ISSB and GRI Alignment for Greenhouse Gas (GHG) Reporting: A Comprehensive Guide

The alignment of sustainability standards is critical in today’s global business environment, where transparency and consistency in environmental reporting are becoming essential for regulatory compliance, investor decision-making, and corporate sustainability strategies. Two of the most widely recognized frameworks in sustainability reporting are the Global Reporting Initiative (GRI) Standards and the IFRS Foundation’s International Sustainability Standards Board (ISSB) Standards.

In January 2024, GRI and the IFRS Foundation collaborated to publish a landmark resource, “Interoperability considerations for GHG emissions when applying GRI Standards and ISSB Standards.” This publication provides companies with comprehensive guidance on aligning their greenhouse gas (GHG) emissions reporting, specifically Scope 1, Scope 2, and Scope 3 emissions, under both GRI 305: Emissions and IFRS S2 Climate-related Disclosures. This blog explores the significance of this alignment, the role of interoperability, and how companies can leverage these frameworks for effective and efficient GHG emissions reporting.

Before delving into the interoperability between GRI and ISSB Standards, it’s important to understand the three types of GHG emissions:

• Scope 1 Emissions: Direct emissions from owned or controlled sources, such as company facilities and vehicles.

• Scope 2 Emissions: Indirect emissions from the generation of purchased electricity, steam, heating, or cooling consumed by the company.

• Scope 3 Emissions: All other indirect emissions that occur in a company’s value chain, including those from purchased goods and services, transportation, and waste management.

Effective measurement and disclosure of these emissions are essential for companies to manage their environmental impact, comply with regulatory requirements, and meet stakeholder expectations.

Historically, sustainability reporting has been fragmented, with companies having to navigate multiple reporting frameworks. The collaboration between the Global Reporting Initiative (GRI) and the International Sustainability Standards Board (ISSB) under the IFRS Foundation represents a critical step toward unifying sustainability reporting practices. Since March 2022, GRI and ISSB have worked together under a collaboration agreement aimed at aligning their work programs and standard-setting activities. The recent publication on GHG emissions builds upon this collaboration and offers companies a clear path for reporting GHG emissions in a consistent and comparable manner. 

The publication is particularly important in light of emerging regulatory frameworks such as Europe’s Corporate Sustainability Reporting Directive (CSRD) and forthcoming mandates in the US. These regulations underscore the need for globally comparable GHG reporting practices, which GRI and ISSB aim to achieve through their coordinated approach. 

The alignment between GRI 305 and IFRS S2 is centered around the measurement and disclosure of GHG emissions. Both standards draw heavily from the GHG Protocol, the most widely used global standard for GHG accounting. This shared foundation means that companies already familiar with GRI 305 will find it relatively easy to transition to or integrate ISSB’s IFRS S2 standards. 

• GRI 305: Emissions focuses on the direct and indirect GHG emissions associated with an organization’s activities, requiring disclosures on Scope 1, 2, and 3 emissions. It emphasizes transparency and provides detailed guidance on how companies should calculate and report these emissions. 

• IFRS S2 Climate-related Disclosures is part of the ISSB’s broader sustainability disclosure framework, which focuses on the financial impacts of climate-related risks and opportunities. IFRS S2 requires companies to disclose how GHG emissions impact their financial performance and position, in addition to reporting on Scope 1, 2, and 3 emissions. 

The term interoperability refers to the ability of different systems, frameworks, and standards to work together seamlessly. In the context of GHG emissions reporting, interoperability between GRI 305 and IFRS S2 means that companies can report their emissions in a way that satisfies both sets of standards without duplication of effort. This streamlined approach reduces the reporting burden and enhances the comparability of sustainability disclosures across different regions and sectors. 

The GRI and ISSB publication outlines several key areas of interoperability: 

• GHG Protocol Alignment: Both GRI 305 and IFRS S2 use the GHG Protocol as their primary reference for calculating and reporting emissions. This alignment means that the methodologies for measuring Scope 1, 2, and 3 emissions are consistent across both standards, enabling companies to use a single data set for dual reporting. 

• Disclosure of Emissions Categories: Both frameworks require detailed disclosures on all three scopes of GHG emissions. By aligning the structure and content of these disclosures, companies can easily fulfill the requirements of both GRI and IFRS reporting without duplicating work. 

• Financial Materiality: While GRI focuses on the broader environmental and societal impacts of GHG emissions, IFRS S2 emphasizes the financial materiality of climate-related risks. The interoperability resource highlights how companies can disclose emissions in a way that meets both the GRI’s emphasis on impact and ISSB’s focus on financial relevance. 

One of the most significant advantages of aligning GRI and ISSB Standards is the reliance on the GHG Protocol as the common methodology for calculating emissions. The GHG Protocol provides a standardized approach to measuring and reporting GHG emissions, ensuring consistency across industries and geographies. 

The GHG Protocol sets the framework for measuring emissions from Scope 1, 2, and 3 sources, guiding companies through the process of identifying emissions sources, collecting relevant data, and applying emission factors. By using this protocol, both GRI 305 and IFRS S2 ensure that companies are reporting emissions in a consistent manner, which enhances the comparability of emissions data across different organizations. 

1. Enhanced Reporting Efficiency: By aligning the reporting requirements of GRI 305 and IFRS S2, companies can streamline their reporting processes, reducing the administrative burden associated with sustainability reporting. The interoperability between these standards means that companies can leverage the same data and reporting infrastructure to satisfy both frameworks.
2. Improved Transparency and Accountability: The alignment of GRI and ISSB standards helps companies provide more transparent and comparable disclosures, which can enhance their accountability to stakeholders, including investors, regulators, and customers.
3. Global Comparability: As more countries adopt regulatory frameworks like the CSRD and US federal mandates, the ability to report GHG emissions in a manner that is globally comparable becomes increasingly important. The collaboration between GRI and ISSB facilitates this comparability, enabling companies to meet the expectations of stakeholders in multiple jurisdictions.
4. Better Risk Management: The financial materiality focus of IFRS S2 encourages companies to assess and report on the potential financial impacts of climate-related risks. By integrating this approach with GRI’s broader impact reporting, companies can gain a more holistic understanding of their exposure to climate-related risks and opportunities.

The publication of the GRI and ISSB interoperability resource represents a significant step forward in the harmonization of sustainability reporting standards. However, there is still much work to be done in aligning different frameworks around the world. As sustainability reporting continues to evolve, it is likely that we will see further collaboration between standard setters, regulators, and other stakeholders to ensure that reporting practices remain consistent, comparable, and aligned with the needs of global markets.

The collaboration between GRI and ISSB on GHG emissions reporting is a major advancement in the field of sustainability reporting. By aligning GRI 305 and IFRS S2, these organizations are helping companies streamline their emissions reporting, improve transparency, and meet the expectations of global stakeholders. As more regulatory frameworks come into play, the interoperability between these standards will be crucial for companies looking to navigate the complex landscape of sustainability reporting. Ultimately, this alignment is not only a step towards more efficient reporting but also a significant contribution to the global effort to address climate change.