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SUSCTCFD, ISSB, GRI, SBTi

Reference Library

The literature

Four agents, four bodies of literature. SUSC-TCFD studies the TCFD recommendations. SUSC-ISSB studies IFRS S1 and IFRS S2. SUSC-GRI studies the GRI Standards. SUSC-SBTI studies the SBTi Corporate Net-Zero Standard. An assessment starts from the company, on the first page, after you choose which framework it uses.

Framework

The TCFD framework

The Task Force on Climate-related Financial Disclosures was set up by the Financial Stability Board so investors, lenders, and insurers could see how climate-related issues affect an organization’s financial position. The recommendations are built to sit in the mainstream financial filing, not in a separate sustainability brochure.

Where the framework stands

Established
2015, by the Financial Stability Board
Recommendations
June 2017
Implementation annex
Implementing guidance updated October 2021
Metrics guidance
Guidance on Metrics, Targets, and Transition Plans, October 2021

The Task Force published its final status report in 2023 and disbanded. The FSB asked the IFRS Foundation to monitor progress. IFRS S2 Climate-related Disclosures incorporates the TCFD recommendations, so the structure below is still the one companies use to get from operations to a climate-related financial filing.

Who should disclose, and on what basis

Who

  • Organizations with public debt or equity are the ones the Task Force asks to implement the recommendations, so investors, lenders, and insurance underwriters can use the information.
  • Because climate-related issues are not limited to listed companies, the Task Force encourages every other organization to implement them as well.
  • Asset managers and asset owners — including public and private pension plans, insurance companies, endowments, and foundations — should implement the recommendations.

Materiality

  • Governance and risk-management disclosures give the context in which financial results are produced. They are part of the recommended set so readers can see whether climate-related issues are actually overseen and managed.
  • Strategy, and metrics and targets, are subject to a materiality assessment, made the same way the organization judges other risks for its financial filing.
  • The 2021 annex asks organizations to disclose Scope 1 and Scope 2 greenhouse gas emissions independent of that materiality assessment. Scope 3 stays subject to materiality; the Task Force still encourages disclosure.
  • The Task Force warns organizations not to decide too quickly that climate-related issues are immaterial just because some of them are longer term.

Where it is published

  • The recommended home for the disclosure is the mainstream financial filing, at least once a year, under controls comparable to financial reporting.
  • If a climate-related event has a material financial impact between filings, the disclosure should be updated.

Four pillars, eleven disclosures

The four recommendations describe how an organization operates: how it is governed, how climate changes its strategy and financial plan, how it manages the risks, and which metrics and targets it uses. The eleven disclosures are the specific information those recommendations ask for. They are meant to be read together.

Governance

Disclose the organization’s governance around climate-related risks and opportunities.

Users of the financial filing want to know whether climate-related issues receive board and management attention, or whether they sit in a side report nobody governs.

  1. Disclosure a

    Describe the board’s oversight of climate-related risks and opportunities.

    • How, and how often, the board or a board committee (audit, risk, or another) is informed about climate-related issues.
    • Whether the board considers those issues when it reviews strategy, major plans, risk-management policies, annual budgets, and business plans, and when it sets performance objectives, oversees major capital expenditure, or weighs acquisitions and divestitures.
    • How the board monitors progress against climate-related goals and targets.

  2. Disclosure b

    Describe management’s role in assessing and managing climate-related risks and opportunities.

    • Whether climate-related responsibilities are assigned to specific management positions or committees, and whether those roles report to the board.
    • The organizational structure that supports the work.
    • How management is informed about climate-related issues and how it monitors them.
    • For the energy, transportation, materials and buildings, and agriculture groups, whether performance metrics for the board and management, including remuneration, take climate-related risks and opportunities into account.

Strategy

Disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning where such information is material.

This is the pillar that connects climate to the business: what the issues are, what they do to the financial plan, and whether the strategy holds up under more than one climate future.

  1. Disclosure a

    Describe the climate-related risks and opportunities the organization has identified over the short, medium, and long term.

    • The organization defines its own short, medium, and long term, taking into account the useful life of its assets or infrastructure. Climate-related issues often show up over the medium and longer terms.
    • Name the specific issues on each horizon that could have a material financial impact, and say whether each risk is a transition risk or a physical risk.
    • Describe the process used to decide which risks and opportunities could be financially material.
    • Where it helps, split the description by sector and geography. Use the transition, physical, and opportunity classifications.

  2. Disclosure b

    Describe the impact of climate-related risks and opportunities on the organization’s businesses, strategy, and financial planning.

    • Impact on businesses and strategy: products and services, supply chain and value chain, adaptation and mitigation, investment in research and development, and operations.
    • Impact on financial planning: operating costs and revenues, capital expenditures and capital allocation, acquisitions and divestments, and access to capital.
    • How the issues feed the financial plan, and the time periods used.
    • For the four non-financial groups, consider revenues, expenditures, assets and liabilities, and capital.

  3. Disclosure c

    Describe the resilience of the organization’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.

    • Say which scenarios were used, including one at 2°C or lower, and how they differ from a publicly available scenario if they were adjusted.
    • Describe critical assumptions, time frames, and what the scenarios imply for the organization’s performance and strategy.
    • Insurance companies with substantial exposure to weather-related perils should consider a scenario warmer than 2°C for physical effects, in addition to a 2°C scenario.

Risk management

Disclose how the organization identifies, assesses, and manages climate-related risks.

Strategy says what the issues are. Risk management says how they are found, judged, and handled, and whether that work is part of ordinary enterprise risk management or a parallel exercise.

  1. Disclosure a

    Describe the organization’s processes for identifying and assessing climate-related risks.

    • How the organization decides the relative significance of climate-related risks versus other risks.
    • Whether it considers existing and emerging regulation, and factors such as the materiality of a risk, its likelihood, and the size of the impact.
    • Banks should consider describing climate-related risks in lending and other intermediary activities, including significant concentrations of credit exposure to carbon-related assets, and framing them in ordinary banking categories such as credit, market, liquidity, and operational risk.

  2. Disclosure b

    Describe the organization’s processes for managing climate-related risks.

    • The processes for managing risks, including how the organization decides to mitigate, transfer, accept, or control them.
    • Insurance companies should describe the tools used to manage climate-related risk in product development and pricing, and the range of climate-related events considered.

  3. Disclosure c

    Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organization’s overall risk management.

    • How climate-related processes sit inside the enterprise risk management system, rather than beside it.

Metrics and targets

Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material.

Metrics make the strategy and risk process checkable. Targets say what the organization is trying to change, over which horizon, and whether it is getting there.

  1. Disclosure a

    Disclose the metrics used by the organization to assess climate-related risks and opportunities in line with its strategy and risk management process.

    • Metrics should line up with the risks and opportunities the organization actually describes under strategy.
    • Include historical periods so a reader can see a trend, and the methodology where it is not obvious.
    • Where relevant, cover water, energy, land use, and waste, an internal carbon price, and revenue from low-carbon products and services.
    • The 2021 guidance asks all organizations to consider seven cross-industry metric categories, for current, historical, and forward-looking periods.

  2. Disclosure b

    Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks.

    • Scope 1 is direct emissions. Scope 2 is indirect emissions from purchased electricity, heat, or steam. Scope 3 is other indirect emissions in the value chain, upstream and downstream.
    • Since the 2021 annex, Scope 1 and Scope 2 should be disclosed independent of a materiality assessment. Scope 3 remains subject to materiality, and the Task Force encourages organizations to disclose it.
    • Relate the inventory to risk: which emissions sit under a carbon price, which depend on sold products, and which sit in the supply chain.

  3. Disclosure c

    Describe the targets used by the organization to manage climate-related risks and opportunities and performance against targets.

    • A target is a level, threshold, quantity, or qualitative goal over a defined time horizon.
    • Targets should be informed by strategy and risk management, quantified where possible, and supported by interim targets when the goal is medium or long term.
    • Explain the base year, the boundary, the methodology, and any use of offsets. The 2021 guidance suggests reviewing targets at least every five years.
    • A transition plan is not a fifth pillar. It is the actionable path for meeting the targets, under the same governance as the strategy.

Seven principles for effective disclosure

The principles sit under the recommendations. They are how the Task Force describes a disclosure that a user of the financial filing can actually use. They can pull against each other — a methodology change can help comparability and hurt consistency — and the organization has to balance them without burying the reader.

  1. 1

    Disclosures should present relevant information

    Write about the effect of climate-related issues on markets, strategy, financial statements, and cash flows. Cut what is immaterial, and avoid boilerplate. If a topic the market cares about is not significant, say so, so the reader can see it was considered.

  2. 2

    Disclosures should be specific and complete

    Cover the exposure, its nature and size, and the governance, strategy, risk process, and performance around it. Include history and a forward look, and state the definitions, boundaries, and assumptions behind numbers.

  3. 3

    Disclosures should be clear, balanced, and understandable

    A specialist and a generalist should both be able to find the point. Balance qualitative and quantitative information, and describe risks and opportunities without slanting either.

  4. 4

    Disclosures should be consistent over time

    Keep formats, language, and metrics stable enough for comparison across periods. When a method changes, explain the change.

  5. 5

    Disclosures should be comparable among organizations within a sector, industry, or portfolio

    Give enough detail, in the financial filing, that a reader can compare strategy, activity, risk, and performance with peers.

  6. 6

    Disclosures should be reliable, verifiable, and objective

    Base disclosures on objective data and stated methods. Forward-looking statements use judgment; the assumptions should be traceable. The same internal governance used for financial reporting should apply. Independent assurance is not required by the recommendations.

  7. 7

    Disclosures should be provided on a timely basis

    Publish at least annually in the mainstream financial report. If a climate-related event has a material financial impact, update the disclosure rather than waiting for the next annual cycle.

How the framework is applied

The recommendations do not publish a separate numbered procedure. They do impose an order. Governance has to exist. Risks and opportunities have to be identified and classified before they can be judged material, tested in scenarios, managed, measured, and disclosed. SUSC-TCFD uses that order when it reads a company.

  1. Step 1

    Put governance in place

    Decide how the board oversees climate-related risks and opportunities and who in management assesses and manages them. The rest of the framework is not credible if nobody owns it.

  2. Step 2

    Identify risks and opportunities

    Look across the company and its value chain. Classify each climate-related risk as transition (policy and legal, technology, market, reputation) or physical (acute or chronic), and each opportunity as resource efficiency, energy source, products and services, markets, or resilience. Place them on the short, medium, and long term horizons the organization defines.

  3. Step 3

    Judge which issues could be financially material

    Use the same materiality judgment the organization uses for other risks in its financial filing. Trace effects through revenues, expenditures, assets and liabilities, and capital and financing. Do not drop an issue only because it sits on a longer horizon.

  4. Step 4

    Test the strategy against scenarios

    Describe how the strategy holds up under different climate-related scenarios, including a 2°C or lower scenario. State the scenarios, the assumptions, the time frames, and the implications.

  5. Step 5

    Integrate the work into risk management

    Describe how climate-related risks are identified, assessed, and then mitigated, transferred, accepted, or controlled, and how that process sits inside overall risk management.

  6. Step 6

    Select metrics and set targets

    Choose metrics that match the strategy and the risk process, including Scope 1 and Scope 2 greenhouse gas emissions and, where appropriate, Scope 3. Set targets over defined horizons, track performance, and describe the transition plan that would meet them.

  7. Step 7

    Disclose in the mainstream financial filing

    Publish the eleven recommended disclosures in the mainstream financial filing, at least annually, and apply the seven principles. The four pillars are meant to be read together: governance oversees what strategy describes, risk management runs the process, and metrics check it.

Glossary

Classifications

How the framework sorts climate-related issues

Before a company can disclose, it has to know what kind of issue it is looking at. These are the classifications the recommendations use, and the ones SUSC-TCFD uses when it reads a company’s operations.

Climate-related risk is a potential negative financial impact. The framework splits it in two, then into types. Transition risk is the shift to a lower-carbon economy. Physical risk is the climate itself. Strategy disclosure (a) asks the organization to say which is which.

Transition risk

Financial risk from the shift to a lower-carbon economy. The Task Force groups the common forms into four types: policy and legal, technology, market, and reputation.

Policy and legal

Changes in policy, regulation, and litigation as governments and courts respond to climate change.

Examples

  • Higher prices on greenhouse gas emissions
  • Tighter emissions-reporting obligations
  • Mandates and regulation of existing products and services
  • Exposure to litigation

Potential financial impact

  • Higher operating and compliance costs
  • Write-offs, early retirement, or impairment of assets
  • Higher insurance premiums
  • Fines and judgments

Technology

Displacement of existing products and processes by lower-emission alternatives, and the cost of getting there.

Examples

  • Substitution of existing products and services with lower-emission options
  • Unsuccessful investment in new technologies
  • Upfront costs of moving to lower-emission technology

Potential financial impact

  • Write-offs and early retirement of assets
  • Lower demand for current products
  • Research and development spending
  • Capital investment to develop or deploy new technology

Market

Shifts in supply and demand as customers, input markets, and asset prices respond to climate change and climate policy.

Examples

  • Changing customer behavior
  • Uncertain market signals
  • Higher cost of raw materials

Potential financial impact

  • Lower demand because preferences shift
  • Higher production costs from energy, water, or waste requirements
  • Abrupt moves in energy costs
  • A different mix of revenues
  • Repricing of assets such as reserves, land, and securities

Reputation

Damage to demand, operations, workforce, or access to capital when customers, communities, or other stakeholders change how they see the organization.

Examples

  • Shifts in consumer preferences
  • Stigmatization of a sector
  • Stakeholder concern or negative feedback

Potential financial impact

  • Lower demand
  • Interrupted production, including delayed permits
  • Harder hiring and retention
  • Less available capital

Physical risk

Financial risk from the physical effects of climate change. Acute risk is event-driven. Chronic risk is a longer shift in climate patterns.

Acute

Event-driven physical impacts, including greater severity of extremes such as cyclones, floods, droughts, and fires.

Examples

  • More severe cyclones, floods, and storms
  • Wildfire
  • Drought events that stop production or logistics

Potential financial impact

  • Lost production and supply-chain interruption
  • Workforce health, safety, and absenteeism
  • Damage and early retirement of assets in high-risk locations
  • Higher insurance premiums, or insurance that is harder to buy
  • Lower revenue from lower output

Chronic

Longer-term shifts in climate, rather than a single event.

Examples

  • Changes in precipitation patterns and weather variability
  • Rising mean temperatures
  • Rising sea levels

Potential financial impact

  • Write-offs and early retirement of assets
  • Higher operating costs, including inadequate water
  • Higher capital costs to repair or relocate facilities
  • Lower sales or output
  • Insurance that costs more or covers less

SUSC-ISSB

The ISSB framework

SUSC-ISSB reads a company against the standards of the International Sustainability Standards Board. Those standards are IFRS S1, the general requirements, and IFRS S2, the climate standard. Together they are the framework. Climate is not the whole of it.

Where the standards stand

Established
November 2021, by the IFRS Foundation
Standards
IFRS S1 and IFRS S2, issued 26 June 2023
Effective date
Annual reporting periods beginning on or after 1 January 2024
Adoption
Each jurisdiction decides whether and when the standards apply. The standards themselves set the global baseline; local law decides who must use them.

The Task Force completed its work in 2023. The IFRS Foundation took on monitoring of the TCFD recommendations. IFRS S2 incorporates those recommendations and adds measurement, industry-based, and financial-effect requirements the recommendations did not spell out.

The ISSB maintains the SASB standards as industry-based guidance. IFRS S1 requires an entity to refer to and consider the SASB disclosure topics. IFRS S2 industry-based content comes from that work.

IFRS S1 — general requirements

IFRS S1 asks an entity to disclose sustainability-related risks and opportunities that could reasonably be expected to affect its cash flows, its access to finance, or its cost of capital over the short, medium, or long term. The readers are the primary users of the financial report: investors, lenders, and other creditors.

Conceptual foundations

  • Fair presentation

    The disclosure is a complete set. It depicts sustainability-related risks and opportunities without bias, and it is comparable across periods. An entity that applies S1 and S2 and meets the requirements makes an explicit and unreserved statement of compliance.

  • Materiality

    Information is material if omitting, misstating, or obscuring it could reasonably be expected to influence decisions primary users make. That is the same materiality judgement as in the financial statements. It is not a catalogue of every impact the company has on the environment or on people.

  • Reporting entity

    The sustainability disclosures are for the same reporting entity as the related financial statements. Greenhouse gases have an extra split: the consolidated accounting group is distinguished from other investees such as associates, joint ventures, and unconsolidated subsidiaries.

  • Connected information

    The reader should see the links among the sustainability disclosures, and between those disclosures and the financial statements. A risk described in the strategy section should be traceable to the metric, the target, and the line in the financials it affects.

Four areas of core content

S1 uses the same four areas as the TCFD recommendations, and applies them to sustainability-related risks and opportunities as a whole, not only to climate.

Governance

The governance processes, controls, and procedures used to monitor, manage, and oversee sustainability-related risks and opportunities.

  • The governance body or individual responsible, including how the body is informed, how often, and whether it takes the risks and opportunities into account when it oversees strategy, major transactions, and risk management.
  • Whether that body considers related trade-offs, and how it oversees targets.
  • Management’s role in the processes, controls, and procedures, and whether that role is delegated to a specific position or committee.
Strategy

The approach the entity uses to manage sustainability-related risks and opportunities.

  • The risks and opportunities that could reasonably be expected to affect the entity’s prospects, and the time horizons over which they could do so. The entity defines short, medium, and long term.
  • Current and anticipated effects on the business model and value chain, and where in that chain the effects are concentrated.
  • Current and anticipated effects on financial position, financial performance, and cash flows, including how the risks and opportunities are included in financial planning.
  • The resilience of the strategy and business model to the risks.
Risk management

The processes used to identify, assess, prioritize, and monitor sustainability-related risks and opportunities.

  • The inputs, parameters, and scope of operations covered.
  • How the nature, likelihood, and magnitude of risks are assessed, and how risks are prioritized relative to other risks.
  • Whether and how those processes are integrated into the entity’s overall risk management.
  • The extent to which the processes have changed from the previous reporting period.
Metrics and targets

The performance measures and the targets used to manage the risks and opportunities.

  • Metrics required by an applicable IFRS Sustainability Disclosure Standard. For climate, that standard is IFRS S2.
  • Metrics the entity itself uses to measure and monitor the risk or opportunity, and its performance against that metric.
  • Targets set by the entity or required by law, the metric used to set the target, the period, the base period, milestones, and performance.

Sources of guidance

  • Apply the IFRS Sustainability Disclosure Standard that deals with the topic. For climate, that is IFRS S2.
  • For a matter S2 does not cover, refer to and consider the applicability of the disclosure topics in the SASB standards for the entity’s industry.
  • The entity may also consider the CDSB Framework application guidance for water and biodiversity, and other standard-setter materials, to the extent they do not conflict with IFRS Sustainability Disclosure Standards.
  • Industry practice and the entity’s own circumstances still have to be judged. A SASB topic is a prompt, not an automatic disclosure.

How the report is prepared

  • Disclose at the same time as the related financial statements, and cover the same reporting period. A transition relief allowed a later publication in the first year.
  • Present comparatives. A transition relief allowed an entity to omit them in the first year.
  • Name the judgements that had the most significant effect on the information, and the measurement uncertainties.
  • Correct material errors by restating comparatives, unless impracticable.
  • An entity need not provide information that is not material. Commercially sensitive information about an opportunity has a narrow, conditioned relief.
  • Information has to be reasonable and supportable, available at the reporting date without undue cost or effort. That proportionality relief changes how hard the entity must search. It does not delete a disclosure that is material and can be made.

IFRS S2 — climate

IFRS S2 asks for information about climate-related risks and opportunities that is useful to primary users. It applies the S1 core content to climate, and then adds climate-specific strategy, metric, and industry-based requirements.

Classifications

Climate-related risks are physical or transition. Physical risks are acute, when they are event-driven, or chronic, when they are longer shifts in climate patterns. Transition risks are the risks of moving to a lower-carbon economy, including policy and legal, technology, market, and reputation effects.

Climate-related opportunities are the potential positive effects of efforts to mitigate and adapt. S2 does not force a fixed menu. The five types the TCFD used — resource efficiency, energy source, products and services, markets, and resilience — are the classification S2 inherited, because S2 incorporates the TCFD recommendations. The entity still has to identify the opportunities that could affect its own prospects.

Strategy under S2

  1. Risks and opportunities

    Describe each climate-related risk and opportunity that could affect prospects. For a risk, say whether it is physical or transition. Place each item on the short, medium, or long term horizon the entity defines, and explain how those horizons were defined.

  2. Business model and value chain

    Describe the current and anticipated effects on the business model and value chain, and where those effects are concentrated. A kiln, a loan book, and a supply of palm oil are different concentrations. The disclosure has to say which one it is.

  3. Strategy and decision-making

    Describe how the entity has responded, and plans to respond, including changes to the business model, mitigation, adaptation, and the transition plan. Say how the response is resourced, and the progress against plans disclosed in earlier periods.

  4. Financial effects

    Disclose the current effects on financial position, financial performance, and cash flows, and the anticipated effects over the short, medium, and long term, including how climate-related risks and opportunities are included in financial planning. Quantitative information is expected where the entity can provide it without undue cost or effort. Where it cannot, it explains why and provides qualitative information.

  5. Climate resilience

    Assess the resilience of the strategy and business model to climate-related changes, developments, and uncertainties, using climate-related scenario analysis. The analysis is commensurate with the entity’s circumstances. Disclose the inputs, the key assumptions, the reporting period in which it was carried out, and the implications for strategy.

Greenhouse gases

  • Measure greenhouse gases using the Greenhouse Gas Protocol Corporate Standard, unless a jurisdictional authority or an exchange requires a different method.
  • Disclose Scope 1 and Scope 2 separately for the consolidated accounting group and for other investees.
  • Disclose location-based Scope 2. Disclose information about contractual instruments if the entity has a Scope 2 target that uses them, or if it discloses a market-based figure.
  • For Scope 3, disclose which of the fifteen categories are included, and the measurement approach, inputs, and assumptions. Financed emissions have additional requirements for commercial banks, asset managers, and insurers.
  • In the first annual reporting period an entity applies IFRS S2, it need not disclose Scope 3. That relief does not continue.

Cross-industry metric categories

S2 requires these seven categories for climate. Industry-based metrics sit beside them. They do not replace them.

  • Greenhouse gases

    Absolute gross Scope 1, Scope 2, and Scope 3 emissions, in metric tonnes of CO2 equivalent.

  • Transition risks

    The amount and percentage of assets or business activities vulnerable to climate-related transition risks.

  • Physical risks

    The amount and percentage of assets or business activities vulnerable to climate-related physical risks.

  • Climate-related opportunities

    The amount and percentage of assets or business activities aligned with climate-related opportunities.

  • Capital deployment

    The amount of capital expenditure, financing, or investment deployed toward climate-related risks and opportunities.

  • Internal carbon prices

    Whether the entity uses an internal carbon price in decision-making, and the price for each metric tonne.

  • Remuneration

    Whether and how climate-related considerations are factored into executive remuneration, and the percentage of remuneration linked to them in the current period.

How SUSC-ISSB applies the standards

  1. Step 1

    Identify what could affect prospects

    Under S1, identify sustainability-related risks and opportunities that could affect cash flows, access to finance, or cost of capital. Use the SASB industry topics as a required reference. Under S2, identify the climate-related risks and opportunities in particular.

  2. Step 2

    Classify the climate issues

    Separate physical risks from transition risks. Place each risk and opportunity on the short, medium, and long term horizons the entity defines. Describe where the effect sits in the business model and value chain.

  3. Step 3

    Trace the financial effects

    Connect each material item to financial position, financial performance, and cash flows, current and anticipated, and to the financial planning process. Link that description to the related line in the financial statements.

  4. Step 4

    Test climate resilience

    Use climate-related scenario analysis, scaled to the entity’s circumstances, and disclose what the scenarios imply for the strategy.

  5. Step 5

    Describe governance and risk management

    Name the governance body and management’s role. Describe how climate-related risks are identified, assessed, prioritized, and monitored, and whether that process sits inside overall risk management.

  6. Step 6

    Measure and set targets

    Report the seven cross-industry metric categories, including Scope 1, Scope 2, and Scope 3 greenhouse gases, plus the industry-based metrics that apply. Disclose targets, the metric used, the period, milestones, and performance.

Glossary

SUSC-GRI

The GRI framework

SUSC-GRI reads an organization against the GRI Standards. The Universal Standards are GRI 1, GRI 2, and GRI 3. Material topics are then reported with Topic Standards, and with a Sector Standard when one applies. The question is the significance of the organization’s impacts, including impacts on human rights.

Where the standards stand

The GRI Standards are a modular system. GRI 1, GRI 2, and GRI 3 are the Universal Standards, revised in 2021 and effective for reports published on or after 1 January 2023.

Topic Standards sit in three series: GRI 200 Economic, GRI 300 Environmental, and GRI 400 Social. An organization uses the Topic Standard for each material topic.

Sector Standards list the topics likely to be material for a sector. When a Sector Standard applies, the organization uses it in determining its material topics. This desk maps GRI 11 Oil and Gas, GRI 12 Coal, GRI 13 Agriculture, Aquaculture and Fishing, and GRI 14 Mining.

A GRI material topic is an organization’s most significant impact on the economy, the environment, and people, including impacts on human rights. That is not the investor materiality in IFRS S1, and it is not the financial-filing materiality in the TCFD recommendations.

Reporting principles

GRI 1 sets eight principles for reporting in accordance with the Standards.

  • Accuracy

    Report information that is correct and sufficiently detailed for the reader to assess the organization’s impacts.

  • Balance

    Report negative impacts as well as positive ones. Do not emphasize one so that the other disappears.

  • Clarity

    Make the information understandable and accessible to the stakeholders who need it.

  • Comparability

    Select, compile, and report information consistently, so performance can be compared over time and, where it helps, with other organizations.

  • Completeness

    Give enough information for the reader to assess the organization’s impacts in the reporting period.

  • Sustainability context

    Place the organization’s impacts in the wider context of sustainable development, including the limits and demands on environmental and social resources.

  • Timeliness

    Report on a regular schedule, close enough to the period that the information is useful for decisions.

  • Verifiability

    Gather, record, compile, and analyze information so that it can be examined and its quality established.

Concepts the process uses

  • Impact

    An effect the organization has, or could have, on the economy, the environment, and people, including on human rights. The effect can be actual or potential, negative or positive, short-term or long-term, intended or unintended, and reversible or irreversible.

  • Material topic

    A topic that represents the organization’s most significant impacts. Significance is assessed for each impact. The most significant impacts are then grouped into topics and prioritized for reporting.

  • Due diligence

    The process through which an organization identifies, prevents, mitigates, and accounts for how it addresses its actual and potential negative impacts. GRI 3 follows that logic.

  • Stakeholder

    An individual or group that has an interest that is affected, or could be affected, by the organization’s activities. Stakeholders inform the context step. They do not replace the significance test.

GRI 2 — general disclosures

An organization that reports in accordance reports these disclosures about itself. They are not limited to material topics.

  • The organization and its reporting practices

    Legal name, ownership, entities included in sustainability reporting, reporting period and frequency, and external assurance.

  • Activities and workers

    Sectors, value chain, employees, and workers who are not employees.

  • Governance

    Governance structure, nomination and chair, role in overseeing impacts, delegation, conflicts of interest, collective knowledge, evaluation, remuneration, and the ratio of pay.

  • Strategy, policies, and practices

    Statement on sustainable development strategy, policy commitments, embedding policy, processes to remediate negative impacts, mechanisms for seeking advice and raising concerns, compliance with laws, and membership of associations.

  • Stakeholder engagement

    Approach to stakeholder engagement, and collective bargaining agreements.

GRI 3 — material topics

Material topics are the organization’s most significant impacts on the economy, the environment, and people, including human rights. The process has four steps.

  1. 1. Understand the organization’s context

    Consider activities, business relationships, the sustainability context, and stakeholders. An applicable Sector Standard is part of this step.

  2. 2. Identify actual and potential impacts

    Identify impacts on the economy, the environment, and people, including human rights, across the organization’s own activities and its business relationships.

  3. 3. Assess the significance of the impacts

    Assess the significance of each impact. For negative impacts, consider severity and likelihood. For positive impacts, consider scale, scope, and likelihood.

  4. 4. Prioritize the most significant impacts

    Group the most significant impacts into topics. Those topics are the material topics reported. Disclose the process, the list of material topics, and how each one is managed.

Reporting in accordance

  • Apply the eight reporting principles in GRI 1.
  • Report the disclosures in GRI 2: General Disclosures.
  • Determine material topics with GRI 3, using an applicable Sector Standard when one exists.
  • Report how material topics were determined, the list of material topics, and how each material topic is managed.
  • Report the disclosures in the Topic Standards for each material topic.
  • Publish a GRI content index and a statement that the report is in accordance with the GRI Standards, and notify GRI.

Topic Standards

Each material topic is reported with its Topic Standard. The standards are grouped in three series.

  • GRI 200 Economic

    Economic performance, including the financial implications of climate change; market presence; indirect economic impacts; procurement; anti-corruption; anti-competitive behavior; and tax.

  • GRI 300 Environmental

    Materials, energy, water and effluents, biodiversity, emissions, waste, and supplier environmental assessment. Greenhouse gases are GRI 305: direct emissions, energy-indirect emissions, and other indirect emissions.

  • GRI 400 Social

    Employment, occupational health and safety, training, diversity, non-discrimination, freedom of association, child labor, forced labor, indigenous peoples, local communities, supplier social assessment, public policy, customer health and safety, marketing, and customer privacy.

Greenhouse gases and energy

When emissions are a material topic, GRI 305 places them in three scopes. Purchased electricity is also energy under GRI 302. Other impacts are not forced into a greenhouse-gas scope.

  • GRI 305-1 is direct (Scope 1) greenhouse gas emissions from sources the organization owns or controls.
  • GRI 305-2 is energy indirect (Scope 2) greenhouse gas emissions from purchased or acquired electricity, heating, cooling, and steam.
  • GRI 305-3 is other indirect (Scope 3) greenhouse gas emissions that occur outside the organization, including upstream and downstream.
  • GRI 302 covers energy consumption within and outside the organization. Purchased electricity is both an energy figure and the activity behind Scope 2.
  • GRI 305 also asks for emissions intensity, reduction of emissions, ozone-depleting substances, and other significant air emissions where those disclosures apply.

How SUSC-GRI applies the standards

  1. 1. Set the context

    Read what the organization does, where it sits in the value chain, and which Sector Standard applies. Stakeholders and the sustainability context belong in this step.

  2. 2. Identify impacts

    List actual and potential impacts on the economy, environment, and people, including human rights, from the organization’s own activities and its business relationships.

  3. 3. Judge significance and prioritize

    Assess significance and keep the most significant impacts as material topics. A Sector Standard’s likely topics are reviewed here. They are not an automatic list.

  4. 4. Report the topic and how it is managed

    For each material topic, describe the impacts, the policies and actions, how effectiveness is tracked, and how stakeholders are involved. Then report the Topic Standard disclosures.

  5. 5. Report greenhouse gases by scope

    Where emissions are a material topic, report Scope 1, Scope 2, and Scope 3 under GRI 305, and energy under GRI 302. Electricity consumption is the Scope 2 activity.

  6. 6. Complete the universal disclosures

    Report GRI 2, the GRI 3 process and the list of material topics, the content index, and the statement of use.

Glossary

SUSC-SBTI

The SBTi framework

SUSC-SBTI reads a company against the Science Based Targets initiative. The standard in force for validation through 2026 is the Corporate Net-Zero Standard, Version 1.3.1. Version 2.0 has been adopted and takes effect in 2027. The text here is paraphrased.

Where the standard stands

The Science Based Targets initiative develops standards for greenhouse-gas reduction targets that line up with limiting warming to 1.5°C and reaching net-zero. It is a target-setting standard. It is not a financial-filing framework and it is not an impact-materiality standard.

The initiative was formed by CDP, the United Nations Global Compact, the World Resources Institute, and the World Wide Fund for Nature. The We Mean Business Coalition is also a partner. Target validation sits with a subsidiary of the initiative.

Throughout 2026, companies setting targets are validated against Corporate Net-Zero Standard Version 1.3.1. That version remains available for submission until 31 January 2028.

Version 2.0 was adopted by the Board of Trustees on 21 May 2026. It takes effect on 31 January 2027. Validation against Version 2.0 opens in the first quarter of 2027, and Version 2.0 is mandatory for submissions after 31 January 2028.

Near-term targets

The near-term target is the five-to-ten-year milestone on the way to net-zero. It is aligned with 1.5°C.

  • Timeframe

    A near-term target reaches five to ten years from the date it is submitted. A supplier or customer engagement target is shorter: no more than five years.

  • Ambition

    The near-term target is aligned with a 1.5°C pathway. Well-below-2°C is no longer the bar for a new corporate target.

  • Scope 1 and Scope 2 boundary

    The target covers at least 95 percent of company-wide Scope 1 and Scope 2 emissions. Version 1.3.1 allows those two scopes to be combined. Version 2.0 will require a separate target for each, covering all of that scope.

  • Scope 3 threshold

    When Scope 3 is 40 percent or more of total Scope 1, 2, and 3 emissions, the company sets one or more near-term Scope 3 targets covering at least 67 percent of Scope 3. Version 2.0 replaces that fixed share with a significance test: categories that are at least 5 percent of Scope 3 categories 1 to 14.

  • Methods

    The cross-sector method is an absolute contraction. Where the initiative has published a pathway, a sector intensity method can be used instead. Scope 2 can be a renewable-electricity target under Version 1.3.1. Scope 3 can combine an emissions target with a supplier or customer engagement target.

Electricity

  • Purchased electricity, heat, steam, and cooling are Scope 2. They sit inside the near-term boundary for every organization.
  • Version 1.3.1 allows an emissions target or a renewable-electricity target for Scope 2.
  • Version 2.0 separates Scope 2 from Scope 1, covers all purchased energy, and bases the emissions target on the location-based inventory. Low-carbon electricity can be an alignment target. Hourly matching is recognized, not required of every company.
  • Market instruments, including contracts and certificates, are an implementation choice. They do not remove the obligation to account for the electricity the organization actually uses.

Net-zero

  • Long-term depth

    A net-zero target reduces emissions to a residual level consistent with a 1.5°C outcome, on the order of a 90 percent reduction, and neutralizes what remains.

  • Year

    The long-term year is 2050 at the latest. For power generation and maritime transport, Version 1.3.1 brings that year forward to 2040.

  • Boundary

    The long-term target covers at least 95 percent of Scope 1 and Scope 2 and at least 90 percent of Scope 3. Version 2.0 keeps a deep Scope 1 reduction where an intensity or asset-transition method is used, and makes a long-term Scope 3 target optional.

  • Neutralization

    Residual emissions are neutralized with permanent carbon removals. A contribution outside the value chain does not replace the abatement target. From 2035, Version 2.0 expects larger companies to support removals as they approach that residual.

Methods and sector routes

  • Cross-sector absolute reduction

    The default method. Scope 1 and Scope 2 fall on a straight 1.5°C contraction. Used where no sector pathway applies.

  • Power, cement, steel, transport, and buildings

    Generation, cement process emissions, iron and steel, aviation, maritime transport, vehicle use, and in-use building energy have sector pathways. The pathway sets the intensity or the activity the target follows. It does not excuse the inventory.

  • Forest, land, and agriculture

    Land emissions and removals — livestock, soils, and land-use change — are set with the forest, land, and agriculture guidance, separate from the energy and industrial inventory.

  • Financial institutions

    Banks, insurers, asset owners, and asset managers set targets on financed, facilitated, or insurance-associated emissions, as well as on their own Scope 1 and Scope 2.

  • Fossil fuel companies

    Oil, gas, and coal production are not validated on the ordinary corporate route. A fossil fuel policy applies. Use of sold products usually dominates the inventory.

What Version 2.0 changes

Version 2.0 was adopted on 21 May 2026 and takes effect on 31 January 2027. Companies can keep submitting under Version 1.3.1 until 31 January 2028.

  • Company categories

    Version 2.0 replaces the separate small-company route with two categories. Larger companies, Category A, carry assurance, transition-planning, and emissions-intensive-activity requirements that smaller companies do not.

  • Governance

    Version 2.0 requires board accountability for the target and a transition plan. Version 1.3.1 asks for public disclosure of the inventory and progress, without that governance criterion.

  • Implementation order

    Direct reductions come first. Shared-system actions and market instruments are allowed when a structural constraint exists, and they have to be traceable, additional, and free of double counting.

  • Ongoing emissions responsibility

    Version 2.0 turns the older beyond-value-chain recommendation into an optional recognition program, and it expands the rules for neutralizing residual emissions.

How SUSC-SBTI applies the standard

  1. 1. Fix the boundary and the base year

    Use the same organizational boundary as the financial statements. Build a recent greenhouse-gas inventory for Scope 1, Scope 2, and Scope 3.

  2. 2. See which sources dominate

    Separate direct emissions, purchased energy, and the value chain. Test whether Scope 3 is at least 40 percent of the total.

  3. 3. Choose the method

    Use a sector pathway, the forest and land guidance, the financial-institutions guidance, or the fossil fuel policy where one applies. Otherwise use cross-sector absolute reduction.

  4. 4. Set the near-term target

    Five to ten years, 1.5°C, at least 95 percent of Scope 1 and Scope 2. Add Scope 3 when the threshold is met.

  5. 5. Set the net-zero target

    Reduce to the residual level by 2050 at the latest, earlier for power and maritime transport, and state how residual emissions will be neutralized.

  6. 6. Disclose progress

    Publish the inventory and movement against the target each year. Recalculate the base year when the structure of the company or the inventory changes enough to break the target.

Glossary