Up until recently, emissions reporting rules have largely been vague, ad-hoc and voluntary – especially when it comes to Scope 3. However, the market’s rapid shift towards sustainability transparency, supported by significant global policy developments, means that accurately measuring Scope 3 emissions can no longer be ignored.
Globally, governments and regulators are developing specialised reporting requirements for the industrial sector that are becoming broader in scope and requiring more detail and accuracy than ever before. Their goal is to create green supply chains with end-to-end carbon emissions reductions.
With Scope 3 emissions covering a large proportion of industrial emissions, pressure is growing from investors, communities and governments for the sector to take a strategic and consistent approach to their reduction.
Accurately measuring and reporting on Scope 3 emissions is not only critical for compliance, but also an essential part of setting and meeting emission reduction targets, investor reporting, transitioning to a sustainable future and keeping up with greener competitors. Rating agencies will also now expect more detailed, accurate and quantitative information that is typically difficult to obtain from the systems of many industrial organisations.
Research reported in ESG Today3, shows that public companies reporting on at least some Scope 3 emissions has increased to 35% (up from 30% seven months prior) with 44% of companies setting decarbonisation targets (up 8% in seven months).
The findings also show that despite better disclosure and well-intentioned targets, direct emissions had not materially declined. On top of this, they reported that many targets did not cover the entire value chain, relied on carbon offsets, lacked third party validation or were not aligned to net zero goals.
The Net Zero Tracker4 also underlined the wide gap between aims and action, reporting that while most public companies do have net-zero targets, the majority are not yet meeting minimum reporting standards. In terms of Scope 3 the gap is even wider, with just 38% of the companies tracked saying they measure all value-chain emissions.
Even though disclosure has been voluntary up until now, the number of companies publishing a sustainability report has been growing steadily over the past decade, with 79% of the top 100 countries in each company surveyed by KPMG5 producing a report. Businesses that aren’t reporting even at a broad level risk falling behind in a market that demands transparency, as well as facing an uphill battle to deliver the granular data now required to report on Scope 3 emissions.
Complying with new standards and expectations will require the industrial sector to improve the availability, rigour, trust and reliability of data. Companies that have not yet begun calculating their Scope 3 emissions are already falling behind.