BDO Sustainability Insights – Q2

Credible, high-quality greenhouse gas (GHG) emissions data has become increasingly important for businesses as they respond to customer disclosure requests, navigate mandatory regulatory reporting, and implement efficiency and resilience planning. In this edition of BDO Sustainability Insights, we dive into two of the more involved aspects of building and maintaining a GHG inventory: sourcing better Scope 3 data and recalculating base year emissions. We also review the current status of global ISSB Standards adoption, which is driving climate and sustainability reporting in many jurisdictions.

• Why Rebaselining Your GHG Inventory Matters – And Why It's So Complex
• ISSB Global Adoption and Considerations for Multinational Companies
• How To Get Better Scope 3 Emissions Data

Why Rebaselining Your GHG Inventory Matters – And Why It's So Complex

GHG emissions disclosure is now standard business practice. As companies build multi-year GHG inventories and reporting programs mature, many face a new challenge: recalculating base year emissions. 

This practice — often referred to as rebaselining — can quickly become complex as companies work to address historical data gaps and navigate broader impacts, such as resubmitting emissions targets for validation. 

Why Base Years and Rebaselining Matter

The base year in a GHG emissions inventory establishes the reference point for measuring emissions performance over time. As businesses grow by M&A activity or as emissions calculation methodologies change, it often becomes necessary to recalculate base year emissions to preserve comparable year-over-year analysis.

Rebaselining is critical for accurately measuring trends and performance against emissions-reduction targets — information used for both internal decision making and communication with external stakeholders. Additionally, if a company sets emissions targets through the Science Based Targets initiative (SBTi) then recalculates its base year, it must also recalculate its targets and resubmit them to SBTi for validation.

How to Know When to Rebaseline

Companies must recalculate their base year when there is significant change to their emissions data, boundary, or methodology. This change can result from a single large event, or the cumulative impact of several smaller events. Non-exhaustive examples of structural or methodological changes that may require rebaselining include:

• Mergers, acquisitions, and divestments
• Outsourcing or insourcing emissions-generating activities
• Updated methodologies, more accurate inputs, or discovery of errors

For example, per GHG Protocol guidance, if emissions from an acquisition result in a material increase or decrease in a company’s base year GHG inventory, the company must recalculate its base year with the acquired entity’s full year emissions.

Rather than setting a specific threshold for assessing if an emissions change is significant, the GHG Protocol leaves this decision up to each individual company through the establishment of a base year emissions recalculation policy. Drawing on common financial audit practices, some company policies use a threshold of greater than 5% change. SBTi standards set a quantitative threshold, stating that a 5% change or more in total base year emissions requires a base year and target recalculation.

Important Considerations for Rebaselining

To recalculate base year emissions, companies must retroactively adjust historical data to reflect their current organizational structure and methodologies — often with limited legacy data and audit trails. The process isn’t always straightforward, and if not properly managed, companies may face difficulty with obtaining third party assurance, maintaining credibility, or revalidating targets. The following practices can help. 

• Establish a Policy: For consistent decision making, develop a base year recalculation policy that outlines which circumstances trigger a base year review and establishes a threshold that, once reached, requires rebaselining (typically >5% change). 
• Maintain an Inventory Change Log: To avoid weak documentation that could lead to assurance findings, data and methodological updates to the GHG inventory should be recorded in an internal control document and applied consistently during recalculation.
• Assess Current State of Data: Outline requirements for recalculation and engage relevant stakeholders to evaluate available data, including collection processes, data storage systems, and identifiers that enable traceability to specific operations.
• Update Calculations and Processes: Create a plan for filling identified data gaps and complete base year recalculation, making sure to incorporate changes into future data collection and assurance processes. In addition, recalculate each year between the base year and current reporting year — although this is optional under the GHG Protocol, it is necessary for comparability and trend analysis. 
• Manage Disclosures and Target Impact: Incorporate updated trend analysis into planning, resubmit science-based targets to maintain validity, and clearly disclose the recalculation to stakeholders to maintain transparency and reduce greenwashing risk.

Contact BDO for help managing your GHG inventory, including navigating the nuances and implications of rebaselining. 

ISSB Global Adoption and Considerations for Multinational Companies

Mandatory reporting aligned with the ISSB Standards continues to advance across a growing number of jurisdictions, reinforcing the ISSB’s role as the global baseline for investor-focused sustainability disclosures. While some companies are now legally required to report under ISSB-aligned rules, many others are evaluating voluntary adoption, driven by participation in global capital markets and the convergence of legacy sustainability reporting standards and frameworks. Details on global implementation of the ISSB Standards, as well as considerations for voluntary use, are below.

About the ISSB Standards

The IFRS Sustainability Disclosure Standards, often referred to as the ISSB Standards, help companies provide sustainability-related information that is material to investors across global markets (i.e., a global baseline). The standards are developed by the International Sustainability Standards Board (ISSB), an independent board that is part of the International Financial Reporting Standards (IFRS) Foundation, and are compatible with the IFRS Accounting Standards.

Currently, the ISSB Standards consist of IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information and IFRS S2 Climate-related Disclosures. The standards build upon widely used, pre-existing approaches to sustainability reporting – including the industry-specific SASB Standards and the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). The ISSB now maintains the SASB Standards (updates are underway), and the task force that developed and maintained the TCFD framework has disbanded and transferred monitoring activities to the IFRS Foundation.

In addition, the ISSB is in the early stages of developing a new resource for nature-related disclosures, which will draw from the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) and complement IFRS S1 and IFRS S2. 

Mandatory Global ISSB Application 

Companies may be subject to mandatory reporting requirements in jurisdictions that have legally adopted the standards. Adoption takes different forms — some jurisdictions develop local standards based on the ISSB Standards or incorporate them into existing requirements, whereas others reference IFRS S1 and/or IFRS S2 directly (sometimes with additional transitional relief to support initial compliance). 

According to IFRS materials published in March 2026, 40 jurisdictions have decided to use or are taking steps to introduce ISSB Standards into their legal frameworks, representing approximately 60% of global GDP.

A BDO analysis of global ISSB compliance revealed the following:

• Mandatory ISSB compliance has been adopted in 25 jurisdictions, concentrated in Asia and Africa (~40% and 25%, respectively). 
• In most of these jurisdictions, reporting periods have already begun to phase in.
• Compliance is often limited to public companies and/or financial institutions, but some requirements also apply to other types of entities (e.g., large non-listed companies).
• While some mandates are limited to climate reporting, about 80% of jurisdictions require broader sustainability disclosures once requirements are fully implemented.
• Local reporting mandates often apply to both foreign and domestic entities that meet scoping requirements. The adoption of ISSB Standards varies across jurisdictions in terms of how rules are applied to foreign entities, whether reports using equivalent standards are accepted, and whether domestic subsidiaries may rely on foreign parent consolidated reporting for relief from separate reporting. 

Entities that believe they may be subject to mandatory reporting requirements should consult their legal counsel.

Voluntary Application: A Multinational Perspective

Because ISSB is designed to support decision-useful communication with global investors, lenders, and other capital providers, multinational and large publicly traded companies may find value in ISSB-aligned reporting — even if they aren’t subject to regulatory requirements that mandate these disclosures.

The ISSB has published guidance for voluntary application of the ISSB Standards, which includes taking a phased approach while building up reporting capacity while transparently disclosing incomplete compliance. Although the ISSB Standards do not require assurance over reporting (these requirements may be established by individual jurisdictions as they formally adopt the standards), the guidance identifies third-party assurance as a way to help build user confidence when standards are only partially applied.   

In the U.S., many companies already use SASB and TCFD in their sustainability reporting, both of which have been integrated into the ISSB Standards. This creates a strong foundation for companies to transition to ISSB reporting if they choose to do so. To support this process, the ISSB has published educational materials that outline how leveraging SASB and TCFD disclosures can help companies move toward ISSB Standards compliance. Additionally, some U.S. multinationals may find that their global subsidiaries are subject to mandatory ISSB disclosures and choose to align group-wide reporting to avoid fragmentation.

Contact BDO for help building a sustainability reporting strategy that’s right for your company.

How To Get Better Scope 3 Emissions Data

Scope 3 emissions are notoriously difficult to track, but disclosure is becoming a common expectation among markets and regulators. Read on to learn what Scope 3 emissions are, why they matter, and how companies can help improve their data.

What are Scope 3 emissions?

Scope 3 emissions are generated by activities in a company’s value chain outside of its direct control. Under the GHG Protocol, they are grouped into 15 separate categories.

Why do Scope 3 emissions matter?

Scope 3 emissions often represent the largest share of a company’s total emissions footprint (one CDP analysis estimated 75% on average), and access to high-quality data can provide a more holistic understanding of exposure to climate-related risk and opportunity across the value chain. For example, Scope 3 data can help companies pinpoint emissions-intensive suppliers and product lines, informing decisions on value chain efficiency improvements, engagement, and diversification. Scope 3 data is also important for setting and reporting progress against science-based emissions reduction targets.

Additionally, companies may receive Scope 3 disclosure requests from investors and customers performing their own risk assessments and reporting, and tracking Scope 3 emissions can help avoid compliance risk. Depending on the sustainability regulation or standard, companies may be required to disclose Scope 3 emissions (often subject to materiality). 

How can companies source better Scope 3 data?

Reliable Scope 3 data is challenging to obtain because companies have limited control over how (or if) the entities in their value chain capture and calculate emissions and underlying activity data. However, there are actions companies can take to enhance their Scope 3 inventories. These include:

• Focus on the highest-impact supplier relationships first. Instead of overwhelming teams by trying to influence emissions data management for all suppliers at once, concentrate data-gathering efforts on the most impactful accounts (e.g., ongoing business, high dollar spend, high emissions intensity). These are the relationships where companies may have influence or see the best return on their efforts.
• Involve procurement early and consider adding data sharing to contracts. Early engagement with the procurement team can establish a line of sight into the quality and availability of suppliers’ emissions data prior to purchasing agreements being finalized. These conversations help avoid surprises around data requests or availability, and if appropriate, data sharing requirements can be worked into official contracts.
• Use targeted sampling or surveys to develop a company-specific proxy. If collecting activity data from all suppliers is not practical, companies can survey a targeted set and use the results to develop a company-specific internal average. To make the results more actionable, the survey sample can be designed around materiality (e.g., highest spend and volume, most concentrated region). This approach can serve as a strong interim solution while companies scale up their emissions measurement and management programs.

Obtaining better Scope 3 data will be an iterative process, with companies working over several reporting cycles to build more mature inventories and expand efforts toward actual emissions reduction. As with all aspects of GHG calculation, approaches and estimates should be clearly documented and disclosed to maintain an inventory that is credible to stakeholders and well-positioned to withstand the scrutiny of assurance.

Contact BDO for help building processes to track and measure Scope 3 emissions and a full GHG inventory.