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Sustainability now: GHG Protocol -What could change? · PwC's accounting podcast

• 0:00
  SPEAKER_00: Thought Leadership from PWC's National Office.
• 0:06
  SPEAKER_04: Hello, this is PWC's Accounting Podcast, and we're back with Sustainability Now.
• 0:12
  SPEAKER_04: I'm Heather Horn, PWC's U.S.
• 0:14
  SPEAKER_04: Sustainability Technical Leader, and I'm happy you're with us today.
• 0:18
  SPEAKER_04: So regular listeners will know we've been talking here on the podcast about changes to ESRS as a result of the European Commission's omnibus proposal to simplify those standards.
• 0:28
  SPEAKER_04: And obviously none of those are enacted yet, but we've been talking about it quite a lot.
• 0:32
  SPEAKER_04: However, today we're going to turn our attention to another standard setter, the GHG protocol.
• 0:38
  SPEAKER_04: So, despite its wide use around the world, as many of you will know, the protocol's core standards haven't been revisited in over a decade until now.
• 0:47
  SPEAKER_04: So today we're going to focus in on their ongoing standard setting efforts and specifically the GHG protocol's proposed changes to the corporate standard, scope 2 guidance, and scope 3 standard, as well as many details around those.
• 1:01
  SPEAKER_04: So these revisions are coming at a critical time because of expectations from regulators and investors continuing to evolve to evolve.
• 1:10
  SPEAKER_04: So I'm very happy to be joined today by Marchin Lewinsky, who, as regular listeners will know, is the chair of our global GSU working group, lots of hands-on experience with clients and otherwise.
• 1:21
  SPEAKER_04: Before we start though, Marchin, one more thing for our listenerslash viewers, this is a video podcast recording.
• 1:29
  SPEAKER_04: So if you are listening and would like to see us live, head on over to the show notes and you'll see that link.
• 1:35
  SPEAKER_04: And then in addition, everything we're talking about today are proposals under discussion.
• 1:41
  SPEAKER_04: These haven't even made their way to exposure drafts or risen to that level yet.
• 1:46
  SPEAKER_04: But we thought it was important to talk about them now because they really could have a substantial impact on the standards.
• 1:51
  SPEAKER_04: But don't take any of this, you know, for being a sort of a done deal.
• 1:57
  SPEAKER_04: And I think, Martin, we would expect that these proposals will evolve a lot before we see the final form.
• 2:03
  SPEAKER_01: Oh, yeah, definitely.
• 2:04
  SPEAKER_01: There's um the first of all, good morning.
• 2:06
  SPEAKER_03: Yes, good morning to you too.
• 2:08
  SPEAKER_01: But you're absolutely right.
• 2:09
  SPEAKER_01: I mean, whatever we're gonna be talking about today, this is what we compiled based on review of things on uh on their website.
• 2:15
  SPEAKER_01: And this is really ongoing project.
• 2:17
  SPEAKER_01: So we expect everything to evolve and potentially quite substantial changes, even from a topic that we're gonna be discussing, topics we we will be discussing today.
• 2:25
  SPEAKER_01: So yeah.
• 2:26
  SPEAKER_04: All right, so then Merchant, maybe just to kick things off, let's maybe rewind a little bit and just remind people exactly what the GEG protocol is, maybe what its role is, and then we can get into some of the changes.
• 2:39
  SPEAKER_01: So um, yes, uh, because it has a long history.
• 2:42
  SPEAKER_01: So, like um the GEG protocol was launched in 1998, and I need to you know refresh, like look at my dates here to make sure I'm not making mistakes.
• 2:50
  SPEAKER_04: I know almost 30 years today.
• 2:52
  SPEAKER_01: Exactly.
• 2:52
  SPEAKER_01: By World Resource Institute and World Business Council for Sustainability Development.
• 2:57
  SPEAKER_01: First standard accounting standard, corporate standard, was published in 2001.
• 3:01
  SPEAKER_01: And when you look at that, uh, for last 10 years, there's no really substantial changes.
• 3:06
  SPEAKER_01: So, what the protocol is, it's basically accounting standard for GHG emissions reporting.
• 3:12
  SPEAKER_01: Uh, historically, it was used primarily on voluntary basis for companies that wanted to report emissions, uh, show how they um track the performance uh over time, how they meet targets.
• 3:24
  SPEAKER_01: So, but again, it was primarily on voluntary basis.
• 3:28
  SPEAKER_01: I don't want to use the word stale, but it was essentially of a standard that it's kind of untouched for more almost 10 years.
• 3:35
  SPEAKER_01: And in the meantime, we have all these developments of uh of regulatory frameworks, as you mentioned, ESRS, IFRS, California, we used to have uh SEC climate rule, which we don't have anymore.
• 3:47
  SPEAKER_01: But so now we have all these evolving requirements, and a lot of them are pointing back to GEGG protocol that is kind of old, put it that way.
• 3:58
  SPEAKER_04: Yeah, and I think you were nice to say you don't want to use the word stale, but I think to be fair, we did run into a lot of issues this first for Wave One reporters under ESRS, because there are aspects of the GEG protocol that are no longer aligned with the accounting standards.
• 4:14
  SPEAKER_04: And so, for example, in areas like leases, even in some cases, some of the discussion on consolidation or otherwise, some of the guidance around the different ways to determine organizational boundaries.
• 4:25
  SPEAKER_04: So I think this is very welcomed.
• 4:27
  SPEAKER_04: Before we get into the details, though, it's we probably should just remind people that in addition to these uh changes that the technical working groups are working on, the GEG protocol actually did spend, I think it took them almost a year to reorganize their governance.
• 4:42
  SPEAKER_04: And I do think that's particularly important given the role in the reporting ecosystem that you talked about.
• 4:48
  SPEAKER_04: So, do you want to run through that?
• 4:50
  SPEAKER_01: Obviously, as we mentioned, we see development of all these regulatory frameworks, and GEG protocol recognized that um they need some action, right?
• 5:00
  SPEAKER_01: So back in 2023, it was, I think, around that time, they issued a series of surveys to seek feedback from various market participants to understand are the changes needed, what areas need change, what they should be focusing on, right?
• 5:14
  SPEAKER_01: They received a lot of feedback.
• 5:16
  SPEAKER_01: And as you mentioned, you know, one of the foundational elements was about their governance, right?
• 5:21
  SPEAKER_01: So people commented on their need to revamp their governance structure and a standard setting process, right?
• 5:27
  SPEAKER_01: So that was very kind of a foundational and they reacted, right?
• 5:31
  SPEAKER_01: So when you look at what happened after they received feedback through surveys, um, they restructured the governance process.
• 5:37
  SPEAKER_01: They introduced three types of new bodies, which is steering committee, independent standard boards, and four technical working groups.
• 5:45
  SPEAKER_01: And they also revamped the standard setting process.
• 5:49
  SPEAKER_01: So let's maybe pause for a second.
• 5:51
  SPEAKER_01: So, what are these new kind of a bodies?
• 5:53
  SPEAKER_01: So, steering committee is basically the new group that sets the um strategic guidance and directions for GEGG protocol, thinking, you know, where what they should be thinking about for a you know longer period of time, uh, what changes, strategic changes are needed for uh uh to standards.
• 6:12
  SPEAKER_01: So it's kind of uh like the body sitting on top thinking about long-term planning and strategy, right?
• 6:17
  SPEAKER_01: And they also are responsible for ratification of any changes to the standards.
• 6:23
  SPEAKER_01: Then you have an independent standard board who is actually responsible for recommending to steering committee what changes are needed, approving any changes as well before it is being ratified by steering committee.
• 6:36
  SPEAKER_01: And they also are responsible for selecting members to technical working groups and oversee and have an oversight role for technical working groups, right?
• 6:47
  SPEAKER_01: And then we get into four technical working groups, and those are, I'm gonna use the word like working horses, right?
• 6:53
  SPEAKER_01: So they basically are multi-stakeholder groups that are responsible for actually working through potential and proposed changing, um, identifying the ideas, drafting the updates to the standards, and debating before it's being submitted to um uh independent standard board for approval or put through the review process.
• 7:17
  SPEAKER_01: So I think that was very, because when you think about it, right, every accounting kind of a governance body, like whether this is FASB in the United States or and in other countries, the foundational element to be credible body and to create standards that are credible, it's their governance.
• 7:36
  SPEAKER_01: And I think this is those very welcome change what GEG protocol did.
• 7:40
  SPEAKER_01: Um, but that's not the only thing when we're talking about governance.
• 7:43
  SPEAKER_01: They also revamp this or design the standard setting process.
• 7:47
  SPEAKER_01: So they basically design the process, which uh, as we say, starts with technical working groups working through the details.
• 7:55
  SPEAKER_01: All the changes are going uh through um ISB or independent standard board for review approval.
• 8:01
  SPEAKER_01: There is a part of a process that requires public comment period, which it's the draft will be available uh to the public to provide submit comments, and then final approval of ISB and ratification by steering committee.
• 8:14
  SPEAKER_01: So it's I don't want to say mimic, but like it's very similar to what we see in developed um uh accounting kind of uh standard processes.
• 8:23
  SPEAKER_04: Yeah, and I think similar to what we see from the ISSB uh in terms of the the IFRS sustainability disclosure standards, or as you reference FASB or the IASB.
• 8:34
  SPEAKER_04: But I think, Marchin, I do want to come back to the process because if you think of the urgency with which we need these new standards, it sounds like that's going to take some time, but let's come back to timeline at the end once we talk about some of the potential changes.
• 8:49
  SPEAKER_04: So you mentioned that there are four working groups.
• 8:53
  SPEAKER_04: Can you just give some highlights of what those groups are and then some of the focus areas of the group?
• 8:58
  SPEAKER_01: Working groups are arranged along the line of existing standards, GEG standards.
• 9:02
  SPEAKER_01: So we have a corporate standard working group, scope two uh working group, scope three, and market and instrument working group.
• 9:09
  SPEAKER_01: And they all focus on different elements of potential updates, right?
• 9:14
  SPEAKER_01: Um, but they also just want to make sure they just don't work in silos, they they work together.
• 9:18
  SPEAKER_01: But their main goal is just to focus what changes I needed in those in those specific standards.
• 9:23
  SPEAKER_01: Based on a survey and feedback that they received, each group designed what was called um standard development plans, right?
• 9:32
  SPEAKER_01: They are public, everybody can like 15 pages each or something like that, which outlines for this round, uh, this is what this working group is gonna focus.
• 9:41
  SPEAKER_01: Those are the elements of the standards that I identify based on the feedback, and they're gonna be focusing on this one.
• 9:47
  SPEAKER_01: So, starting with corporate standards, uh they have actually three subgroups, and then each subgroup focuses on something on different elements of corporate standard.
• 9:57
  SPEAKER_01: And um, the main focus currently is uh clarifying the objectives and purpose of corporate standard, like in a in a broader world of GEG emissions reporting, looking at such a foundational elements of a standard like organizational and operational operational boundary, uh looking at topics related to tracking emissions over time, setting targets.
• 10:18
  SPEAKER_01: Um and it also they consider whether scope three reporting requirements should be embedded into corporate standard as well.
• 10:27
  SPEAKER_01: So it's pretty broad, which it makes perfect sense because corporate standards is sort of the basic basis for all the reporting.
• 10:36
  SPEAKER_01: And then you have a scope two.
• 10:37
  SPEAKER_01: And in a scope two, they're looking on also clarifying objectives, looking at specific uh potential changes to the uh reporting and calculation methodologies between market-based and location-based uh emissions calculations.
• 10:51
  SPEAKER_01: Um, also looking at what is the role of project uh-based accounting methodology methodology in scope, scope two, and how it interacts with scope three.
• 11:00
  SPEAKER_01: Because when you think about it, um scope three emissions calculated uh using one of those methods oftentimes is an input to calculate scope three um uh emissions for the purpose of value chain reporting, right?
• 11:13
  SPEAKER_01: Then we're moving to scope three uh working group.
• 11:16
  SPEAKER_01: Again, three subgroups reflecting complexity and a volume of potential changes.
• 11:21
  SPEAKER_01: And they focus on various topics, starting with um you know, looking at materiality, looking at minimum boundaries of each category within this scope, scope three, also focusing on target setting and the performance tracking.
• 11:35
  SPEAKER_01: And they have an entire kind of a working group focusing primarily on uh category 15, which is reporting of emissions for investments and finance emissions, investments, debt, loans, and things like that.
• 11:48
  SPEAKER_01: Because that's that's a very complex uh part of scope three.
• 11:52
  SPEAKER_01: And then last but not least, markets and instruments.
• 11:55
  SPEAKER_01: So when you think about the history and existing guidance, what we call market methodology is only available for scope two.
• 12:03
  SPEAKER_04: Yes, we've got lots of questions.
• 12:05
  SPEAKER_04: Exactly.
• 12:06
  SPEAKER_01: And and but a lot of people are asking how we should be thinking about this for scope one and scope three, especially in a context of setting targets and demonstrating achievements or progress in emission reduction.
• 12:19
  SPEAKER_01: So we have a separate working group that looks at that, looks at interactions between existing emission reporting and a project um based standard, how those things, is there any way we could make it work together?
• 12:34
  SPEAKER_01: And how to answer this multiple questions for market participants?
• 12:38
  SPEAKER_01: Uh, because we have a lot of market instruments.
• 12:41
  SPEAKER_01: There's not only RECs or anything for scope, scope two reporting, there's various types of market instruments that are available for clients, but it's really unclear how to use it, how to reflect it in emissions reporting.
• 12:53
  SPEAKER_01: Is it even allowed or not?
• 12:54
  SPEAKER_01: So I think it's a very important element of the process to clarify those things, right?
• 12:59
  SPEAKER_04: I agree.
• 13:00
  SPEAKER_04: And just again, for our listeners' benefit, RECs, renewable energy credits.
• 13:03
  SPEAKER_04: So those are used uh to offset emissions from you know coal or gas or otherwise, but to Marchin's point, only scope two.
• 13:11
  SPEAKER_04: This is not a podcast about RECs, but as Marchin knows, we try not to use acronyms uh here on the podcast.
• 13:18
  SPEAKER_01: I was very careful and uh you got me.
• 13:20
  SPEAKER_04: Anyway, just case you margin.
• 13:22
  SPEAKER_04: But Marchin, I think one key point before we go on is that this is all public information.
• 13:27
  SPEAKER_04: What we're sharing today is available to any of our listeners who wanted to dig in further and understand more.
• 13:33
  SPEAKER_04: This is all available on the GHG protocols website.
• 13:36
  SPEAKER_01: Yes, so um, it's interesting.
• 13:38
  SPEAKER_01: You mentioned before that there's little time, changes are needed, but like as yeah, as I outlined, there's a lot of work to be done.
• 13:46
  SPEAKER_01: In my opinion, they're actually moving pretty fast.
• 13:48
  SPEAKER_01: And it's and it's reflected, as you mentioned, they published minutes of the websites, their plans.
• 13:53
  SPEAKER_01: Uh, so that the pace of the work is pretty fast.
• 13:57
  SPEAKER_01: It's just that the existing timeline is fully replaced reflective of uh of complexity that they have to deal with.
• 14:04
  SPEAKER_01: Because the good governance is like you really want to go through the process and make sure that the proposed changes are vetted or make sense, and you also be thinking what impacts they're gonna cause on multiple companies that use the protocol to report emissions.
• 14:17
  SPEAKER_01: So um, yes, it's all available.
• 14:19
  SPEAKER_04: All right.
• 14:20
  SPEAKER_04: So, with that said, I we obviously do not have time today to dig into everything, but let's try to hit some of the highlights and you know we can keep this moving along.
• 14:29
  SPEAKER_04: So, where would you start in terms of the most important?
• 14:32
  SPEAKER_04: Uh, I personally would start with organizational boundaries because it's an area where there's a lot of discussion.
• 14:37
  SPEAKER_04: Think that's where you would also start?
• 14:39
  SPEAKER_01: I would I would start with organizational boundary because, as many times we mentioned on our webcasts, podcasts, and uh, and uh in this mini-series, it's it's a starting point of emission reporting because it helps you determine what should be included in emission reporting.
• 14:53
  SPEAKER_01: So, um, as I mentioned before, they're looking into this.
• 14:56
  SPEAKER_01: Currently, for for our viewers and listeners who are familiar with familiarized with uh emissions reporting, GHG protocol allows for optionality.
• 15:07
  SPEAKER_01: So that they they outline three methodologies that could be used to determine organizational boundary.
• 15:12
  SPEAKER_01: Again, when you think about organizational boundaries, it's like consolidation methodology, so which subsidiaries operations on operations should be included in emissions reporting.
• 15:21
  SPEAKER_01: And currently there's optionality, right?
• 15:23
  SPEAKER_01: There's a financial control approach, operational control approach, and equity share approach, which, as you can imagine, it introduces certain level of challenges, right?
• 15:34
  SPEAKER_01: Because uh, how to select that, how to apply it properly, there's certain diversity in on a market, how people, what people choose and how they apply this.
• 15:44
  SPEAKER_01: So protocol working group recognize the challenges and are considering currently, are we okay with with this optionality to stay?
• 15:52
  SPEAKER_01: Again, they haven't made any decisions, but that's what they're looking at.
• 15:55
  SPEAKER_01: Should we continue allowing for optionality?
• 15:58
  SPEAKER_01: Should we just, as a, you know, the other option would be should we just select one and say this is the the methodology you should choose?
• 16:05
  SPEAKER_01: Or maybe something in um in between, like maybe we keep the control approaches but skip the equity share, which currently is not very you know popular, it's not used that often by by so they they are debating, there's no decisions made, but they really kind of um considering this really hard.
• 16:22
  SPEAKER_01: Together with that, because you know, like if you make changes, remove one or the other, they also look in into existing definitions.
• 16:29
  SPEAKER_01: So starting with financial control, um uh they look in at should the definition of financial control be uh updated, should be clarified, because as you remember, currently financial control is is defined as an ability to direct the financial and operating policies, right?
• 16:48
  SPEAKER_01: A lot of people interpret that already, that it's equal with consolidation of financial statements, but that's not how it's written, right?
• 16:55
  SPEAKER_04: Well, to be clear, PwC interprets that exactly.
• 16:58
  SPEAKER_01: Yes, but like we're not the only ones, right?
• 17:00
  SPEAKER_04: No, no, many, many people, yes.
• 17:03
  SPEAKER_01: But that's not how it's written.
• 17:04
  SPEAKER_01: So they, you know, the one of the reactions that they're considering is to clarify that and make it make it explicit in a standard that financial control boundary equals the financial consolidation.
• 17:15
  SPEAKER_01: So you purely follow what's is what is consolidated in your financial statements, which means unconsolidated joint venture, for example, or equity method investments would be excluded from uh scope from the boundary, or you wouldn't report scope one and two uh for those.
• 17:30
  SPEAKER_01: And uh in my opinion, it's a it's a good consideration, would be easier because you don't really you remove certain level of um ambiguity there.
• 17:40
  SPEAKER_01: Uh you simply can point to what's already decided and reported on, being financial statements.
• 17:46
  SPEAKER_01: So I think it's a good direction they want to take, and they believe that the clarification is needed to remove any ambiguity.
• 17:52
  SPEAKER_01: Again, it's all discussion at this point, right?
• 17:55
  SPEAKER_01: And uh last but not least, um they also look in an operational control.
• 18:00
  SPEAKER_01: Um, operational control, in my opinion, is even more challenging because there's not really too many, too much guidance out there, how to practically apply that.
• 18:11
  SPEAKER_01: And we know there's diversity in practice.
• 18:13
  SPEAKER_01: In fact, it was one of our um uh suggestions, just to clarify operational control, provide more guidance, and that's what they're considering.
• 18:21
  SPEAKER_01: Should we clarify operational control and also provide more examples and guidance so people would that would potentially improve the consistency of application, which again, I think it's a very good idea, especially that we don't know whether we're gonna retain this or not, like this this optionality.
• 18:36
  SPEAKER_01: But if they do, operational control is very frequently used methodology in various industries.
• 18:43
  SPEAKER_01: So having clarifications would be very welcome change.
• 18:47
  SPEAKER_04: Yeah, and I think it's interesting for both operational control and financial control.
• 18:50
  SPEAKER_04: I mean, when we were putting together our our guidance and interpretation, this is some of the areas we spent the most time on.
• 18:57
  SPEAKER_04: And as I kind of jumped in there, I I think it is generally accepted that financial control equals the financial statements.
• 19:05
  SPEAKER_04: I think for operational control, it is a bit hazier.
• 19:08
  SPEAKER_04: I think we're comfortable with where we landed, and if you look in our sustainability reporting guide, but the way it's written right now, there is a lot of overlap between those two and a lot of interpretation needed to kind of tease that out.
• 19:21
  SPEAKER_04: And so I do think more guidance here will be very helpful.
• 19:24
  SPEAKER_04: So it'll be interesting to see what they come up with.
• 19:27
  SPEAKER_04: And then again, for ESRS reporters, it'll be interesting to see if FRAG proposes a change in its revisions to ESRS, because right now, obviously, you have both together, which is another challenge that's not for today.
• 19:40
  SPEAKER_04: So, Marchin, those are obviously very big.
• 19:43
  SPEAKER_04: I know you mentioned scope three guidance potentially becoming part of the corporate standard.
• 19:47
  SPEAKER_04: And I have to say, you know, if we move on to that one, that one to me really seems less momentous because I think for most of, you know, many, many companies at least, they're either reporting under the guidance of ESRS or the ISSB standards, or they're preparing for compliance with California, all of which require scope three.
• 20:08
  SPEAKER_04: And many voluntary reporters have already decided to report scope three.
• 20:12
  SPEAKER_04: However, I know this is an important point, and I know you have some points of view on this.
• 20:17
  SPEAKER_01: Well, I mean, uh, I personally wasn't going back and forth.
• 20:20
  SPEAKER_01: Is it really needed?
• 20:21
  SPEAKER_01: Um, but so let's step back.
• 20:23
  SPEAKER_01: Why is working group even talking about this?
• 20:25
  SPEAKER_01: Because when you think about the current standard is written, as I mentioned before, the first working protocol, uh GEG protocol started with corporate standard.
• 20:34
  SPEAKER_01: And at the time, focus on that was primarily scope one and two.
• 20:38
  SPEAKER_01: Obviously, scope three is considered, but it's not, it's only optional reporting, right?
• 20:43
  SPEAKER_01: Which makes sense.
• 20:44
  SPEAKER_01: We're starting emissions reporting, value chain is very complex, there's no calculation methodologies, and corporate standard doesn't have any calculation methodologies or any specifics, right?
• 20:54
  SPEAKER_01: So, in that standard, the reporting of scope three emissions is um is optional, right?
• 20:59
  SPEAKER_01: But then subsequent to that, they issued scope three standard, which mandates reporting of scope three emissions, and also calculate technical calculation guidance for scope three, which is the third document, right?
• 21:10
  SPEAKER_01: So the three documents with slightly different uh approaches.
• 21:13
  SPEAKER_01: If you look at a um scope three standard, there's even a chapter that focuses on that, how to navigate the differences between corporate and scope three standards, and outlines two potential scenarios.
• 21:26
  SPEAKER_01: If you want to claim compliance with corporate standards, I mean scope three is not, you don't have to, but if you want to um uh comply with scope three standard, right, you have to.
• 21:36
  SPEAKER_01: It's just like it's confusing.
• 21:38
  SPEAKER_01: It's very confusing.
• 21:39
  SPEAKER_01: So I think that's the reason they they decided to to um to kind of uh consider bringing it and make it in part of corporate standard, they're part of a required reporting.
• 21:49
  SPEAKER_01: Another reason is what you mentioned, all the other reporting frameworks uh require reporting with scope three.
• 21:55
  SPEAKER_01: So having some optionality in there might be even more confusing for everybody.
• 22:00
  SPEAKER_01: But um but it like when you think, okay, so should we just say, yeah, it's required, move on?
• 22:05
  SPEAKER_01: Unfortunately, it's not so easy because of you have you have a scope three standard calculation guidance.
• 22:10
  SPEAKER_01: So do you bring part of that into corporate standard?
• 22:13
  SPEAKER_01: What about measurement methodology?
• 22:15
  SPEAKER_01: Do you remove the other two and bring everything to one document?
• 22:19
  SPEAKER_01: So they have to make a decision technically how to make the change and how in the future these three documents are gonna be working uh with each other.
• 22:27
  SPEAKER_01: So I think again, it's gonna take them some time.
• 22:29
  SPEAKER_01: Technically, it's not gonna be that big of a change, but if they want to make it right, they need to be thinking through all these the details that I just mentioned, right?
• 22:38
  SPEAKER_04: Um yeah, actually, Martin, one thing I was just reflecting, because you we talked about the fact all these standards now require it.
• 22:44
  SPEAKER_04: So when we go back in time, corporate standards issued um the 2002 time frame, I think 2001.
• 22:51
  SPEAKER_04: Uh so not required.
• 22:52
  SPEAKER_04: Even TCFD, which was issued around 2017, did not require reporting of scope three is high, I think it was highly encouraged, or they had some wording along those lines.
• 23:04
  SPEAKER_04: But now we fast forward, you know, so eight years from 2017 and or I guess six years from when all those other, you know, when ISSB and uh the ESRS were issued, that we see that then scope three standard is being mandated.
• 23:20
  SPEAKER_04: And I do think that shows some evolution of reporting.
• 23:22
  SPEAKER_04: So it's just interesting to reflect on that.
• 23:24
  SPEAKER_04: But to your point, how they're actually going to do this, you know, it's potentially interesting to see.
• 23:30
  SPEAKER_01: They also like considering how to improve or um clarify concept of materiality in a in a context of broader emissions reporting and in the context of scope three in particular.
• 23:41
  SPEAKER_01: You know, how do you apply materiality concept to determine relevant and significant categories of scope three, whether scope three altogether is uh is material.
• 23:50
  SPEAKER_01: So they actually, the the corporate working group and a scope three uh working group, um, they're thinking about like maybe we should put some uh quantitative um uh thresholds in there, working together, just making sure that they resolve it properly.
• 24:05
  SPEAKER_01: So uh it's it's it's kind of uh interesting how the cooperation looks like and how challenging it it will be, right?
• 24:12
  SPEAKER_01: To to make everything kind of uh synced in.
• 24:14
  SPEAKER_04: With scope three, we also have the technical working groups that are focused on different elements.
• 24:21
  SPEAKER_04: So what else are they focused on?
• 24:23
  SPEAKER_01: I think the main focus of scope three working group, and that's my opinion, right?
• 24:28
  SPEAKER_01: Yeah, from the notes that you can see publicly.
• 24:30
  SPEAKER_01: What I can see there.
• 24:31
  SPEAKER_01: Um, it's truly looking at the boundary of reporting and the minimum boundaries in each category.
• 24:36
  SPEAKER_01: So clarifying, looking at you know, various levels of option of optionality in there.
• 24:42
  SPEAKER_01: So um so they spend a lot of time on that.
• 24:46
  SPEAKER_01: And as I mentioned before, category 15 gets special consideration, right?
• 24:51
  SPEAKER_01: So um, and why is that?
• 24:53
  SPEAKER_01: Because when you look at that, it's pretty difficult to say one category is bigger than the other, but it's complex, right?
• 25:00
  SPEAKER_01: Because we're talking about reporting emissions from uh finance emissions from underlying investments that regular companies have or financial institutions like bank or insurance company might have.
• 25:11
  SPEAKER_01: So when you think about it, there's a lot of different types of investments, right, that companies can make, and regulating how to capture, measure, and report emissions from those might be complex.
• 25:21
  SPEAKER_01: What makes it a little bit challenging, even today?
• 25:24
  SPEAKER_01: Currently, scope three standard requires only three types of investments, which is debt and equity investments and project finance to be reported, which with no use of proceeds.
• 25:35
  SPEAKER_04: So it's not I mean it's very narrow, yes.
• 25:37
  SPEAKER_01: So uh it's very narrow, it represents only fraction.
• 25:41
  SPEAKER_01: Maybe for like regular production company, it's sufficient, but when you move to those various types of financial institutions of financial service companies, that's only a small fraction.
• 25:53
  SPEAKER_01: What makes it even more complex?
• 25:55
  SPEAKER_01: Those institutions over the last few years got together and developed their own standard, right?
• 26:00
  SPEAKER_01: Um uh to report emissions and measure.
• 26:04
  SPEAKER_01: So they kind of as their industry approach, which is called PCAP or Partnership for Carbon Accounting Financial.
• 26:10
  SPEAKER_01: Those are three parts of this.
• 26:11
  SPEAKER_01: So there's additional guidance in the market.
• 26:14
  SPEAKER_01: So I uh I think you if you have a different body issuing the guidance, different level of guidance existing on the market, that increases uh complexity and uh and creates challenges.
• 26:24
  SPEAKER_01: And working um GEG Protocol reviewed actually one of this, part A, and endorsed it, but never reviewed part B and C.
• 26:32
  SPEAKER_01: And um, so I think that this working group is trying to like look at what is my uh entire, let's say, universe of uh category 15 uh reporting and what how what changes should we make to make it more transparent, more kind of workable.
• 26:49
  SPEAKER_01: Therefore, they're considering expansion of those types of investments or asset classes to be to be included.
• 26:56
  SPEAKER_01: They looking about different other types of debt.
• 26:58
  SPEAKER_01: They're looking about they're looking at um insurance products, facilitated emissions associated with different kind of market transactions.
• 27:07
  SPEAKER_01: Uh, they're looking at asset managers.
• 27:09
  SPEAKER_01: So kind of a going more or less, or at least being inspired by the guidance currently included in PCAP part A, B, and C.
• 27:18
  SPEAKER_01: So again, we don't know where where they're where it's gonna go, but they spend a lot of time trying to think about this category, which could have a very consequential kind of an impact on reporting of this this category in emissions in that.
• 27:37
  SPEAKER_04: Yeah, so I mean, definitely an area to watch.
• 27:39
  SPEAKER_04: And again, this is another area we potentially could see some changes in ESRS as well.
• 27:44
  SPEAKER_04: That's one of the recommendations we made to FREG.
• 27:47
  SPEAKER_04: So it will be interesting to see how these both progress.
• 27:51
  SPEAKER_04: And again, I think from financial institutions, you know, this is obviously one of the biggest areas.
• 27:56
  SPEAKER_04: You had mentioned specifically that, you know, the scope three technical working group is very focused on the minimum boundaries.
• 28:04
  SPEAKER_04: And I think when we talk about the main areas of issues, this is probably the number one area of issues we saw for the year-end reporting.
• 28:11
  SPEAKER_04: So it's very important they're focused on this.
• 28:13
  SPEAKER_01: And especially that one could argue that those different um regulatory framework frameworks might have slightly different approach to those two.
• 28:22
  SPEAKER_01: So I think clarifying and bulletproofing those concepts and uh within scope three is gonna be very important.
• 28:29
  SPEAKER_01: Um it may make it more difficult for companies because of a might make it easier.
• 28:35
  SPEAKER_01: We don't know.
• 28:35
  SPEAKER_01: Yes.
• 28:36
  SPEAKER_01: But um, but I think that that some changes are kind of a would be welcome.
• 28:41
  SPEAKER_01: Clarity will be helpful.
• 28:42
  SPEAKER_04: So, Marchin, let's change our focus to scope two, and maybe a key reminder before we get into scope two.
• 28:48
  SPEAKER_04: You know, we talked about the fact that scope three standard is separate, it's not really part of the corporate standard.
• 28:54
  SPEAKER_04: One thing I think to highlight that I've always found interesting is the scope two guidance, which is also a separate document, is actually technically part of the corporate standard.
• 29:04
  SPEAKER_04: So I think this is something that's always confusing to people.
• 29:06
  SPEAKER_04: So then when we're talking about scope two, that guidance is already part of the corporate standard, albeit in a separate document.
• 29:13
  SPEAKER_04: And so I guess these changes also would be part of the corporate standard document-wise, you know, we don't know where that will look.
• 29:19
  SPEAKER_04: So I just think that's an important level setting because I do think it's a point of confusion.
• 29:24
  SPEAKER_04: No, no, okay.
• 29:25
  SPEAKER_04: So I just in terms of what they're focused on, what are areas of focus for scope two?
• 29:31
  SPEAKER_01: So, as we mentioned before, scope two guidance, that's a good point there, uh, is the only part of a GEG protocol that introduces the concept of market-based economy, right?
• 29:41
  SPEAKER_01: Which for our viewers who are familiar with this, it's just a reminder, currently recognizes two methodologies to calculate scope two emissions, location-based and market-based.
• 29:51
  SPEAKER_01: Location-based, in a few words, uses the average, uh grid average emission factors and does not give any recognitions to any contractual instruments or decisions that companies are making, let's say signing the renewable PPA or things like that, versus market-based um uh approach or methodology gives recognitions to those.
• 30:12
  SPEAKER_01: So you can consider contractual arrangements, emission factors truly um representative of your decisions that you're making.
• 30:19
  SPEAKER_01: So if you enter in some renewable energy agreements, it will be reflected in calculation of emissions under market-based.
• 30:26
  SPEAKER_01: So that's kind of a preface.
• 30:28
  SPEAKER_01: Why it's important?
• 30:29
  SPEAKER_01: Because during the survey process, they receive overwhelming number of comments in this area, kind of a challenging application of market-based and location-based uh calculation methodologies, with reporting entities and some renewable energy industries advocating or supporting market-based methodologies, asking for more changes in uh more guidance how to practically apply, but basically saying we should retain this duality, versus some academics and NGOs were very skeptical of market-based um uh methodology, especially when it relates to use of unbundled kind of instruments in there, and they questioned is it really kind of a representative of emission reductions?
• 31:17
  SPEAKER_01: Does it help in the whole process?
• 31:19
  SPEAKER_01: So I think they received a lot of comments that drove them to kind of a look into and say, what do we do with this duality?
• 31:26
  SPEAKER_01: Right?
• 31:26
  SPEAKER_01: Do we still support both?
• 31:28
  SPEAKER_01: Do we need to provide more guidance and equality criteria?
• 31:32
  SPEAKER_01: So I think that's um that's the main focus right now.
• 31:36
  SPEAKER_01: How to improve that reporting of scope to emissions.
• 31:40
  SPEAKER_04: Yeah, and I mean it's interesting because you and I have debated this quite a bit.
• 31:44
  SPEAKER_04: And I definitely have some sympathy to the view that location-based is really the best, I'll use the word the best way to measure, but I do have sympathy for market-based and this extremely complex issue, particularly if for people I think that are you know not deep in how the energy markets work or the electricity markets.
• 32:05
  SPEAKER_04: So it's good to have this working group specifically focused.
• 32:09
  SPEAKER_04: I guess do we we don't really have a sense then of directionally and where this may go?
• 32:14
  SPEAKER_01: Well, there's a few possibilities.
• 32:16
  SPEAKER_01: They've been discussing a few things.
• 32:18
  SPEAKER_01: So um the, for example, as it relates to, so whether they're gonna stick to one, uh, keep one or stick to two, it's unknown.
• 32:27
  SPEAKER_01: But like they they considering any potential changes to both.
• 32:30
  SPEAKER_01: So, for example, for location-based um uh method, they looking, can we improve the quality of you know the um the guidance in terms of use of data?
• 32:40
  SPEAKER_01: Should the companies, what's the best available data that should be used, how you really reflect the real grid emissions in a and what emissions factors you're using.
• 32:49
  SPEAKER_01: So thinking about uh potentially, right?
• 32:54
  SPEAKER_01: Um uh what's the time period, how you match the time of uh generation and utilization of power.
• 33:00
  SPEAKER_01: Uh, because right now a lot of people use average annual uh grid emission factors, they're thinking should we move the increase the frequency to be monthly, quarterly, sometimes even daily.
• 33:10
  SPEAKER_01: So they looking into that, and the main goal is to improve the quality of that information.
• 33:15
  SPEAKER_04: So um and maybe, Marchin, before you go on, I think where that is so critically important, and again, this is where if you haven't really focused on the electrical grids, it's like, well, what difference does it make if it's average or not?
• 33:29
  SPEAKER_04: But depending even on the time of day that you're using electricity, it can be much different between, oh, it's you know, the wind blows more maybe at night, but you have more solar during the day.
• 33:38
  SPEAKER_04: And so in different even parts of the country, you will have different what they call these mixes, depending on time of day, much less the month of the year, much less, you know, so over a period.
• 33:49
  SPEAKER_04: And so if you have where your electricity usage is concentrated during, let's say, daylight hours, but you're using this average, it really could almost be misleading from that point of view.
• 34:01
  SPEAKER_04: And so it will be interesting though, because this companies aren't used to necessarily focusing on their hour-to-hour energy usage and then how it matches.
• 34:10
  SPEAKER_04: So it's quite a technical challenge, it seems like it is.
• 34:13
  SPEAKER_01: And then the other thing, and that's my personal opinion, you also have to take into consideration what is the availability of data.
• 34:18
  SPEAKER_04: Well, exactly.
• 34:19
  SPEAKER_04: That's where it's going.
• 34:20
  SPEAKER_04: Yes.
• 34:21
  SPEAKER_01: When we look at the different markets, because we're now talking, this is this is a discussion about global markets, right?
• 34:26
  SPEAKER_01: So the different places you know around the globe might have a different level of sophistication and developments and availability of this data.
• 34:33
  SPEAKER_01: So I think that's another thing they have to consider, right?
• 34:36
  SPEAKER_01: I mean, how you think about quality and availability of data if you make some changes in there and how it's reflected in this new updated guidance.
• 34:43
  SPEAKER_04: So um, well, and even to that point, March, and there's some parts of the world where maybe the source of the energy is much more concentrated.
• 34:50
  SPEAKER_04: And so then maybe this isn't as important.
• 34:52
  SPEAKER_04: And so there isn't really a one size fits all for how to answer this question.
• 34:56
  SPEAKER_01: Well, and and that's why it's it takes them time to figure out which what decisions to make.
• 35:01
  SPEAKER_01: And the important element is, and we didn't mention that, uh I mentioned the word multi-stake uh holders, right?
• 35:07
  SPEAKER_01: But composition of those working groups is really diverse.
• 35:10
  SPEAKER_01: So there are people from industry, uh, academia, NGOs, professionals.
• 35:16
  SPEAKER_01: So like when you look at the minutes of the meetings, it's really good, good uh stimulating discussion, and I'm confident they're gonna get to the right answer uh in a long time.
• 35:25
  SPEAKER_04: Wow, that's a very strong statement.
• 35:26
  SPEAKER_01: Well, yeah, but but now they have a really kind of a public process review so people will have ability to provide the feedback, right?
• 35:34
  SPEAKER_01: But that's only location base.
• 35:35
  SPEAKER_03: Yeah, so how about market base?
• 35:36
  SPEAKER_01: So the market base, as I mentioned, there's a lot of criticism around the market base.
• 35:40
  SPEAKER_01: Just one thing that for example, um IFRS standards, sustainability standards, they only mandate uh reporting emissions using location base.
• 35:48
  SPEAKER_03: Right.
• 35:48
  SPEAKER_03: And then they have another way to report these other market instruments.
• 35:52
  SPEAKER_01: Exactly, like additional disclosures about the instruments.
• 35:54
  SPEAKER_01: So, which I I think that's also shows you it's not settled science, but it are the debate is ongoing and people have a different approach.
• 36:03
  SPEAKER_01: So um, so the basically what they're looking at, how can we improve the quality of the criteria for the instruments that companies are using?
• 36:12
  SPEAKER_01: As I mentioned right now, there's a variety of instruments that people can use, and some of them have a higher quality than the others.
• 36:21
  SPEAKER_01: So you can use the PPA or power purchase agreements with uh green attributes or renewable attributes embedded in it, right?
• 36:29
  SPEAKER_01: But you can also um uh buy it unbundled, separate just attributes without the power.
• 36:34
  SPEAKER_01: This is the crux of the matter because people think that it's unbundled instruments, they might be misleading.
• 36:40
  SPEAKER_01: They really do not improve the development of renewable power, and um they do not really demonstrate reductions uh of emissions.
• 36:49
  SPEAKER_04: So well, and then there's double counting potentially because people are actually receiving that power, maybe counting them as well.
• 36:57
  SPEAKER_01: Yes, so like they're looking at multiple scenarios, how to improve the quality, right?
• 37:01
  SPEAKER_01: Um should you have some ideas potentially allowing only kind of a use the products as associated with um new kind of development of projects versus existing.
• 37:12
  SPEAKER_03: Oh, that's so complicated.
• 37:13
  SPEAKER_03: It is complicated.
• 37:14
  SPEAKER_01: So um most likely they will tighten requirements around the use of those instruments, focus more on maybe supplier specifics, focus on bundle instruments.
• 37:24
  SPEAKER_01: But again, it's all just discussions, but those are directions and and topics that they are picking up.
• 37:30
  SPEAKER_04: And Martin, are they talking at all yet about like the use of residual mixed factors?
• 37:35
  SPEAKER_04: Because that's another big issue that uh in terms of reporting, because using those residual mixed factors actually then helps with this double counting issue, but they're not available everywhere.
• 37:46
  SPEAKER_01: Exactly.
• 37:46
  SPEAKER_01: So they they exactly when talk when they talk about market base, it's not only uh instruments, but also residual mixed factor, the quality of those factors, uh how they should be calculated, how they should be reported and used.
• 37:58
  SPEAKER_01: Because as you mentioned, like in the US, there's we don't have we don't have any residual mixed factors, right?
• 38:03
  SPEAKER_01: So that people, there's no way to reflect utilization of these green attributes and include it in your in your calculation.
• 38:11
  SPEAKER_01: So um, so I think they're looking at that too.
• 38:13
  SPEAKER_01: It's gonna be interesting because this topic is to me, it's it's it's really important because the availability of data limits the directions they can take.
• 38:23
  SPEAKER_01: So I'm curious how they're gonna resolve this problem because they know, and it's not only US, right?
• 38:28
  SPEAKER_01: Oh, yes.
• 38:28
  SPEAKER_01: Yes, and in a lot of geographical locations, countries, or uh jurisdictions, it it's not available.
• 38:35
  SPEAKER_01: So, how you overcome that and create guidance is gonna fit everybody.
• 38:40
  SPEAKER_04: Right, because there is are available, and for example, the EU.
• 38:44
  SPEAKER_04: And so then, yeah, I think this is a difficult um it will be difficult to balance and makes me um for any of our listeners that are thinking, residual mix, how does this fit in?
• 38:55
  SPEAKER_04: We did a number of episodes last fall where we explained this in much more detail.
• 38:59
  SPEAKER_04: It's probably time for another one, but in the meantime, our uh listeners can go back and listen to that.
• 39:05
  SPEAKER_04: So, Marchin, let's move on because it actually is related in a way to the market-based method, but to the uh the actions and markets working group, or I sometimes think market methodology working group.
• 39:16
  SPEAKER_04: But you mentioned before why it was created, but sort of what is some of the areas of focus for this group?
• 39:21
  SPEAKER_01: Yes, so as we mentioned, like that this market-based approach only exists for scope two, but there's a lot of demand and the questions, how similar emission reduction or avoidance uh actions taken by by reporting entities should be reflected in their um emissions inventories.
• 39:40
  SPEAKER_01: Currently, there's nothing that would allow sort of reflection of this market-based instruments in, like, let's say, scope one and scope three.
• 39:48
  SPEAKER_01: But a lot of people advocate we have to have some venue, right?
• 39:51
  SPEAKER_01: Because currently it's a bit confusing.
• 39:53
  SPEAKER_01: Um, how how we reflect the use of those in our target setting and a performance assessment.
• 40:00
  SPEAKER_01: So I think that's the main aspect of this working group, trying to figure out how to really um combine or maybe combine is a good word, um reporting of uh emissions inventories with you know reporting of those actions and removals of those market instruments.
• 40:21
  SPEAKER_01: So I think that's the biggest challenge.
• 40:23
  SPEAKER_01: And when you look at this group, they're even starting with definitions, right?
• 40:27
  SPEAKER_01: Because when you look at currently how people, there's really limited guidance in GEGG protocol about the carbon, let's let's call them carbon offsets, right?
• 40:35
  SPEAKER_01: As an example, right?
• 40:37
  SPEAKER_01: There's not that much that talks about this type of instruments, right?
• 40:41
  SPEAKER_01: So they start and look, okay, how we should define those, how we differentiate the different different types of instruments, and then how and whether it should be combined with uh inventory reporting.
• 40:53
  SPEAKER_01: One kind of a potential uh uh scenario that they're considering to bring some, let's say, parallel reporting.
• 41:00
  SPEAKER_01: So you're gonna report your emissions inventory growth and your actions taken to reduce, remove, or avoid emissions separately, right?
• 41:09
  SPEAKER_01: In within the same report, because they they they believe and they recognize the fact that some venue is needed.
• 41:16
  SPEAKER_04: Yes.
• 41:16
  SPEAKER_01: But um, but so that's one of the potential options.
• 41:20
  SPEAKER_04: Although, in some ways, at least for scope one, you have that option already.
• 41:23
  SPEAKER_04: You are required to report gross and then you can report these actions.
• 41:28
  SPEAKER_04: I I guess my question, and I was thinking maybe for listeners that aren't as focused on this, I'll give an example, and you can tell me either a better one or another one.
• 41:38
  SPEAKER_04: I mean, where we see this question come up is often there we have companies that they're doing work to offset their own electricity usage in scope two, but then let's say they have a supplier that has very high energy usage that isn't counted in their scope three.
• 41:54
  SPEAKER_04: And so then they say, well, I want to offset my supplier's emissions and actually show uh you know a reduced number instead of a gross number.
• 42:03
  SPEAKER_04: And so that's one example.
• 42:04
  SPEAKER_04: I don't know if you have some other examples you could give, just why this is so important to some companies.
• 42:10
  SPEAKER_01: No, it it is uh very good examples.
• 42:12
  SPEAKER_01: The same uh applies to, let's say, sustainable aviation fields.
• 42:16
  SPEAKER_01: Yes, exactly.
• 42:16
  SPEAKER_04: We get so many questions.
• 42:18
  SPEAKER_04: Exactly.
• 42:18
  SPEAKER_01: So uh and a book and claim mechanism, which by the way, they're looking into it, right?
• 42:22
  SPEAKER_01: Uh also kind of how to consider um this.
• 42:26
  SPEAKER_01: Yes, right now companies can report this type of instruments, like you know, I call it voluntarily uh in the same report, but it's not, I would say, were very well regulated, right?
• 42:38
  SPEAKER_01: And outline.
• 42:39
  SPEAKER_01: Um, there's no guidance about how to assess the quality of this instrument.
• 42:42
  SPEAKER_01: So when you look at a scope to guide, it prescribes very, it has very specific guidance as to what instruments can be used, how you assess the quality of those instruments, and those quality criteria are very important because they might be kind of a, if you don't meet some of those criteria, you might not be allowed to use some of some of the instruments, right?
• 43:03
  SPEAKER_01: And disclosing the nature of those instruments and quality criteria provides more transparency for users.
• 43:09
  SPEAKER_01: So I think starting point even is like how we go about definitions, quality criteria, and then how we, I don't want to say word again combined, but how we kind of uh have these two systems coexisting so people to could uh take credit.
• 43:25
  SPEAKER_01: So I think it's important, right?
• 43:27
  SPEAKER_01: Uh, because you say people doing this, but it's not really so look at ESRS.
• 43:32
  SPEAKER_01: They're very prescriptive guidance when and how those types of instruments should be used, which this guidance doesn't exist in GEG project.
• 43:40
  SPEAKER_04: So it's a really good point.
• 43:41
  SPEAKER_04: So no, I agree it's very important.
• 43:43
  SPEAKER_04: It's just I think it's also quite challenging.
• 43:47
  SPEAKER_04: So any other specifics on this?
• 43:50
  SPEAKER_04: I know there's quite a bit more to come in terms of what they're looking at, or should we kind of skip over to the timeline?
• 43:55
  SPEAKER_01: No, I I I think that those are the kind of um uh main things.
• 43:58
  SPEAKER_01: They also um Starting to look at verification of assurance of, you know, in project-based accounting, too.
• 44:06
  SPEAKER_01: But that's all part of the increasing the quality of these instruments and coming up with a plan how to kind of report that alongside the emissions inventory.
• 44:17
  SPEAKER_04: All right, very helpful.
• 44:18
  SPEAKER_04: So, Martin, we talked very briefly at the beginning about the fact that this is an enormous amount of work that needs to get done.
• 44:25
  SPEAKER_04: They have these very focused, dedicated working groups, lots of information out there.
• 44:30
  SPEAKER_04: What do we expect to see from a timeline perspective?
• 44:33
  SPEAKER_01: 2025 is a key year because that's where all the working groups are coming up with actual proposed text of the updates, uh, areas we're like making decisions.
• 44:43
  SPEAKER_01: So we're gonna see this work throughout uh 2025.
• 44:47
  SPEAKER_01: Toward the end of 2025, hopefully the potential updates are gonna be put in front of ISB, so independent standard board, for review approval and potential changes.
• 44:58
  SPEAKER_01: The 2026 is gonna be uh we're gonna see the public outreach, so publication of uh exposure drafts and uh for comments uh for comments.
• 45:07
  SPEAKER_01: And hopefully the updated standards are gonna be issued no later than the end of 2027.
• 45:12
  SPEAKER_01: So there's still long runway, but it's for a reason.
• 45:15
  SPEAKER_01: Again, if anybody looks at their plans, it's a lot.
• 45:18
  SPEAKER_04: Yeah, and actually I thought some of it may even fall into 2028, but I guess we'll see as as it progresses how long this takes.
• 45:26
  SPEAKER_04: So if I'm listening and some of these uh piqued my interest, or I want to know more, what should people do as this continues to progress?
• 45:35
  SPEAKER_01: Follow this, you know, uh really thoroughly.
• 45:39
  SPEAKER_01: So because there even ourselves like there was a period where there's not much coming in from uh from GG.
• 45:44
  SPEAKER_01: I know, and then suddenly and suddenly all the things popped up on their website, which actually, quite frankly, granted, we're all focusing on ESRSs because it was the topic of a day, uh, but it surprised me how much material they produce and how quickly, right?
• 45:58
  SPEAKER_01: So uh I would kind of um urge everybody to pay attention, uh, make it part of your day or regular uh schedule just to check for updates and see which directions they might be taking, right?
• 46:10
  SPEAKER_01: For multiple reasons.
• 46:11
  SPEAKER_01: First of all, it would allow you to be more prepared to what's coming and you could start soliciting internal feedback.
• 46:17
  SPEAKER_01: What do we think about this?
• 46:18
  SPEAKER_01: What will be our comments uh during the comment period?
• 46:21
  SPEAKER_01: And are we ready, right?
• 46:23
  SPEAKER_01: And that's the other thing.
• 46:24
  SPEAKER_01: You could also start seeing if those changes are approved and the standards is issued, what extra effort will be required in your organizations to comply, right?
• 46:34
  SPEAKER_01: So again, I'm not suggesting start making the changes uh right now because it's unknown, but at least start making those assessments so you know more or less uh what effort will be required.
• 46:45
  SPEAKER_01: One thing which we don't know is like what's going to be transition period, or is there gonna there going to be any kind of a transition period concept in uh after the issuance, but um especially as it relates to how it works with all their regulatory standards like BSRS and IFRS, because they all they too, but all of them refer to uh in one way or the other to GEG protocols.
• 47:08
  SPEAKER_01: So people need to be start thinking okay how to integrate everything.
• 47:12
  SPEAKER_04: Well, and I think that's an interesting point because right now they point to specific versions of these standards.
• 47:21
  SPEAKER_04: And uh FRAG and the ISSB do both have observers that would have an opportunity to at least observe the independent standards board's meetings.
• 47:30
  SPEAKER_04: So that will be interesting to see if if they weigh in along the way.
• 47:34
  SPEAKER_04: I think the other thing, Marchin, that stands out to me is that if you look at the composition of the working groups, you mentioned it's very broad, but it's also very it's public.
• 47:43
  SPEAKER_04: And so to the extent that there are issues I think that are very important to you and that you kind of don't want to wait, I do think there's could be some opportunity through your industry groups, maybe talking to your auditors or or otherwise, that you know, can you talk to some of these people on the working groups?
• 48:00
  SPEAKER_04: Not to inundate them.
• 48:01
  SPEAKER_04: I don't think they want to be inundated, but I do think these are some of these, in particular, are topics industry groups might want to start thinking about now, at a minimum to your point, so that you have a perspective on the ones that are most important to you when these exposure drafts start coming out.
• 48:16
  SPEAKER_01: Yeah, I would agree.
• 48:18
  SPEAKER_04: All right.
• 48:18
  SPEAKER_04: So, Marchin, I think definitely we will be continuing to release episodes as things develop.
• 48:23
  SPEAKER_04: I was also thinking while we were talking, it might be helpful to dig a little deeper into some of these so people can understand potential implications.
• 48:31
  SPEAKER_04: So I guess to our listeners slash viewers, maybe you guys uh can look for that or you should look for that in the future, assuming Marchin agrees.
• 48:39
  SPEAKER_04: He's fine.
• 48:42
  SPEAKER_04: So, as always, uh just want to thank our listenerslash viewers for joining us today.
• 48:47
  SPEAKER_04: Hope you join us again for some other episodes.
• 48:50
  SPEAKER_04: And if you'd like to follow us, please follow on your favorite app or look for us on viewpoint.pwc.com.
• 48:58
  SPEAKER_04: Thanks again for joining us.
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• 49:22
  SPEAKER_02: From Thought Leadership at PWC, I'm Heather Horn.
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