Short answer
The answer, before the reasoning
IFRS S2 does not require every entity to set a climate or greenhouse-gas target. It requires disclosure of targets the entity has set and targets it is required to meet by law or regulation when the information is material.
A credible target disclosure defines the metric, objective, boundary, period, base period, milestones, whether the target is absolute or intensity based, validation and review, revisions and performance. For a net GHG target, the associated gross target must remain visible. Planned carbon-credit use is disclosed separately, including reliance, verification or certification scheme, credit type and factors affecting credibility and integrity.
LRA Knowledge Hub visual - branded for editorial and learning use.
PUBLIC ARTICLE
In practice
FORMAT
| FORMAT | LANGUAGE | VERSION |
|---|---|---|
| Deep disclosure guide and anti-greenwashing control tool | British English | 1.0 • 1 August 2026 |
Rule
WHO THIS IS FOR
Sustainability reporting, climate, finance, strategy, operations, procurement, carbon-market, legal, investor-relations, internal-audit and assurance-readiness teams, plus boards approving climate targets and claims.
Technical status
STANDARD STATUS
IFRS S2 is effective for annual reporting periods beginning on or after 1 January 2024, subject to jurisdictional adoption. The December 2025 greenhouse-gas amendments apply from periods beginning on or after 1 January 2027, with earlier application permitted, but do not change the core target and carbon-credit requirements explained here. Other laws, exchanges or voluntary commitments can impose additional target or claim rules.
Begin with the target anatomy, not the marketing phrase
A public phrase such as net zero, carbon neutral or climate positive is not yet a complete IFRS S2 target disclosure. Users need to understand what is being targeted, which part of the entity or value chain is included, how progress will be measured and what portion of the result depends on operational change, removals or carbon credits.
IFRS S2 requires the entity to disclose climate-related targets it has set and those it is required to meet by law or regulation. The entity describes the metric, objective, scope, period, base period, milestones, whether the target is absolute or intensity based and how the latest international agreement on climate change informed the target. It also explains the approach to setting and reviewing targets and reports performance and trend.
Figure 1. Credible climate-target disclosure keeps the gross inventory, gross reduction target, net target and planned carbon-credit reliance visible as separate layers.
Rule
CORE PRINCIPLE
A net target cannot obscure the gross target. Carbon credits are not deducted from the absolute gross Scope 1, Scope 2 and Scope 3 inventory disclosure. Keep measurement, target design and claim language separate but reconciled.
In practice
What IFRS S2 requires for climate-related targets
| TARGET FIELD | REQUIRED DISCLOSURE LOGIC | CONTROL QUESTION |
|---|---|---|
| Metric | The metric used to set and monitor the target. | Is the metric definition identical across the target register, emissions inventory and public disclosure? |
| Objective | The objective of the target, such as mitigation, adaptation or another climate outcome. | Does the objective explain why the target matters to strategy and risks or opportunities? |
| Entity part / boundary | The part of the entity to which the target applies. | Are entities, operations, geographies, assets, products, scopes and value-chain categories explicit? |
| Target period | The period over which the target applies. | Is the end date and any time horizon clear? |
| Base period | The period from which progress is measured. | Is the baseline controlled, comparable and restated when required by the approved method? |
| Milestones | Interim targets and milestones. | Can users assess near-term implementation rather than only a distant end date? |
| Absolute or intensity | Whether the target is absolute or intensity based. | If intensity based, is the denominator defined and are absolute emissions also understandable? |
| International agreement | How the latest international agreement on climate change informed the target. | Is the explanation entity specific rather than an unsupported alignment statement? |
| Setting and review | Whether and how the target and methodology were validated, reviewed and revised. | Are governance, external validation, methodology changes and approvals traceable? |
| Performance | Performance against the target and analysis of trends or changes. | Does the movement bridge distinguish real-world performance from boundary, data and methodology effects? |
Rule
WHAT IFRS S2 DOES NOT REQUIRE
The Standard does not require every entity to set a target, use one universal net-zero pathway, obtain third-party target validation, use a specific carbon-credit standard or make a carbon-neutral claim. Those obligations can arise from other regimes or choices and should be sourced separately.
Distinguish absolute and intensity targets
An absolute target limits or reduces a total amount, such as tonnes of CO2e. An intensity target expresses emissions relative to a denominator such as revenue, production, floor area, passenger-kilometres or financed exposure. Both can be decision-useful, but they answer different questions. An intensity metric can improve while absolute emissions rise if activity expands; an absolute metric can fall because output declines rather than because operations become more efficient.
In practice
| TARGET TYPE | WHAT IT SHOWS | PRACTITIONER RISK — DISCLOSURE CONTROL |
|---|---|---|
| Absolute GHG target | Planned change in total gross emissions within the target boundary. | Acquisitions, disposals, outsourcing, closures or volume changes can dominate the trend. — Explain boundary, baseline, structural changes and restatement policy. |
| Intensity GHG target | Emissions per defined unit of activity or financial measure. | Denominator growth can create apparent improvement while total emissions increase. — Define denominator, source and changes; present associated absolute information where needed for understanding. |
| Portfolio intensity target | Emissions or alignment metric relative to exposure, AUM, revenue or activity. | Market value, portfolio flows and classification can move the metric without investee decarbonisation. — Explain portfolio boundary, denominator, methodology and movement drivers. |
| Non-GHG climate target | Targets for energy, resilience, capital deployment, products or risk reduction. | A proxy target can be mistaken for a GHG outcome. — State the objective, metric, relationship to climate risks/opportunities and effectiveness evidence. |
In practice
| MYTH | An intensity target is automatically weaker than an absolute target. |
|---|---|
| REALITY | The appropriate metric depends on the objective and business model. The disclosure should make the denominator and its limitations visible and should not use intensity improvement to obscure absolute emissions or target performance. |
Separate the gross inventory, gross target and net target
IFRS S2 requires absolute gross Scope 1, Scope 2 and Scope 3 emissions. Gross means that carbon credits or other offsetting efforts are not deducted from the inventory disclosure. Target disclosure then distinguishes the planned change in gross emissions from any net target that incorporates planned offsetting efforts.
In practice
| LAYER | MEANING | DISCLOSURE RULE |
|---|---|---|
| Gross emissions inventory | Absolute gross emissions generated during the reporting period within the disclosed inventory boundary. | Report without deducting carbon credits or planned offsetting. Explain method, inputs, assumptions, scopes and categories. |
| Gross GHG target | Planned change in gross emissions within the target boundary before offsetting. | If the entity has a GHG target, specify whether it is gross or net. If a net target exists, disclose the associated gross target separately. |
| Net GHG target | Targeted gross emissions minus planned offsetting efforts, such as planned carbon-credit use. | The net target cannot obscure the gross target or the extent of credit reliance. |
| Removals within the value chain or inventory method | Physical removals or storage can be relevant depending on the target and measurement method. | Explain the method, boundary, permanence and relationship to gross and net outcomes; do not assume all removals are carbon credits. |
| Carbon credits | Transferable or tradeable units issued by a carbon-crediting programme, representing a reduction or removal. | Disclose planned use to achieve a net target, reliance, scheme, type and integrity factors. |
Rule
ANTI-OBSCURATION TEST
A reader should be able to see the gross inventory, gross target, net target and planned offsetting relationship without reverse-engineering a single net number. If one layer is missing, the claim is likely to overstate progress or hide reliance.
Disclose planned carbon-credit use and integrity attributes
IFRS S2 requires information about planned use of carbon credits to offset emissions to achieve a net GHG target. The focus is forward-looking reliance. The entity is required to disclose only planned use, although it may also provide information about credits already purchased that it plans to use if this helps users understand the target.
The Standard does not provide a universal list of high-integrity programmes or guarantee the quality of a credit because it is certified. The entity should disclose factors necessary for users to understand credibility and integrity and should maintain an internal eligibility and due-diligence process. That process is LRA implementation practice unless another applicable requirement prescribes it.
In practice
| CREDIT DISCLOSURE FIELD | WHAT USERS NEED TO UNDERSTAND | EVIDENCE / CONTROL |
|---|---|---|
| Extent and timing of reliance | How much of the net target is expected to be achieved through credits and at which milestone or target date. | Target model, annual credit requirement and sensitivity. |
| Verification / certification scheme | Which third-party programme will verify or certify the credits. | Programme documentation, eligibility policy and due diligence. |
| Credit type | Nature-based or technological removal, and reduction or removal. | Project type, methodology, vintage and registry information. |
| Credibility and integrity factors | Other factors needed to assess integrity, including permanence assumptions. | Additionality, permanence, leakage, reversal, double-counting, host-country treatment and retirement controls where relevant. |
| Purchased credits planned for future use | Existing holdings can be described when useful to understanding planned use. | Inventory, registry status, ownership, vintage, intended target and impairment/valuation information where relevant. |
| Changes in reliance | How the expected credit quantity, type, scheme or timing changed. | Change log, target-model bridge and governance approval. |
Rule
PLANNED USE, NOT SILENT NETTING
Do not subtract credits from the gross inventory table. Explain the planned role of credits in the net target and how the entity will control acquisition, ownership, eligibility, retirement and claim use.
Build a controlled target and credit register
A target register should preserve the full anatomy and link each public claim to the underlying inventory, strategic action and governance decision. A carbon-credit register should be connected but separate so that planned use, purchases and retirements cannot be confused with gross operational reductions.
In practice
| TARGET REGISTER FIELD | PURPOSE | EXAMPLE CONTROL |
|---|---|---|
| Stable target ID and approved wording | Keeps reports, dashboards and public claims consistent. | No public wording changes without target-owner and technical approval. |
| Objective and metric | Explains what outcome is being managed. | Metric definition, unit, calculation and data owner. |
| Boundary | Entities, operations, geographies, scopes, categories, portfolios or products included and excluded. | Reconcile to emissions and financial reporting boundaries; log changes. |
| Base period and baseline | Creates the comparison point. | Controlled dataset, restatement method and approval. |
| Target period and milestones | Makes near-term progress testable. | Annual/interim milestones, tolerance and escalation. |
| Absolute / intensity / gross / net status | Prevents incompatible labels. | Approved classification and relationship between metrics. |
| Actions and resources | Connects target to implementation. | Action owner, capex/opex, milestone and evidence. |
| Planned credits and removals | Shows amount, timing, type, scheme and reliance. | Separate gross reduction bridge and credit plan. |
| Validation, review and revisions | Preserves governance and change history. | Validator, review date, methodology change, reason and effect. |
| Progress and movement bridge | Explains result and trend. | Actual result plus operational, structural, data, methodology and credit drivers. |
In practice
| CREDIT REGISTER FIELD | MINIMUM CONTENT |
|---|---|
| Credit / project ID | Programme, project, methodology, jurisdiction and registry identifier. |
| Type and attributes | Nature-based or technological; reduction or removal; vintage; monitoring period. |
| Quantity and status | Contracted, purchased, issued, owned, transferred, retired or cancelled. |
| Intended target use | Target ID, milestone, planned year and expected reliance. |
| Integrity assessment | Additionality, permanence, leakage, reversal, double counting, safeguards and other relevant factors. |
| Ownership and retirement evidence | Contract, registry account, serial numbers, retirement record and claim owner. |
| Valuation / accounting link | Cost, carrying treatment and relevant finance records without implying a prescribed accounting outcome. |
| Review and changes | Due diligence, approval, exceptions, impairment of intended use and change log. |
Rule
LRA IMPLEMENTATION TOOL
The target and credit registers are not prescribed IFRS forms. They support traceability, target governance, anti-double-counting controls, public-claim review, progress analysis and future assurance.
Explain progress with a movement bridge
Performance against a target should be analysed, not merely stated. A year-on-year change can arise from operational reductions, renewable-energy procurement, asset or portfolio changes, acquisitions, disposals, outsourcing, production volume, foreign exchange, updated factors, better Scope 3 coverage, data corrections, baseline restatement or planned offsetting. The disclosure should distinguish these drivers when material.
When a target is missed, transparent disclosure is more credible than silently replacing it. The entity should explain the variance, actions taken, whether the target or methodology changed and how the revised position affects strategy, resources and financial effects.
In practice
| MOVEMENT DRIVER | POSSIBLE EFFECT | DISCLOSURE QUESTION |
|---|---|---|
| Operational or investee performance | Real change in energy use, process emissions, technology or financed activity. | What evidence shows the change and whether it is durable? |
| Business / portfolio structure | Acquisition, disposal, closure, outsourcing, divestment, client flow or asset reallocation. | Was the target or baseline restated and is the real-world effect clear? |
| Activity level | Production, sales, occupancy, traffic or exposure changed. | How did absolute and intensity results differ? |
| Methodology or emission factor | A calculation or factor changed. | What changed, why and what was the effect on comparability? |
| Data quality and coverage | More specific or verified data became available. | Does the reported increase reflect better measurement rather than worse performance? |
| Carbon-credit plan | Planned reliance, quantity, type or timing changed. | How does the change affect the gross/net relationship and target credibility? |
| Missed milestone or revision | Target timing, scope or ambition changed. | Why, what is the effect and who approved the change? |
In practice
| MYTH | A lower reported net number proves that the entity reduced its own emissions. |
|---|---|
| REALITY | The net result can reflect planned offsetting. Users need the gross inventory, gross target performance and credit reliance separately to understand actual operational and value-chain change. |
Control claims such as net zero and carbon neutral
IFRS S2 target disclosure is not a marketing-claim standard, but its information can expose whether a public climate claim is supported. Terms such as net zero and carbon neutral can have different meanings across jurisdictions, initiatives and products. Before publication, the entity should test the claim against the approved target boundary, time horizon, gross reduction pathway, residual emissions, planned credits, progress and legal context.
In practice
| CLAIM TEST | QUESTION | EVIDENCE |
|---|---|---|
| Boundary | Does the claim cover the entity, a product, a site, an event or selected emissions only? | Target and inventory boundary, exclusions and prominent qualification. |
| Gross reduction | What real gross emissions reduction is planned and achieved? | Gross target, milestones, actions, abatement and performance bridge. |
| Residual emissions | Which emissions remain at the claimed date and why? | Residual-emissions definition, method and forecast. |
| Credit reliance | How many credits, of what type and under which scheme are planned? | Credit strategy, register and integrity assessment. |
| Timing | Is the statement current achievement, future target or conditional ambition? | Target date, milestone status and wording approval. |
| Progress | Is the entity on track based on evidence rather than narrative? | Actual results, variance, resources and corrective actions. |
| Consistency | Does the claim agree with the annual report, website, products, financing documents and advertisements? | Cross-channel claim inventory and sign-off. |
| Legal / jurisdictional context | Do consumer, securities, competition or advertising rules impose additional requirements? | Legal review; do not treat this article as jurisdiction-specific legal advice. |
Rule
DO-NOT-SAY REGISTRY
Avoid unqualified phrases such as “carbon neutral today”, “fully offset”, “net-zero aligned” or “credits eliminate our emissions” unless the precise boundary, method, timing, gross reduction, residual emissions and credit evidence support the wording.
Hypothetical case: manufacturer with a 2030 net target
The entity discloses both gross and net targets, the site and Scope boundary, base period, 2027 and 2029 milestones, actions, resource needs and planned credit reliance. It explains how acquisitions are treated and whether the target will be revised. The credit disclosure identifies the planned scheme and mix of removals and reductions, permanence assumptions and the expected quantity by milestone. Progress reporting shows operational change separately from factor, boundary and credit effects.
The stronger wording is illustrative. It makes gross reduction, net outcome, target boundary, milestones, planned credit reliance and unresolved acquisition treatment visible. It does not declare current carbon neutrality without evidence.
Hypothetical scenario
HYPOTHETICAL SCENARIO
A manufacturer has a 2030 net Scope 1 and Scope 2 target covering 12 production sites. The associated gross target is a 42% absolute reduction from a 2022 base period. The entity expects electrification and efficiency to deliver 34 percentage points, renewable-power changes to deliver 5 points and carbon credits to address the remaining 3 points. Two sites acquired in 2026 are not yet in the approved target boundary.
Illustrative only. It shows how the decision is made, not wording that can be copied or relied on.
In practice
| WEAK WORDING | STRONGER ILLUSTRATIVE WORDING |
|---|---|
| We are carbon neutral and on track for net zero by 2030 through operational improvements and high-quality offsets. | The Group has a 2030 net Scope 1 and Scope 2 target for 12 production sites and an associated gross target to reduce absolute emissions by 42% from the 2022 base period. At the reporting date, gross emissions were 18% below the restated base period, compared with the 2027 milestone of 20%. The current implementation model attributes 34 percentage points of the 2030 reduction to electrification and efficiency, 5 points to renewable-power changes and 3 points to planned carbon-credit use. The Group expects to rely on approximately 18,000 credits in 2030, subject to programme eligibility, availability and integrity review. Two sites acquired in 2026 are outside the current approved target boundary; the Target Committee will decide by March 2027 whether to restate the baseline and target. |
In practice
Common errors
| ERROR | WHY IT MISLEADS | CORRECTION |
|---|---|---|
| Deducting credits from gross inventory | It hides actual gross emissions and violates the gross disclosure logic. | Report gross emissions and planned credit reliance separately. |
| Publishing a net target without gross target | Users cannot see planned real reductions. | Disclose the associated gross target separately. |
| Leaving the boundary implicit | Users cannot know what the target covers. | Specify entities, sites, scopes, categories, portfolios and exclusions. |
| Using intensity improvement as proof of absolute reduction | Growth can increase total emissions. | Show absolute information and explain denominator effects. |
| Calling purchased credits reductions | A purchase does not equal operational abatement or retirement. | Track credit status and describe planned use accurately. |
| Calling credits high quality without attributes | Certification alone does not explain integrity. | Disclose scheme, type and relevant integrity factors. |
| Replacing missed targets without history | It erases accountability and trend. | Explain variance, revision, effect and approval. |
| Claiming target assurance without scope detail | Users may infer assurance over inventory, pathway and credits. | State exact subject matter, boundary, period, criteria, level and provider. |
In practice
| MYTH | Carbon credits can be deducted from the IFRS S2 emissions inventory once purchas |
|---|---|
| REALITY | No. IFRS S2 requires absolute gross emissions. Planned carbon-credit use is disclosed in relation to a net target, and purchased credits can be described when they are planned for future target use and the information is useful. |
Readiness
Final disclosure checklist
- • ☐ Each target has a stable ID, objective, metric, boundary, target period and base period.
- • ☐ Interim milestones and near-term actions are visible.
- • ☐ Absolute and intensity metrics are distinguished and denominator effects are explained.
- • ☐ Gross inventory, gross target and net target remain separate and reconciled.
- • ☐ A net GHG target does not obscure the associated gross target.
- • ☐ Planned carbon-credit reliance is quantified or otherwise described with timing and extent.
- • ☐ Credit scheme, type, reduction/removal status and relevant integrity factors are disclosed.
- • ☐ Purchased, issued and retired credits are not confused and double use is controlled.
- • ☐ Progress analysis distinguishes operational, structural, data, methodology and credit effects.
- • ☐ Missed milestones, target revisions and baseline changes remain transparent.
- • ☐ Claims such as net zero or carbon neutral are tested across all public channels.
- • ☐ Any assurance statement states the exact scope and does not imply more than the engagement covers.
Bottom line
A credible IFRS S2 target disclosure allows users to reconstruct the pathway from gross emissions to gross reduction, net outcome and planned carbon-credit reliance. It defines the boundary and baseline, preserves milestones and changes, explains progress drivers and supports every public claim with controlled evidence rather than a single headline number.
Official source anchors
The source set below should be rechecked as part of the pre-publication update control. Normative conclusions are based on current official IFRS Foundation and ISSB sources. Registers, templates, workflow steps and control suggestions identified as LRA practice are implementation aids rather than prescribed IFRS templates.
1. IFRS S2 Climate-related Disclosures. Current December 2025 issued text. Main anchors: paragraphs 29(a), 33-37 and B68-B71. Open official source
2. Greenhouse Gas Emissions Disclosure requirements applying IFRS S2. Official May 2025 educational material on Scope 1, Scope 2, Scope 3, measurement and data quality. Non-mandatory. Open official source
3. Amendments to Greenhouse Gas Emissions Disclosures. Issued December 2025; effective from 1 January 2027 unless early applied. Included for standard version control. Open official source
4. IFRS S1 General Requirements for Disclosure of Sustainability-related Financial Information. Current issued text on materiality, connected information, judgements, uncertainty and location of disclosures. Open official source
5. IFRS S2 Standards Navigator. Official overview, effective date and supporting implementation resources. Open official source
Take it with you
The checklists as a working spreadsheet
Every checklist and table on this page, with empty status, owner and evidence columns for your team to fill in and keep.
✓ LRA AI Assistant · Human-in-the-loop
Ask about this guide
It answers from this page, and reaches into the linked disclosure cards when your question is about the standard itself. Your first two answers are free without signing in.
Go deeper · IFRS S1 / S2
IFRS S1 and S2 training
Financial materiality, scenario analysis and the S2 climate disclosures, applied to your own reporting.
Available as Guided Flex, Live Cohort, 1:1 Expert Mentorship or Corporate Programme.
