ifrs-s2-ibg-volume-4-e-commerce-part-b

Title: Volume 4—E-Commerce

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 4—E-Commerce

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 4—E-Commerce

Industry Description

E-Commerce industry entities provide an online marketplace for other entities or

individuals to sell their goods and services, as well as retailers and wholesalers that

provide an exclusively web-based platform for consumers to buy goods and services.

Entities in this industry sell to consumers as well as to other businesses. Because of the

accessibility of e-commerce sites, the industry is a global marketplace for buyers and

sellers.

Note: This industry scope applies only to ‘pure-play’ e-commerce operations and does not

address the manufacturing or brick-and-mortar retail operations of entities. Many

consumer goods manufacturers and retailers have incorporated or are in the process of

incorporating an e-commerce component to their business. Separate standards exist for

the Multiline and Specialty Retailers & Distributors (CG-MR); Apparel, Accessories &

Footwear (CG-AA); and Toys & Sporting Goods (CG-TS) industries. Depending on the

specific activities and operations of entities in these industries, disclosure topics and

metrics associated with the E-Commerce industry also may be relevant.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Data processing capacity, percentage outsourced 7 Quantitative See note CG-EC-000.B Number of shipments Quantitative Number CG-EC-000.C Hardware Infrastructure Energy & Water Management Topic Summary The E-Commerce industry uses a large part of the energy it consumes to power critical hardware and IT infrastructure in data centres. Data centres must be powered continuously, and disruptions to the energy supply can have a material impact on operations, depending on the disruption magnitude and timing. Entities also face a trade-

off between energy and water consumption for their data centre cooling needs. Cooling data centres with water instead of chillers improves energy efficiency, but this method can result in dependence on potentially scarce local water resources. Entities that effectively manage this issue may benefit from cost savings and minimise reputational risks, because concerns over energy and water use are growing.

Metrics CG-EC-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 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 (GCV), which are measured directly or taken from the Intergovernmental Panel on Climate Change (IPCC).

6 Note to CG-EC-000.A – The entity shall define and disclose a basic measure of user activity suitable for its business activities. This measure may be sales transactions, purchase transactions, number of searches, monthly active users, page views, and/or unique URLs.

7 Note to CG-EC-000B – Data processing capacity shall be reported in units of measure typically tracked by the entity or used as the basis for contracting its IT services needs, such as million service units (MSUs), million instructions per second (MIPS), mega floating-point operations per second (MFLOPS), compute cycles, or other units of measure. Alternatively, the entity may disclose owned and outsourced data processing needs in other units of measure, such as rack space or data centre square footage. The percentage outsourced shall include co-location facilities and cloud services (e.g., Platform as a Service and Infrastructure as a Service).

IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

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.

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 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 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 (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.

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).

5 The entity may disclose the trailing twelve-month (TTM) weighted average power usage effectiveness (PUE) for its data centres.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 5

5.1

PUE is defined as the ratio of the total amount of power a computer data centre facility uses to the amount of power delivered to computing equipment.

5.2

If disclosing PUE, the entity shall follow the guidance and calculation methodology described in PUE™: A Comprehensive Examination of the Metric

(2014), published by ASHRAE and The Green Grid Association.

CG-EC-130a.2. (1) Total water withdrawn, (2) total water consumed; percentage of each in regions with High or Extremely High Baseline Water Stress 1 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.

2 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.

3 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 entity’s 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.

4 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.

5 The entity shall disclose water withdrawn in locations with High or Extremely High Baseline Water Stress as a percentage of the total water withdrawn.

6 The entity shall disclose water consumed in locations with High or Extremely High Baseline Water Stress as a percentage of the total water consumed.

CG-EC-130a.3. Discussion of the integration of environmental considerations into strategic planning for data centre needs 1 The entity shall discuss the environmental considerations integrated into siting,

design, construction, refurbishment and operational specifications for its data centres, including factors related to energy and water consumption.

1.1

Environmental factors may include energy-efficiency standards; layout design, such as 'hot aisle/cold aisle' layouts; and location-based factors,

such as accounting for regional humidity, average temperature, water availability and groundwater stress, water permits, jurisdictional carbon legislation or pricing, and the carbon intensity of electricity from the local grid.

2 The scope of disclosure shall include data centres currently owned and operated by the entity, data centres that have been planned or are under construction, and outsourced data centre services.

3 The entity shall discuss how it incorporates environmental considerations into decisions related to its data centres made during the reporting period, including if they influenced decisions to insource or outsource data centre services, improve efficiency of existing data centres or construct new data centres.

Product Packaging & Distribution Topic Summary A significant part of the E-Commerce industry’s added value comes from an entity’s ability to move a wide array of goods efficiently to consumers who would otherwise have to personally travel to collect the goods from brick-and-mortar stores. As the volume of packaging shipments increases, the industry may become more exposed to environmental externalities, such as carbon pricing and rising fuel costs that present risks associated with the shipping of products. While entities that outsource shipping and logistics have less control over the specific processes of shipping operations, they still can select suppliers with more energy-efficient business practices. Because this is a highly competitive and low-margin industry, the ability to reduce shipping costs through fuel reduction and more efficient routing may permit entities to pass those savings on to their customers. E-commerce entities also have an incentive to minimise the use of packaging.

Efficient packaging can decrease costs by reducing the amount of purchased packaging material, as well as saving logistics costs because more products may fit into a single shipping load.

Metrics CG-EC-410a.1. Total greenhouse gas (GHG) footprint of product shipments 1 The entity shall disclose the complete tank-to-wheels greenhouse gas (GHG) footprint, in metric tons of CO2-e, associated with outbound shipment of the entity’s products.

1.1

Tank-to-wheels emissions relate to vehicle processes and exclude upstream emissions associated with primary energy production (well-to-tank emissions).

1.2

The entity shall calculate its disclosure according to EN 16258:2012 –

Methodology for calculation and declaration of energy consumption and GHG emissions of transport services (freight and passengers).

1.2.1

Calculations shall be consistent with the methodology used to calculate the ‘tank-to-wheels GHG emissions (Gt)’ result that is described in EN 16258:2012.

1.2.2

Determination of transportation system scope, boundaries and any necessary allocations shall be consistent with the methodology described in EN 16258:2012.

2 The scope of disclosure includes emissions from all freight transportation and logistics activities associated with the outbound shipment of the entity’s products,

including those from contract carriers and outsourced freight forwarding services and logistics providers (Scope 3) as well as those from the entity’s own assets (Scope 1).

3 The scope of disclosure includes emissions from all modes of transportation, such as road freight, air freight, barge transport, marine transport, and rail transport.

4 Consistent with EN 16258:2012, disclosure may be based on calculations from a mix of categories of emissions values (specific measured values, transport operator vehicle-type- or route-type-specific values, transport operator fleet values and default values).

5 If relevant and necessary for interpretation of disclosure, the entity shall describe its allocation methods, emissions values, boundaries, mix of transport services used and other information.

CG-EC-410a.2. Discussion of strategies to reduce the environmental impact of product delivery 1 The entity shall discuss its strategies to reduce the environmental impact of fulfilment and product delivery, including impacts associated with packaging materials and those associated with product transportation.

2 Relevant strategies to discuss may include:

2.1

Discussion of logistics selection, mode selection and management (for example, rail transport vs air freight transport) or operation for route efficiency

2.2

Discussion of packaging choices that may include decisions to use recycled or renewable (for example, bio-based plastic) packaging material, decisions to optimise the amount of packaging materials used (for example, source reduction), use of refillable or reusable packaging, and design for efficient shipping and transport

2.3

Discussion of fuel choices and vehicle choices for fleets owned or operated by the entity, such as decisions to use renewable and low-emission fuels and low-emission vehicles IFRS S2 INDUSTRY-BASED GUIDANCE 8© IFRS Foundation

2.4

Other relevant strategies, such as efforts to reduce idling of vehicles owned or operated by the entity, innovations to improve the efficiency of ‘last-

mile’ delivery and strategies to optimise delivery times to reduce traffic congestion IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023© IFRS Foundation 9

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