ifrs-s2-ibg-volume-3-building-products-and-furnishings-part-b

Title: Volume 3—Building Products & Furnishings

Category: Part B—Industry-based Guidance for IFRS S2

Source: IFRS Foundation (https://www.ifrs.org)

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Year: 2023

Type: Industry

Industry-based Guidance on implementing

Climate-related Disclosures

Volume 3—Building Products & Furnishings

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 3—Building Products & Furnishings

Industry Description

Entities in the Building Products & Furnishings industry design and manufacture home

improvement products, home and office furnishings, and structural wood building

materials. The industry’s products include flooring, ceiling tiles, home and office

furniture and fixtures, wood trusses, plywood, panelling and lumber. Entities typically

sell their products through distribution channels to retail stores or through independent

or entity-owned dealerships.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Annual production 4 Quantitative See note CG-BF-000.A Area of manufacturing facilities 5 Quantitative Square metres (m²) CG-BF-000.B 3 Note to CG-BF-430a.1 – The entity shall describe its practices for sourcing: (1) wood fibre materials from forestlands that are not certified to a third-party forest management standard,

and (2) wood fibre materials not certified to other wood fibre certification standards.

4 Note to CG-BF-000.A – Production shall be disclosed in typical units tracked by the entity such as number of units, weight, and/or square feet.

5 Note to CG-BF-000.B – The scope shall be limited to total area under roof, including manufacturing and administrative functions.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 3

Energy Management in Manufacturing Topic Summary The Building Products & Furnishings industry creates value through energy-intensive manufacturing processes. Purchased electricity represents the largest share of energy consumption across the industry, while entities also may use fossil fuel energy on-site.

The price of conventional grid electricity and volatility of fossil fuel prices may increase because of evolving climate change regulations and new incentives for energy efficiency

because of evolving climate change regulations and new incentives for energy efficiency and renewable energy, among other factors, while alternative energy sources become more cost-competitive. Decisions regarding energy sourcing and type, as well as the use of alternative energy, can create trade-offs related to the energy supply’s cost and reliability for operations. Since the industry operates on relatively narrow profit margins,

reliability for operations. Since the industry operates on relatively narrow profit margins,

reductions in energy consumption may have a significant influence on financial performance. The way an entity manages energy efficiency, its reliance on different types of energy and their associated sustainability risks, and access alternative energy sources are likely to impact financial performance.

Metrics CG-BF-130a.1. (1) Total energy consumed, (2) percentage grid electricity and

(3) percentage renewable 1 The entity shall disclose (1) the total amount of energy it consumed as an aggregate figure, in gigajoules (GJ).

1.1

The scope of energy consumption includes energy from all sources,

including energy purchased from external sources and energy produced by the entity itself (self-generated). For example, direct fuel usage, purchased

the entity itself (self-generated). For example, direct fuel usage, purchased electricity, and heating, cooling and steam energy are all included within the scope of energy consumption.

1.2

The scope of energy consumption includes only energy directly consumed by the entity during the reporting period.

1.3

In calculating energy consumption from fuels and biofuels, the entity shall use higher heating values (HHV), also known as gross calorific values

use higher heating values (HHV), also known as gross calorific values (GCV), which are measured directly or taken from the Intergovernmental Panel on Climate Change (IPCC).

2 The entity shall disclose (2) the percentage of energy it consumed that was supplied from grid electricity.

2.1

The percentage shall be calculated as purchased grid electricity consumption divided by total energy consumption.

3 The entity shall disclose (3) the percentage of energy it consumed that was renewable energy.

3.1

Renewable energy is defined as energy from sources that are replenished at a rate greater than or equal to their rate of depletion, such as geothermal, wind, solar, hydro and biomass.

3.2

The percentage shall be calculated as renewable energy consumption divided by total energy consumption.

IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

3.3

The scope of renewable energy includes renewable fuel the entity consumed, renewable energy the entity directly produced and renewable energy the entity purchased, if purchased through a renewable power purchase agreement (PPA) that explicitly includes renewable energy certificates (RECs) or Guarantees of Origin (GOs), a Green‐e Energy Certified utility or supplier programme, or other green power products that explicitly include RECs or GOs, or for which Green‐e Energy Certified

that explicitly include RECs or GOs, or for which Green‐e Energy Certified RECs are paired with grid electricity.

3.3.1

For any renewable electricity generated on-site, any RECs and GOs shall be retained (not sold) and retired or cancelled on behalf of the entity for the entity to claim them as renewable energy.

3.3.2

For renewable PPAs and green power products, the agreement shall explicitly include and convey that RECs and GOs be retained or

explicitly include and convey that RECs and GOs be retained or replaced and retired or cancelled on behalf of the entity for the entity to claim them as renewable energy.

3.3.3

The renewable portion of the electricity grid mix that is outside of the control or influence of the entity is excluded from the scope of renewable energy.

3.4

For the purposes of this disclosure, the scope of renewable energy from biomass sources is limited to materials certified to a third-party standard

biomass sources is limited to materials certified to a third-party standard (for example, Forest Stewardship Council, Sustainable Forest Initiative,

Programme for the Endorsement of Forest Certification or American Tree Farm System), materials considered eligible sources of supply according to the Green-e Framework for Renewable Energy Certification, Version 1.0 (2017) or Green-e regional standards, or materials eligible for an applicable jurisdictional renewable portfolio standard.

jurisdictional renewable portfolio standard.

4 The entity shall apply conversion factors consistently for all data reported under this disclosure, such as the use of HHVs for fuel usage (including biofuels) and conversion of kilowatt hours (kWh) to GJ (for energy data including electricity from solar or wind energy).

Product Lifecycle Environmental Impacts Topic Summary Depending on the specific building product or furnishing, significant environmental

Topic Summary Depending on the specific building product or furnishing, significant environmental impacts can arise during raw material sourcing, transportation, manufacturing, use-

phase or end-of-life. Increasing consumer and regulatory preference for less impactful products has spawned the development of more sustainable products, broadly termed

‘green building materials’. In addition, product lifecycle certification has arisen as a tool

‘green building materials’. In addition, product lifecycle certification has arisen as a tool for entities and their customers to assess and improve a product’s lifecycle impact.

Certification programmes typically examine specific sustainability characteristics of a product category and include the use of closed-loop materials that minimise a product’s end-of-life environmental impacts and reduce the need for extracting or producing virgin

end-of-life environmental impacts and reduce the need for extracting or producing virgin materials. Through product innovation and design that facilitates end-of-life product recovery and the use of less impactful materials, the adoption of product certification programmes, and partnerships with customers, manufacturers of building products can IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5

improve lifecycle impacts, reduce regulatory risk, meet growing customer demand and realise cost savings.

Metrics CG-BF-410a.1. Description of efforts to manage product lifecycle impacts and meet demand for sustainable products 1 The entity shall discuss strategies to assess and manage the environmental impact of products throughout their lifecycle.

1.1

Relevant strategies and efforts to assess product lifecycle impacts include

1.1

Relevant strategies and efforts to assess product lifecycle impacts include the use of environmentally focused design principles, and the use of sustainability performance standards, screening tools and sampling methods, among others, including the operational processes used for these assessments.

1.2

Relevant strategies and efforts to manage product lifecycle impacts include changes in materials selection, assessment of upstream environmental

changes in materials selection, assessment of upstream environmental impacts, changes in manufacturing (resource intensity), recycled and renewable materials use,optimisation of packaging,design for consolidated shipping, design of low-energy-consumption products, design for product take-back and labelling for recycling, among others.

2 The entity shall discuss factors that drive demand for its sustainable building and furnishings products, including green building certification programmes,

furnishings products, including green building certification programmes,

jurisdictional procurement criteria, demand from retailers or retail consumer demand.

3 The entity shall describe the scope of its efforts including to which product categories, business segments or operating regions they relate.

4 The entity may discuss its use of Life Cycle Assessment (LCA) and Environmental Product Declarations (EPD) in the context of its approach to reducing

Product Declarations (EPD) in the context of its approach to reducing environmental impact and maximising product resource efficiency.

4.1

Improvements to the environmental efficiency of products should be discussed in terms of LCA functional unit service parameters (time, extent and quality of function).

4.2

LCA should be based on ISO 14040 and ISO 14044. EPD should be based on ISO 14025 and ISO 21930:2017 for construction products.

ISO 14025 and ISO 21930:2017 for construction products.

5 The entity may disclose the percentage of its products certified to third-party multi-attribute or single-attribute sustainability standards.

6 The entity may describe its extended producer responsibility (EPR) efforts,including:

6.1

How end-of-life considerations are incorporated into product design,

including using materials that are easily and commonly recyclable in existing recycling infrastructure IFRS S2 INDUSTRY-BASED GUIDANCE 6

existing recycling infrastructure IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation

6.2

Designing products for disassembly (designing products so they can be easily, rapidly and cost-effectively disassembled with commonly available tools)

6.3

Proper labelling of products and their component materials to facilitate disassembly and recycling.

CG-BF-410a.2. (1) Weight of end-of-life material recovered, (2) percentage of recovered materials recycled 1 The entity shall disclose the weight, in metric tons, of materials recovered,

1 The entity shall disclose the weight, in metric tons, of materials recovered,

including those recovered through recycling services, product take-back programmes and refurbishment services.

1.1

The scope of disclosure shall include products, materials and parts at the end of their useful life that would have otherwise been discarded as waste or used for energy recovery, but have instead been collected.

1.2

The scope of disclosure shall include both materials physically handled by

1.2

The scope of disclosure shall include both materials physically handled by the entity and materials of which the entity does not take physical possession, but for which it has contracted with a third party the task of collection for the express purpose of reuse, recycling or refurbishment.

1.3

The scope of disclosure excludes products and parts that are under warranty and have been collected for repairs.

2 The entity shall disclose the percentage of end-of-life materials recovered that

2 The entity shall disclose the percentage of end-of-life materials recovered that were recycled or remanufactured.

2.1

Recycled and remanufactured materials are defined as waste materials reprocessed or treated by means of production or manufacturing processes and made into a final product or a component for incorporation into a product.

2.2

The scope of recycled materials includes materials used, reused or reclaimed.

2.2.1

Reused materials are defined as those recovered products or

reclaimed.

2.2.1

Reused materials are defined as those recovered products or components of products used for the same purpose for which they were conceived.

2.2.2

Reclaimed materials are defined as those processed to recover or regenerate a usable product.

2.3

The scope of recycled materials includes materials sent for further recycling through the transfer to a third party for the express purpose of reuse, recycling or refurbishment.

2.4

reuse, recycling or refurbishment.

2.4

The scope of recycled and remanufactured products includes primary recycled materials, co-products (outputs of equal value to primary recycled materials), and by-products (outputs of lesser value than primary recycled materials).

2.5

The entity shall calculate the percentage as the weight of incoming recovered material recycled or remanufactured divided by the total weight of incoming recovered material.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

of incoming recovered material.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 7

2.6

Portions of products and materials discarded in landfills are not considered recycled. Only the portions of products directly incorporated into new products, co-products or by-products shall be included in the percentage recycled.

2.7

Materials incinerated, including for energy recovery, are not considered reused, recycled or reclaimed.

2.7.1

Energy recovery is defined as the use of combustible waste to generate energy through direct incineration, with or without other

generate energy through direct incineration, with or without other waste, but with recovery of the heat.

3 The entity may disclose:

3.1

Whether it directly conducts product take-back, recovery and recycling or if it contracts with a third party the task of collection for the express purpose of reuse, recycling or refurbishment

3.2

If it supports infrastructure for product recovery and recycling through joint ventures, partnerships or by funding research into recycling technologies

3.3

joint ventures, partnerships or by funding research into recycling technologies

3.3

Whether its product take-back, recovery and recycling efforts are voluntary or mandatory

3.4

Relevant performance measures or targets for its product take-back,

recovery and recycling efforts such as the total amount of material recovered and the total amount of material recycled Wood Supply Chain Management Topic Summary The Building Products & Furnishings industry uses large amounts of wood sourced from

Topic Summary The Building Products & Furnishings industry uses large amounts of wood sourced from forests worldwide. Unsustainable production and timber harvesting can result in adverse environmental and social impacts, including biodiversity loss and harm to the livelihoods of forest-dependent communities. Entities inadvertently may source wood from areas susceptible to unsustainable forestry practices. Reports of illegal logging, environmental

susceptible to unsustainable forestry practices. Reports of illegal logging, environmental pollution or adverse impacts on communities can result in reputational repercussions that can damage an entity’s brand value, affecting demand for their products. In addition, regulations banning the importation of illegally produced wood can result in supply constraints, penalties and further damage to brand value. To mitigate these risks,

supply constraints, penalties and further damage to brand value. To mitigate these risks,

entities increasingly are adopting third-party certifications verifying wood is grown and harvested in a sustainable manner. Obtaining wood sourcing certifications also can provide entities with a potential growth channel because they can satisfy customer demand for certified products.

IFRS S2 INDUSTRY-BASED GUIDANCE 8© IFRS Foundation

Metrics CG-BF-430a.1. (1) Total weight of wood fibre materials purchased, (2) percentage from third-party certified forestlands, (3) percentage by standard and

(4) percentage certified to other wood fibre standards, (5) percentage by standard 1 The entity shall disclose the total amount of wood fibre materials (in air-dried metric tons) purchased during the reporting period.

1.1

Wood fibre materials include wood-fibre-based raw materials,

components, and semi-finished and finished goods.

1.2

include wood-fibre-based raw materials,

components, and semi-finished and finished goods.

1.2

The scope of wood-fibre-based materials includes all inputs processed to be sold as finished goods, including recycled raw materials, virgin raw materials and goods consumed directly in the production process,

excluding biomass for energy.

1.3

If wood fibre comprises a portion of a material, component or product, the entity shall include the portion in the total amount.

entity shall include the portion in the total amount.

2 The entity shall disclose the percentage of its total wood fibre materials purchased that have been sourced from forestlands certified to a third-party forest management standard.

2.1

Third-party forest management standards are those certifying forests are harvested in a sustainable manner and ensuring adherence to environmental and social criteria including legal compliance, land rights,

environmental and social criteria including legal compliance, land rights,

community and worker relations, environmental impact and biodiversity,

forest management plans and practices, land use, wildlife habitat conservation and water conservation, among others.

2.2

Third-party forest management standards include:

2.2.1

American Tree Farm (ATFS)

2.2.2

Forest Stewardship Council (FSC) (Forest Management and Chain of Custody certifications)

2.2.3

Forest Stewardship Council (FSC) (Forest Management and Chain of Custody certifications)

2.2.3

Programme for the Endorsement of Forest Certification (PEFC) Chain of Custody certifications

2.2.4

Forest certification systems endorsed by the PEFC

2.2.5

Sustainable Forest Initiative (SFI) Forest Management and Chain of Custody certifications

2.3

The percentage shall be calculated as the weight (in air-dried metric tons) of the entity’s wood fibre materials purchased during the reporting period

of the entity’s wood fibre materials purchased during the reporting period sourced from forestlands certified to one or more of the third-party forest management standards divided by the total weight (in air-dried metric tons) of wood fibre materials purchased during the reporting period.

2.3.1

Wood fibre certified to more than one third-party forest management standard shall be accounted for by the entity only once.

3 The entity shall disclose the percentage of its total wood fibre materials sourced from forestlands certified to each applicable third-party forest management standard, separately by standard.

3.1

The percentage shall be calculated as the weight (in air-dried metric tons) of the entity’s wood fibre materials purchased during the reporting period sourced from forestlands certified to each applicable third-party forest management standard divided by the total weight (in air-dried metric tons)

management standard divided by the total weight (in air-dried metric tons) of wood fibre materials purchased during the reporting period.

3.1.1

Wood-fibre certified to more than one third-party forest management standard shall be accounted for by the entity in its calculations for each applicable standard.

4 The entity shall disclose the percentage of total wood fibre materials purchased that have been certified to wood fibre standards.

4.1

that have been certified to wood fibre standards.

4.1

Wood fibre standards exclude third-party forest management standards.

4.2

Wood fibre standards include:

4.2.1

SFI Certified Fibre Sourcing Standard

4.2.2

FSC Controlled Wood Standard

4.2.3

PEFC Controlled Wood Standard

4.2.4

Recycled wood fibre standards that include post- and pre-consumer reclaimed material (for example, PEFC Recycled Label and FSC Recycled Label)

4.2.5

Any other due diligence standards related to wood fibre sourcing

Recycled Label)

4.2.5

Any other due diligence standards related to wood fibre sourcing requirements for wood fibre from non-certified forestlands

4.3

The percentage shall be calculated as the weight (in air-dried metric tons) of the entity’s wood fibre materials purchased during the reporting period certified to wood fibre standards divided by the total weight (in air-dried metric tons) of wood fibre materials purchased during the reporting period.

4.3.1

metric tons) of wood fibre materials purchased during the reporting period.

4.3.1

Wood-fibre certified to more than one wood fibre standard shall be accounted for by the entity only once.

5 The entity shall disclose the percentage of its wood fibre materials purchased that have been certified to wood fibre standards, separately by standard.

5.1

The percentage shall be calculated as the weight (in air-dried metric tons) of the entity’s wood fibre materials purchased during the reporting period

of the entity’s wood fibre materials purchased during the reporting period certified to each applicable wood fibre standard divided by the total weight (in air-dried metric tons) of wood fibre materials purchased during the reporting period.

5.1.1

Wood-fibre certified to more than one third-party wood fibre standard shall be accounted for by the entity in its calculations for each applicable standard.

Note to CG-BF-430a.1 1 The entity shall describe its practices for sourcing wood fibre materials from forestlands not certified to a third-party forest management standard and for sourcing wood fibre materials not certified to other wood fibre certification standards.

2 The entity shall describe its policies to verify the forestry management and harvesting practices of suppliers, which include codes of conduct, audits or contracts.

harvesting practices of suppliers, which include codes of conduct, audits or contracts.

3 The scope of disclosure shall include how the entity’s sourcing practices and policies consider the following criteria:

3.1

Wood legality and compliance with applicable jurisdictional laws or regulations

3.2

Wood sourced from areas of protected conservation status or high biodiversity value

3.3

Logging in or near areas of endangered species habitat

3.4

Logging in or near areas of indigenous peoples’ land

3.4

Logging in or near areas of indigenous peoples’ land

3.5

The forestry management and harvesting practices of suppliers, including environmental impact assessments or forestry management plans

3.6

The use of genetically modified organisms (GMOs), pesticides or other chemicals in forests

3.7

Criteria outlined in the definition of SFI ‘controversial sources’, the definition of FSC ‘controlled wood’ or the equivalent 4

definition of FSC ‘controlled wood’ or the equivalent 4 The entity also may disclose its wood fibre sources (for example, from corporate,

private or government owned forestlands and whether fibre is grown domestically or internationally) and the potential risks associated with procuring fibre from these sources.

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