ISSB Resources 4 — Questions and Answers
Question 1: Under the GHG Protocol as referenced by ISSB, which Scope covers emissions from resource extraction and processing by an entity's suppliers?
- Scope 1 — direct emissions from owned or controlled sources
- Scope 2 — indirect emissions from purchased energy
- Scope 3 upstream — emissions from purchased goods and services (Correct answer)
- Scope 3 downstream — emissions from the use of sold products
Correct answer: Scope 3 upstream — emissions from purchased goods and services
Scope 3 upstream emissions include those generated by suppliers during the extraction, processing, and transportation of raw materials and purchased goods before they reach the reporting entity.
Question 2: How does IFRS S2 treat capital expenditures for transitioning from fossil fuel resources to renewable energy?
- They are excluded from climate-related disclosures as purely financial decisions
- They must be disclosed as part of climate-related transition plans, including amounts and anticipated timing (Correct answer)
- They are only disclosed when they individually exceed $1 million USD
- They appear only in the financial statements and are excluded from the sustainability report
Correct answer: They must be disclosed as part of climate-related transition plans, including amounts and anticipated timing
IFRS S2 requires entities with climate transition plans to disclose associated CapEx and OpEx commitments, including amounts, timing, and the resource changes they are intended to achieve.
Question 3: What does IFRS S2 require regarding disclosure of an entity's energy resource mix?
- Only the total energy cost in dollar terms must be disclosed
- Energy consumption broken down by fossil fuels and renewable sources, with intensity metrics when material (Correct answer)
- Only Scope 1 direct combustion of fossil fuels must be reported
- Energy resource disclosures are entirely voluntary under IFRS S2
Correct answer: Energy consumption broken down by fossil fuels and renewable sources, with intensity metrics when material
IFRS S2 requires disclosure of total energy consumption split between fossil fuel and renewable sources, plus energy intensity metrics, when energy is a material climate-related issue for the entity.
Question 4: Under ISSB, how broadly should companies assess resource-related risks in their supply chains for materiality purposes?
- Only risks from direct Tier 1 suppliers need to be assessed
- Resource risks should be assessed across the full value chain when they could affect the entity's financial performance (Correct answer)
- Supply chain resource risks are entirely excluded from ISSB materiality assessments
- Only risks in supplier countries with weaker environmental regulations require assessment
Correct answer: Resource risks should be assessed across the full value chain when they could affect the entity's financial performance
ISSB's materiality framework requires assessment of sustainability-related risks across the full value chain, including upstream supply chain resource risks that could ultimately affect financial performance.
Question 5: In ISSB's climate-related disclosure framework, what is a 'stranded asset'?
- A physical asset damaged beyond repair by an acute climate event such as a flood
- A resource or infrastructure asset that loses economic value earlier than expected due to climate transition forces (Correct answer)
- An asset that has been written down to zero under standard accounting impairment rules
- A natural resource that becomes geographically inaccessible due to permafrost thaw or sea-level rise
Correct answer: A resource or infrastructure asset that loses economic value earlier than expected due to climate transition forces
Stranded assets are resources or infrastructure — such as fossil fuel reserves or high-emission facilities — that may become economically unviable ahead of their expected useful life due to transition-related forces.
Question 6: Under IFRS S2, when must an entity disclose its internal carbon price if it uses one?
- When the internal carbon price is used in decision-making related to climate-related risks and resource allocation (Correct answer)
- Only if the internal carbon price has been independently validated by a recognized third party
- Only public sector and government-owned entities are required to disclose internal carbon prices
- Internal carbon prices are confidential commercial information and are always exempt from ISSB disclosure
Correct answer: When the internal carbon price is used in decision-making related to climate-related risks and resource allocation
IFRS S2 requires disclosure of internal carbon prices when entities use them in decision-making — such as capital allocation and resource planning — because this is decision-relevant information for investors.
Question 7: Under ISSB standards, what comprehensive information must be disclosed for resource-related sustainability targets?
- Only the absolute reduction target amount and the target year
- The base year, metrics used, interim milestones, whether the target is science-based, and annual progress against it (Correct answer)
- Only targets that have been formally verified by the Science Based Targets initiative (SBTi)
- Resource-related targets are optional disclosures under both IFRS S1 and IFRS S2
Correct answer: The base year, metrics used, interim milestones, whether the target is science-based, and annual progress against it
IFRS S1 and S2 require comprehensive target disclosures: the base year, metrics tracked, interim milestones, the basis for target-setting, and annual progress reporting — not just the headline end goal.
ISSB Resources 4
Under the GHG Protocol as referenced by ISSB, which Scope covers emissions from resource extraction and processing by an entity's suppliers?