope 3 emissions.

These standards provide a common framework for measurement and classification, supporting comparability of disclosures.

3. Is the entity required to disclose GHG emissions generated in the reporting period on a gross basis?

IFRS S2 requires disclosure of the absolute gross GHG emissions generated in the reporting period, without taking into account reductions or offsets such as carbon credits.

4. Is the entity required to include all 15 categories of the GHG Protocol Corporate Value Chain Standard in the measurement of Scope 3 emissions?

The entity should assess the relevance of each category and include only categories relevant to its business. Relevance is determined on the basis of the materiality of the information to the primary users.

5. Is it permissible to limit the measurement and disclosure of Scope 3 emissions to the minimum limits set out in the GHG Protocol Corporate Value Chain Standard?

IFRS S2 does not allow entities to limit themselves only to the GHG Protocol's minimum boundaries or simplified guidance. Instead, it requires that the entire value chain structure of the entity be assessed to determine the relevance of each of the 15 categories of Purpose 3. Only those categories deemed relevant in terms of climate risks and opportunities should be measured and reported. The entity shall justify and document decisions to include or exclude each category.

6. Is there a conflict between the requirement in IFRS S1 to provide information about the reporting entity and the organisational boundary determined under the GHG Protocol Corporate Standard?

IFRS S2 requires entities to set their organisational boundaries for emissions reporting consistent with the boundaries used for financial reporting, as required by IFRS S1. At the same time, IFRS S2 recognises that the GHG Protocol allows two methods:

• control approach (operational or financial)
• (percentage) shareholding approach

The entity must select an approach and apply it consistently so that the reporting of GHG emissions is consistent with the reporting entity defined in the financial statements. This alignment ensures comparability and clarity between financial and sustainability data.

7. What is the measurement framework for Scope 3 in IFRS S2 and how does it assist entities in measuring GHG emissions in Scope 3?

The Measurement Framework for Goal 3 provides guidance for the use of available information and reasonable estimates in the measurement of Goal 3 emissions, prioritising data specific to the entity's activities. It helps entities accurately represent Scope 3 emissions, even in the absence of direct data.

8. How does the use of the proportionality mechanism affect the measurement framework requirements for Aim 3?

Entities may use all reasonable and supportable information available at the time of reporting, without unreasonable cost or effort, to measure Scope 3 emissions. This principle allows flexibility in data collection while maintaining the quality of the information disclosed.

9. What should an entity do if GHG emissions data from its value chain are not available due to differences in reporting periods?

The entity may use the most recent data available and shall disclose any significant events that could affect the relevance of that data. Transparency regarding the reporting periods used for value chain data is important.

10. How should an entity engaged in commercial banking activities measure the absolute gross funded issuance of undrawn loan commitments?

IFRS S2 does not require a specific methodology for measuring these emissions. However, financial entities shall:

• choose an appropriate and sensible method (e.g. PCAF methods are recognised in the industry but not mandatory);
• clearly document and disclose the methodology used, including all assumptions, estimates and data sources;
• ensure that the disclosures give a true and fair representation of the absolute gross emissions related to committed but undrawn borrowings;
• reveal methodological limitations and uncertainties.

Essentially, the emphasis is on transparency, methodological robustness and reasonably supportable information.

11. Does IFRS S2 require entities to set GHG emission targets?

IFRS S2 does not require the establishment of targets, but if the entity has such targets, it shall disclose them and provide detailed information about them, including the nature of the target (gross or net), the greenhouse gases covered and the planned use of carbon credits.

12. Is the entity required to disclose specific information if it has a net GHG emissions target?

If an entity has a net-zero target, IFRS S2 requires disclosure of extensive details including:

• Gross and net target - including values in tonnes CO₂e and target year;
• Degree of utilisation of carbon credits - the extent to which the entity intends to achieve the target through offsetting rather than direct reduction;
• Details of carbon credits used or planned:
  • type (source reduction, capture, storage, etc.);
  • source (certified, voluntary or regulated projects);
  • accreditation schemes (e.g. Gold Standard, VCS);
  • assumptions about permanence and additionality;
• Direct reduction vs compensation strategies;
• Assumptions and risks related to reaching the target.

The purpose of these disclosures is to enable users to assess the credibility, ambition and transparency of the entity's climate strategy.

13. Is the entity required to adjust the disclosure of comparative information about GHG emissions if the composition of the reporting entity changes, for example, because of an acquisition or sale of a subsidiary?

IFRS S2 does not require the adjustment of comparative information in such cases, but the entity shall disclose the material effects of these changes on reported emissions and provide additional information if necessary to understand the impact on climate-related risks and opportunities.

The educational material can be accessed here: Greenhouse Gas Emissions Disclosure Requirements Applying IFRS S2 Climate-related Disclosures (PDF)