Estimation and measurement uncertainty

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In sustainability reporting, estimates are likely to happen quite often, considering that.

Data that has been estimated is still useful if the extent of the uncertainty is clearly communicated. It follows that users of the digital version of a sustainability report, when looking at a reported value, should also be able to retrieve information about its uncertainty.

We should therefore look into the different types of sources of uncertainty disclosures and whether anything better than text in footnotes can be used.

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(ESRS November 2022 drafts)

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The IFRS SDS and ESRS almost have the exact same content when it comes to this topic.

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Sources of uncertainty

• Industry benchmarks to evaluate value chain (upstream or downstream), for example Scope 3
• Partial data (entity is unable to collect direct measurements in part of their operations) : "sampling and extrapolation"
• Differentiate company-decided sampling from surveys filled on a voluntary basis for disclosure on employees or similar
• Calculation methodologies: direct measurement / modelling / best estimates
• Change in previously reported scope and restatements (for example after a significant acquisition)

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Expected disclosures:

• "Level" of uncertainty
• Range of possible values
• Share of a measurement done using a specific calculation methodology

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Example of disclosure of sampling, but the choice of the sample is not documented.

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Example with estimates based on the previous year.

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Disclosure of estimates for data that could not be measured at the end of the period.

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Example of estimate based on a benchmark

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Example where several estimation methodologies are used but the extent of their use is unknown.