ifrs-s2-ibg-volume-58-software-and-it-services-part-b

Title: Volume 58—Software & IT Services

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 58—Software & IT Services

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 58—Software & IT Services

Industry Description

The Software & Information Technology (IT) Services industry offers products and

services globally to retail, business and government customers, and includes entities that

develop and sell applications software, infrastructure software and middleware. The

industry generally is competitive but with dominant players in some segments. Although

relatively immature, the industry is characterised by high-growth entities that place a

heavy emphasis on innovation and depend on human and intellectual capital. The

industry also includes IT services entities delivering specialised IT functions, such as

consulting and outsourced services. New industry business models include cloud

computing, software as a service, virtualisation, machine-to-machine communication, big

data analysis and machine learning. Additionally, brand value is important for entities in

the industry to scale and achieve network effects, whereby wide adoption of a particular

software product may result in self-perpetuating growth in sales.

Sustainability Disclosure Topics & Metrics

Table 1. Sustainability Disclosure Topics & Metrics

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Environmental

Footprint of

TOPIC

METRIC

CATEGORY

UNIT OF

MEASURE

CODE

Environmental

Footprint of

Hardware

Infrastructure

(1) Total energy consumed,

(2) percentage grid electricity and (3) percentage renewable Quantitative Gigajoules (GJ),Percentage (%) TC-SI-130a.1

(1) Total water withdrawn, (2) total water consumed; percentage of each in regions with High or Extremely High Baseline Water Stress Quantitative Thousand cubic metres (m³),Percentage (%) TC-SI-130a.2 Discussion of the integration of

Thousand cubic metres (m³),Percentage (%) TC-SI-130a.2 Discussion of the integration of environmental considerations into strategic planning for data centre needs Discussion and Analysis n/a TC-SI-130a.3 Managing Systemic Risks from Technology Disruptions Number of (1) performance issues and

(2) service disruptions; (3) total customer downtime 102 Quantitative Number, Days TC-SI-550a.1 Description of business continuity risks related to disruptions of operations Discussion and Analysis n/a

related to disruptions of operations Discussion and Analysis n/a TC-SI-550a.2 Table 2. Activity Metrics

ACTIVITY METRIC

CATEGORY

UNIT OF

MEASURE

CODE

(1) Number of licences or subscriptions, (2) percentage cloud-based Quantitative Number,Percentage (%) TC-SI-000.A continued...

102 Note to TC-SI-550a.1 – Disclosure shall include a description of each significant performance issue or service disruption and any corrective actions taken to prevent future disruptions.

issue or service disruption and any corrective actions taken to prevent future disruptions.

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

...continued

ACTIVITY METRIC

CATEGORY

UNIT OF

MEASURE

CODE

(1) Data processing capacity, (2) percentage outsourced 103 Quantitative See note TC-SI-000.B

(1) Amount of data storage, (2) percentage outsourced 104 Quantitative Petabytes,Percentage (%) TC-SI-000.C Environmental Footprint of Hardware Infrastructure Topic Summary With the growth of cloud-based service offerings, entities in this industry own, operate or

With the growth of cloud-based service offerings, entities in this industry own, operate or rent increasingly more data centres and other hardware. Thus, managing the energy and water use associated with IT hardware infrastructure is relevant to value creation. Data centres must be powered continuously, and disruptions to the energy supply can have a material effect on operations, depending on the magnitude and timing of the disruption.

material effect on operations, depending on the magnitude and timing of the disruption.

Entities face a trade-off between energy and water consumption because of data centre cooling needs. Cooling data centres with water instead of chillers improves energy efficiency, but this method may create dependence on significant local water resources.

Data centre specification decisions are important for managing costs, obtaining a reliable

Data centre specification decisions are important for managing costs, obtaining a reliable supply of energy and water, and reducing reputational risks, particularly with the increasing global regulatory focus on climate change and the opportunities arising from energy efficiency and renewable energy innovations.

Metrics TC-SI-130a.1. (1) Total energy consumed, (2) percentage grid electricity and (3) percentage renewable 1

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.

1.2

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

103 Note to TC-SI-000.B – Data processing capacity shall be reported in units of measure typically tracked by the entity or used as the basis for contracting software and IT services, such as Million Service Units (MSUs), Million Instructions per Second (MIPS), Mega Floating- Point

Million Service Units (MSUs), Million Instructions per Second (MIPS), Mega Floating- Point Operations per Second (MFLOPS), compute cycles, or other. 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 on-premise cloud services,

those that are hosted on public cloud, and those that are residing in colocation data centres.

104 Note to TC-SI-000.C – The percentage outsourced shall include On-Premise cloud services, those that are hosted on public cloud, and those that are residing in colocation data centres.

IFRS S2 INDUSTRY-BASED GUIDANCE 4© IFRS Foundation

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).

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.

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

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

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

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 outside 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

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

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.

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

4 The entity shall apply conversion factors consistently for all data reported under this disclosure, such as the use of HHVs for fuel use (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 12-month (TTM) weighted average power usage effectiveness (PUE) for its data centres.

5.1

PUE is defined as the ratio of the total amount of power used by a

5.1

PUE is defined as the ratio of the total amount of power used by a computer data centre facility 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.

TC-SI-130a.2. (1) Total water withdrawn, (2) total water consumed; percentage of

TC-SI-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

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

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 operations.

3.1

Water consumption is defined as:

3.1.1

Water that evaporates during withdrawal, use and discharge

3.1.2

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 IFRS S2 INDUSTRY-BASED GUIDANCE 6© IFRS Foundation

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.

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.

TC-SI-130a.3. Discussion of the integration of environmental considerations into strategic planning for data centre needs 1 The entity shall describe how it integrates environmental considerations,

including energy and water use, into strategic planning for data centres.

2 Discussion shall include, but is not limited to, how environmental factors impact the entity’s decisions regarding the siting, design, construction, refurbishment,

and operations of data centres.

2.1

Environmental factors and criteria may include:

2.1.1

Location-based environmental factors, such as regional humidity,

average temperature and water availability.

2.1.2

average temperature and water availability.

2.1.2

Environmental regulations, such as energy efficiency standards and national- or state-level carbon legislation on pricing, and carbon intensity of grid electricity.

3 The scope of disclosure includes considerations for existing owned data centres,

development of new data centres and outsourcing of data centre services, where relevant.

Managing Systemic Risks from Technology Disruptions Topic Summary

relevant.

Managing Systemic Risks from Technology Disruptions Topic Summary With trends towards increased cloud computing and Software as a Service (SaaS),

software and IT service providers must ensure they have robust infrastructure and policies in place to minimise disruptions to their services. Disruptions such as programming errors or server downtime may generate systemic risks, because computing and data storage functions move from individual entity servers in various industries to

and data storage functions move from individual entity servers in various industries to data centres of cloud-computing service providers. The risks are increased particularly if the affected customers are in sensitive sectors, such as financial institutions or utilities,

which are considered critical national infrastructure. Entities’ investments in improving the reliability and quality of their IT infrastructure and services may attract and retain

the reliability and quality of their IT infrastructure and services may attract and retain customers, thereby creating revenue and opportunities in new markets.

Metrics TC-SI-550a.1. Number of (1) performance issues and (2) service disruptions;

(3) total customer downtime 1 The entity shall disclose (1) the number of performance issues in software and information technology (IT) services provided to customers.

1.1

Performance issues are defined as any planned or unplanned downtime causing an interruption, of more than 10 minutes but less than or equal to 30 minutes, in the provision of cloud-based services to customers.

1.2

30 minutes, in the provision of cloud-based services to customers.

1.2

Performance issues may include those caused by technical failures,

programming errors, cyber-attacks, weather events or natural disasters at hosting facilities.

2 The entity shall disclose (2) the number of service disruptions in software and IT services provided to customers.

2.1

Service disruptions are defined as any planned or unplanned downtime causing an interruption of more than 30 minutes in provision of cloud-

causing an interruption of more than 30 minutes in provision of cloud-

based services to customers.

2.2

Service disruptions may include those caused by technical failures,

programming errors, cyber-attacks, weather events or natural disasters at hosting facilities.

3 The entity shall disclose (3) the total customer downtime related to performance issues and service disruptions in software and IT services provided to customers.

3.1

issues and service disruptions in software and IT services provided to customers.

3.1

Total customer downtime is defined as the interruption duration of each service disruption multiplied by the number of software and IT services licences affected, reported in licence-days. For context, the entity shall indicate the licensing basis (for example, number of seats, number of CPU cores, number of cloud subscriptions) and whether the licences are consumption-based or capacity-based.

consumption-based or capacity-based.

Note to TC-SI-550a.1 1 For each significant service disruption, the entity shall disclose the duration of the disruption, the extent of disruption and the root cause, as well as any corrective actions taken to prevent future disruptions. Where material, the entity shall disclose the associated cost incurred, such as remediation costs to correct technology or process issues, as well as any liability costs.

technology or process issues, as well as any liability costs.

2 A service disruption is considered significant if the cost to correct it is material or if it is disruptive to a large number of customers or fundamental business operations in a manner that affects time to market, revenue capture or other material parameters.

TC-SI-550a.2. Description of business continuity risks related to disruptions of operations 1 The entity shall describe potential business continuity risks associated with

operations 1 The entity shall describe potential business continuity risks associated with technology disruptions affecting operations.

1.1

Examples of disruptions may include those caused by technical failures,

programming errors, cyber-attacks, weather events or natural disasters at hosting facilities.

2 The entity shall discuss measures implemented to manage business continuity risks, such as technologies or processes that reduce the effects of disruptions,

enhance the resilience of systems, insure against loss, or provide redundancies to critical business operations.

critical business operations.

3 The entity shall identify which critical business operations support cloud-based services, and the entity shall further note whether those operations are owned or outsourced.

4 The entity may discuss estimated amount of potential loss, probability of that loss and the associated time frame. These estimates may be based on insurance figures or other third-party or internal assessments of potential loss.

IFRS S2 CLIMATE-RELATED DISCLOSURES–JUNE 2023

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