ISSB IFRS S2: How will it impact freight forwarders?
Freight and logistics is a vital component of the modern globalised world, but the industry is under pressure to comprehend and reduce its environmental impact. Regional emissions disclosure regulations — such as the EU’s Corporate Sustainability Reporting Directive (CSRD) — and consumer demands for sustainable practices are driving this pressure, causing many businesses reliant on the shipment of goods to evaluate their supply chain carbon footprints.
As of now, there is no globally enforced legislation compelling businesses to report their supply chain carbon footprint. But change might be on the horizon. The emergence of the International Sustainability Standards Board (ISSB) promises to herald a new era of carbon emissions reporting standards on a global scale.
In this article, we’ll explore what the ISSB is and how it will impact supply chain emissions reporting globally. We’ll delve into what this means for you as a freight forwarder and how it can help shippers meet their carbon emissions reporting obligations.
What is the ISSB?
The International Sustainability Standards Board was set up at COP26 in Glasgow by the trustees of the International Financial Reporting Standards (IFRS) foundation, which is the same body that developed the global financial Accounting Standards. The main purpose of setting up the ISSB is to provide a “high-quality, comprehensive global baseline of sustainability disclosures focused on the needs of investors and the financial markets.”
Since then, the ISSB has become a pivotal player in setting the stage for global sustainability reporting. Committed to enhancing transparency in Environmental, Social and Governance (ESG) disclosures, the ISSB plays a crucial role in shaping standards that facilitate comparability and consistency in sustainability reporting practices worldwide.
What is IFRS S2?
At the heart of the ISSB's influence on sustainability regulations is the International Financial Reporting Standard S2 Climate Related Disclosures (IFRS S2), a set of recommendations designed for “an entity to disclose information about its climate-related risks and opportunities that is useful to users of general purpose financial reports”. Notably, IFRS S2 recommends the inclusion of Scope 3 emissions reporting — which includes supply chain emissions reporting — as standard.
Published in June 2023, the standard’s reporting period started from 1 January 2024, making it relevant for any business that wants to meet its criteria now. Governments worldwide are recognising the importance of the ISSB standards, signalling a global shift towards a universally accepted framework for compulsory sustainability reporting. For example, the EU’s CSRD — which came into effect on January 1 2024 — follows the ISSB’s IFRS S2 standard on emissions reporting. The UK has also suggested it is creating its Sustainability Disclosure Standards (UK SDS) in accordance with IFRS S2.
The UK Sustainability Disclosure Technical Advisory Committee (TAC) has been tasked with assessing the IFRS S2 and providing recommendations on its implementation to the Business and Trade Secretary via the Department for Business and Trade. An announcement on the UK’s implementation of its SDS is expected in July 2024.
How will IFRS S2 impact freight forwarders?
As a freight forwarder, the most important aspect of the IFRS S2 standard is the inclusion of scope 3 emissions reporting requirements. For shippers, a large proportion of scope 3 emissions come from their supply chain activities, but they often have no visibility of their shipment's journey except for origin and destination. You have access to the vital shipment journey data which can then be used to determine a shipment’s emissions. Due to your unique position in the supply chain, you can expect shippers to approach you to provide the emissions data they need to meet their emissions reporting regulations. As the ISSB IFRS S2 starts to influence emissions reporting legislation globally, you will start to see shipment emissions reporting become a standardised part of forwarding as vendors start meeting customer needs.
But, the prospect of adding these services to your offering shouldn’t be viewed as a hindrance — this new requirement from shippers presents you with an opportunity. By providing shippers with shipment emissions reporting as standard, you can offer tangible value to your customers, reassuring them that this part of their reporting obligation is under control. As a result, you’ll elevate your brand and position your business as a key partner in this new reporting landscape.
In this sense, the widespread incorporation of the ISSB's IFRS S2 into reporting legislation should be viewed as a potential business opportunity that’s there for the taking.
Prepare for impending regulations with Pledge
With ISSB standards poised to influence the development of regulations in major global markets, there’s a clear opportunity for freight forwarders to offer shippers the data they need to meet inevitable emissions reporting requirements. At Pledge, we’ve developed a freight emissions measurement platform that does exactly that. It’s easy to use and can be integrated into any customer portal or TMS, or used as a stand-alone solution.
Show your customers that you’re ready to meet upcoming regulations. Sign up for your 14-day free trial to try it for yourself.