ifrs-s2-ibg-volume-40-biofuels-part-b

Industry-based Guidance on implementing

Climate-related Disclosures

Volume 40—Biofuels

June 2023

IFRS S2

IFRS

® Sustainability Disclosure Standard

International Sustainability Standards Board

This Industry-based Guidance accompanies IFRS S2 Climate related Disclosures (published

June 2023; see separate booklet) and is issued by the International Sustainability

Standards Board (ISSB).

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IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

Introduction

This volume is part of the Industry-based Guidance on Implementing IFRS S2 Climate-related

Disclosures. This guidance suggests possible ways to apply some of the disclosure requirements in

IFRS S2 but does not create additional requirements.

This volume suggests possible ways to identify, measure and disclose information about

climate-related risks and opportunities that are associated with particular business

models, economic activities and other common features that characterise participation in

this industry.

This industry-based guidance has been derived from Sustainability Accounting Standards

Board (SASB) Standards, which are maintained by the International Sustainability

Standards Board (ISSB). The metric codes used in SASB Standards have been included for

ease of reference. For additional context regarding the industry-based guidance contained

in this volume, including structure and terminology, application and illustrative

examples, refer to Section III of the Accompanying Guidance to IFRS S2.

IFRS S2 INDUSTRY-BASED GUIDANCE

Volume 40—Biofuels

Industry Description

Biofuels industry entities produce biofuels and process raw materials for production.

Using organic feedstocks, entities manufacture biofuels that are used primarily in

transportation. Entities typically source feedstocks, which include food, oil crops and

animal products, from agricultural product distributors. Ethanol and biodiesel are the

most widely produced biofuels, while other types include biogas, biohydrogen and

synthetic biofuels, produced from a variety of organic feedstocks. Biofuels entities’

customers are chiefly fuel-blending and fuel-supply entities, including major integrated

oil entities. Government regulations related to the use of renewable fuel are a significant

demand driver in the industry.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Biofuel production capacity

Quantitative

Millions of

litres (ML)

RR-BI-000.A

Production of: (1) renewable fuel, (2) advanced biofuel,

(3) biodiesel, and (4) cellulosic biofuel

Quantitative

Millions of

litres (ML)

RR-BI-000.B

Amount of feedstock consumed in production 66

Quantitative

Metric tons (t)

RR-BI-000.C

Water Management in Manufacturing

Topic Summary

Biofuel refining is water-intensive. Biorefineries require water for feedstock processing,

fermentation, distillation and cooling. Although water use at biorefineries is modest

relative to the quantities consumed during feedstock crop production, it is concentrated,

and thus may affect local water resources. Facilities also may generate wastewater

containing salts, organic compounds, dissolved solids, phosphorus and other substances,

requiring wastewater treatment. Biofuel refineries also may face reduced water

availability, related cost increases or operational disruptions. Water extraction from

particular areas for refining, as well as contamination of water supplies because of

refining operations, also could create regulatory risk and tensions with local

communities. Water efficiency in operations and the proper treatment of effluents are

therefore important for biofuels entities.

Metrics

RR-BI-140a.1. (1) Total water withdrawn, (2) total water consumed; percentage of

each in regions with High or Extremely High Baseline Water Stress

The entity shall disclose the amount of water, in thousands of cubic metres,

withdrawn from all sources.

1.1

Water sources include surface water (including water from wetlands,

rivers, lakes and oceans), groundwater, rainwater collected directly and

stored by the entity, and water and wastewater obtained from municipal

water supplies, water utilities or other entities.

The entity may disclose portions of its supply by source if, for example, significant

portions of withdrawals are from non-freshwater sources.

2.1

Fresh water may be defined according to the local laws and regulations

where the entity operates. If no legal definition exists, fresh water shall be

considered to be water that has less than 1,000 parts per million of

dissolved solids.

2.2

Water obtained from a water utility in compliance with jurisdictional

drinking water regulations can be assumed to meet the definition of fresh

water.

Note to RR-BI-000.C – The amount of feedstock consumed in production is defined as feedstock

purchases adjusted for changes in inventory throughout the reporting period.

IFRS S2 INDUSTRY-BASED GUIDANCE

The entity shall disclose the amount of water, in thousands of cubic metres,

consumed in its operations.

3.1

Water consumption is defined as:

3.1.1

Water that evaporates during withdrawal, use and discharge

3.1.2

Water that is directly or indirectly incorporated into the product or

service

3.1.3

Water that does not otherwise return to the same catchment area

from which it was withdrawn, such as water returned to another

catchment area or the sea

The entity shall analyse all its operations for water risks and identify activities

that withdraw and consume water in locations with High (40–80%) or Extremely

High (>80%) Baseline Water Stress as classified by the World Resources Institute’s

(WRI) Water Risk Atlas tool, Aqueduct.

The entity shall disclose water withdrawn in locations with High or Extremely

High Baseline Water Stress as a percentage of the total water withdrawn.

The entity shall disclose water consumed in locations with High or Extremely

High Baseline Water Stress as a percentage of the total water consumed.

RR-BI-140a.2. Description of water management risks and discussion of

strategies and practices to mitigate those risks

The entity shall describe its water management risks associated with water

withdrawals, water consumption and discharge of water or wastewater.

1.1

Risks associated with water withdrawals and water consumption include

risks to the availability of adequate, clean water resources, which include:

1.1.1

Environmental constraints—such as operating in water-stressed

regions,

drought,

concerns

aquatic

impingement

entrainment, interannual or seasonal variability, and risks from

the impact of climate change

1.1.2

Regulatory and financial constraints—such as volatility in water

costs, stakeholder perceptions and concerns related to water

withdrawals (for example, those from local communities, non-

governmental organisations and regulatory agencies), direct

competition with and impact from the actions of other users (for

example, commercial and municipal users), restrictions to

withdrawals because of regulations, and constraints on the entity’s

ability to obtain and retain water rights or permits

1.2

Risks associated with the discharge of water or wastewater include the

ability to obtain rights or permits related to discharges, regulatory

compliance related to discharges, restrictions to discharges, the ability to

maintain control over the temperature of water discharges, liabilities,

reputational risks and increased operating costs because of regulation,

stakeholder perceptions and concerns related to water discharges (for

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

example, those from local communities, non-governmental organisations

and regulatory agencies).

The entity may describe water management risks in the context of:

2.1

How risks may vary by withdrawal source, including surface water

(including water from wetlands, rivers, lakes and oceans), groundwater,

rainwater collected directly and stored by the entity, and water and

wastewater obtained from municipal water supplies, water utilities or

other entities; and

2.2

How risks may vary by discharge destinations, including surface water,

groundwater or wastewater utilities.

The entity may discuss the potential effects that water management risks may

have on its operations and the time line over which such risks are expected to

manifest.

3.1

Effects include those associated with costs, revenue, liabilities, continuity

of operations and reputation.

The entity shall discuss its short- and long-term strategies or plans to mitigate

water management risks, which include:

4.1

The scope of its strategy, plans, goals or targets, such as how they relate to

various business units, geographies or water-consuming operational

processes.

4.2

Any water management goals or targets it has prioritised, and an analysis

of performance against those goals or targets.

4.2.1

Goals and targets include those associated with reducing water

withdrawals,

reducing

water

consumption,

reducing

water

discharges, reducing aquatic impingements, improving the quality

of water discharges and regulatory compliance.

4.3

The activities and investments required to achieve the plans, goals or

targets, and any risks or limiting factors that might affect achievement of

the plans or targets.

4.4

Disclosure of strategies, plans, goals or targets shall be limited to activities

that were ongoing (active) or reached completion during the reporting

period.

For water management targets, the entity shall additionally disclose:

5.1

Whether the target is absolute or intensity-based, and the metric

denominator if it is an intensity-based target.

5.2

The time lines for the water management activities, including the start

year, the target year and the base year.

5.3

The mechanism(s) for achieving the target, including:

5.3.1

Efficiency efforts, such as the use of water recycling or closed-loop

systems;

IFRS S2 INDUSTRY-BASED GUIDANCE

5.3.2

Product innovations, such as redesigning products or services to

require less water;

5.3.3

Process and equipment innovations, such as those that enable the

reduction of aquatic impingements or entrainments;

5.3.4

Use of tools and technologies (for example, the World Wildlife

Fund Water Risk Filter, the Global Water Tool and Water Footprint

Network Footprint Assessment Tool) to analyse water use, risks and

opportunities; and

5.3.5

Collaborations or programmes in place with the community or

other organisations

5.4

The percentage reduction or improvement from the base year, in which

the base year is the first year against which water management targets are

evaluated towards the achievement of the target.

The entity shall discuss whether its water management practices result in any

additional lifecycle impacts or trade-offs in its organisation, including trade-offs

in land use, energy production and greenhouse gas (GHG) emissions, and why the

entity chose these practices despite lifecycle trade-offs.

RR-BI-140a.3. Number of incidents of non-compliance associated with water

quality permits, standards and regulations

The entity shall disclose the total number of incidents of non-compliance,

including violations of a technology-based standard and exceedances of quantity

or quality-based standards.

The scope of disclosure includes incidents governed by applicable jurisdictional

statutory permits and regulations, which include the discharge of a hazardous

substance, violation of pre-treatment requirements or total maximum daily load

(TMDL) exceedances.

The scope of disclosure shall only include incidents of non-compliance that

resulted in a formal enforcement action(s).

3.1

Formal enforcement actions are defined as governmental recognised

actions that address a violation or threatened violation of water quantity

or quality laws, regulations, policies or orders, and can result in

administrative penalty orders, administrative orders and judicial actions,

among others.

Violations shall be disclosed, regardless of their measurement methodology or

frequency. These include violations for:

4.1

Continuous discharges, limitations, standards and prohibitions that are

generally expressed as maximum daily, weekly and monthly averages; and

4.2

Non-continuous discharges, limitations that are generally expressed in

terms of frequency, total mass, maximum rate of discharge and mass or

concentration of specified pollutants.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

Lifecycle Emissions Balance

Topic Summary

The rapid growth in global biofuels production has been encouraged by government

energy policies that seek to reduce net GHG emissions from transportation fuels and

dependence on fossil fuels. Most major renewable-fuel policies worldwide require that

biofuels achieve lifecycle GHG emissions reductions relative to a fossil-fuel baseline to

qualify for renewable fuel-mandate thresholds. The biofuel lifecycle emission calculation

may include indirect and direct emissions from feedstock crop production and land use,

fuel refining, fuel and feedstock transport, and vehicle exhaust emissions. Biofuel

producers may influence net emissions directly during the refining process through

energy management (fuel use), process innovations and by using feedstocks with lower

emissions profiles. Fuel products that achieve a reduction in net emissions may qualify as

advanced biofuels, which could increase future demand. Biofuel entities that cost-

effectively reduce product net carbon emissions may gain a competitive product

advantage, spur revenue growth and increase market share.

Metrics

RR-BI-410a.1. Lifecycle greenhouse gas (GHG) emissions, by biofuel type

The entity shall disclose its lifecycle GHG emissions (in grammes of CO2-e per

megajoule) for each biofuel category produced.

1.1

Lifecycle GHG emissions are defined as the aggregate quantity of GHG

emissions (including direct emissions and significant indirect emissions,

such as significant emissions from land-use changes) related to the full

fuel lifecycle, including all stages of fuel and feedstock production and

distribution, from feedstock generation or extraction through the

distribution and delivery of the finished fuel, to the ultimate consumer

and fuel use, in which the mass values for all GHGs are adjusted to

account for their relative global warming potential.

1.2

The entity shall disclose its lifecycle GHG emissions for each of the

following biofuel types produced: (1) renewable fuel, (2) advanced biofuel,

(3) biodiesel and (4) cellulosic biofuel.

1.2.1

Renewable fuel is defined as fuel derived from biomass.

1.2.2

Advanced biofuel is defined as fuel derived from algae, animal

manure, corn cobs, grape marcs and wine lees, nut shells, husk

wastes and residues from forestry and forest-based industries, used

cooking oil, etc.

1.2.3

Biodiesel is defined as fuel derived from oils such as rapeseeds,

sunflowers, soybeans, palm oil and waste cooking oil, and used in

place of diesel fuel.

1.2.4

Cellulosic biofuel is defined as fuel derived from material

composed of lignin, cellulose, hemicellulose such as biomass

sourced from forests, woody energy crops, straw, strove, husks,

grasses and cover crops.

IFRS S2 INDUSTRY-BASED GUIDANCE

The entity shall disclose the applicable jurisdictional laws or regulations used for

calculation.

Sourcing & Environmental Impacts of Feedstock Production

Topic Summary

The Biofuels industry uses a variety of plant-based feedstocks for production. Most

entities purchase feedstocks from agricultural producers and distributors. A growing

proportion of the world’s arable land now is occupied by biofuel crops. Unsustainable

cultivation practices can have negative environmental externalities, including

deforestation and biodiversity loss, soil degradation, and water pollution. These factors

may affect feedstock crop yields adversely over the short- and long-term. This, in turn,

may influence the price and availability of feedstocks for biofuels producers.

Consequently, vetting the sustainability of supply chains, such as through certifications

or engagement with suppliers, is an important consideration for biofuels producers.

Metrics

RR-BI-430a.1. Discussion of strategy to manage risks associated with

environmental impacts of feedstock production

The entity shall discuss its strategy to manage the environmental impacts and

regulatory risks associated with feedstock production, where risks may include:

1.1

Risks to feedstock supply and pricing created by climate change impacts

such as the increased likelihood of extreme weather events, decreased

availability of clean water resources, increased competition for arable

land, and decreased crop yields because of temperature increases.

1.2

Long-term risks to feedstock supply associated with suppliers’ impacts on

environmental health including those on biodiversity and soil health that

may be because of monoculture practices or fertiliser and pesticide use.

1.3

Constraints created by regulation such as compliance with sustainability

criteria in renewable fuel mandates; potential regulatory limits on the

types of land where feedstock can be grown; potential limits on what

qualifies as renewable biomass; potential for reduction or loss of public or

political support for biofuel mandates because of the environmental

impacts of feedstock production; and resistance to the use of genetically

modified organisms (GMOs).

The disclosure scope excludes risks associated with the lifecycle GHG emissions,

which are addressed in RR-BI-410a.1, respectively.

If the entity identifies the availability of clean water resources as a risk to

feedstock supply or pricing, it shall discuss the vulnerability to feedstock growing

regions with water stress and how it manages price variability risk because of

sourcing feedstock from these regions.

3.1

The entity should identify its known sources of feedstock from growing

regions with High (40–80%) or Extremely High (>80%) Baseline Water

Stress using the World Resources Institute’s (WRI) Water Risk Atlas tool,

Aqueduct.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

The entity shall describe how it manages risks or opportunities associated with

feedstock production, including constraints created by regulation, and limits on

availability and price.

4.1

Relevant strategies to discuss include sourcing from feedstock producers

that are third-party certified to environmental sustainability standards,

diversification of suppliers, using feedstock procurement criteria to choose

suppliers for varied feedstocks with fewer environmental impacts or

greater adaptability to the effects of environmental externalities (for

example, drought-tolerant or disease-resistant feedstocks), supplier audits,

sourcing from regions where the entity has greater control over feedstock

sources, and expenditures on research and development (R&D) for

alternative and substitute feedstocks that are less susceptible to

environmental externalities.

4.2

The entity should disclose the sustainability criteria it uses to assess its

feedstock suppliers.

RR-BI-430a.2. Percentage of biofuel production third-party certified to an

environmental sustainability standard

The entity shall calculate the percentage as the volume of biofuel produced that is

third-party certified to an environmental sustainability standard divided by the

total volume of biofuel produced.

Environmental sustainability standards include Bonsucro, the Council on

Sustainable Biomass Production (CSBP), International Sustainability & Carbon

Certification, Roundtable on Sustainable Biomaterials (RSB), and Roundtable on

Responsible Soy (RTRS), as well as other standards with equivalent criteria.

2.1

At a minimum, standards should include the following environmental

sustainability topics:

2.1.1

GHG and other air emissions, water consumption and quality, soil

health, fertiliser and pesticide use, land-use change, biodiversity

and waste management.

The entity should disclose the certification schemes to which its biofuel is

certified and the percentage of production certified to each scheme.

Management of the Legal & Regulatory Environment

Topic Summary

The Biofuels industry is dependent on government policies and regulations that create

market demand and incentivise supply with tax breaks and other support for feedstock

production. The Biofuels industry supports some regulations and policies related to

renewable fuel policy, production tax credits and feedstock production. While regulatory

support can result in positive short-term gains by supporting the biofuels market, the

potential long-term adverse environmental impacts from feedstock and biofuels

production may result in a reversal of beneficial policies, leading to a more uncertain

regulatory environment. Consequently, biofuels entities may benefit from developing

IFRS S2 INDUSTRY-BASED GUIDANCE

clear strategies for engaging regulators that are aligned with long-term sustainable

business outcomes and that account for environmental externalities.

Metrics

RR-BI-530a.1. Amount of subsidies received through government programmes

The entity shall disclose the amount of subsidies received through government

programmes during the reporting year. Subsidies include tax credits such as

blending and production tax credits, funding for projects such as research and

development, import tariffs, direct payments, capital grants, loans and loan

guarantees and any other monetary support received from government

departments or programmes.

Government programmes include those worldwide at all jurisdictional levels.

The entity may disclose the type of biofuel subsidies received and the amount of

each. Types of biofuel subsidies may include blending and production tax credits,

capital grants, direct payments, loans and loan guarantees, surcharges or tariffs

on competing products, and funding for projects such as research and

development.

The entity shall disclose the amount of subsidies as an aggregate amount that was

recognised during the reporting year, regardless of the accounting method (for

example, deferral method, flow-through method or other GAAP methods for

investment tax credits).

RR-BI-530a.2. Discussion of corporate positions related to government

regulations or policy proposals that address environmental and social factors

affecting the industry

The entity shall identify risks and opportunities it faces related to laws,

regulations or rulemaking, (hereafter referred to collectively as ‘legal and

regulatory environment’) related to environmental and social factors that may

have a significant financial impact.

1.1

The scope shall include existing, emerging and known future risks and

opportunities.

1.2

The scope shall include risks and opportunities that may exist

domestically and globally.

1.3

The regulatory environment related to material environmental and social

factors includes those related to non-greenhouse gas air emissions,

greenhouse gas emissions, water withdrawals and effluents, feedstock

sourcing, and process and employee safety.

Relevant risks may include increased compliance costs, policy reversal (for

example, changes to existing environmental regulations), loss of financial

incentives (for example, reduction or elimination of tax deductions), reputation

(for example, the entity’s stance and actions related to the legal and regulatory

environment), legal and regulatory environment misalignment with long-term

strategy, and misalignment with the expectations of customers, investors and

other stakeholders.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

Relevant opportunities may include improved financial conditions (for example,

through policies that incentivise biofuel manufacturing activities), improved

community relations (for example, the entity’s stance and actions related to the

legal and regulatory environment), and other benefits the entity realises from the

alignment of the legal and regulatory environment with long-term strategy.

The entity shall discuss its efforts to manage risks and opportunities associated

with each aspect of the legal and regulatory environment associated with the

topics included in this Standard that are relevant to the entity’s business and may

have a significant financial impact.

In addition to efforts to influence the legal and regulatory environment, the

entity shall discuss its overall strategy to manage identified risks and

opportunities associated with each aspect of the legal and regulatory

environment.

5.1

Any changes it has made or plans to make to its business structure or

model

5.2

The development of new technologies or services

5.3

Any changes made or plans to make to operational processes, control or

organisational structures

IFRS S2 INDUSTRY-BASED GUIDANCE

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