Scope 3 emissions data capture is limited, but can be overcome to prepare for more stringent CSRD, TCFD and SFDR compliance requirements.

Scope 3 emissions have proven to be much more difficult for companies to account for than Scope 1 or 2 emissions, both of which are under their direct control. The lack of a standardized methodology and the need to rely on modelling have so far led to limited and cautious integration of Scope 3 data into investment processes.

Assessing Scope 3 emissions for reporting requires internal modelling capabilities or additional reliance on third-party expertise. When reporting, companies often omit part of their Scope 3 emissions, and our analysis found that only 30% of companies rely on external verification processes to increase accuracy and comprehensiveness.

Comsu Solutions is aware that this remains a challenge for many companies in all sectors, so, they have developed a tool and methodologies that are easy to implement and that help quickly and easily capture information and subsequently analyze it to be incorporated into the report of its scopes 1 and 2.

The first step is a relevance assessment to determine which of the 15 categories are relevant to the reporting organization. The companies should follow the principles of relevance, completeness, accuracy, consistency, and transparency when deciding whether to exclude any activities from the scope 3 inventory. To do this it is important to follow the criteria set out in the “Corporate Value Chain (Scope 3) Accounting and Reporting Standard” of the Greenhouse Gas Protocol and which includes:

• Size
• Influence
• Risk
• Stakeholders
• Outsourcing
• Sector guidance
• Other

To determine relevance, the organization can review the Scope 3 Standard’s description of each scope 3 category and consult appropriate contacts across the organization. In some cases, an emissions estimate may be necessary to determine if the category is relevant based on size. A rough estimate will suffice, but if that is not possible, then proceed to step 2 to estimate emissions.

Some of the challenges to overcome when implementing this methodology are:

• Data collection and reporting is often time-consuming and resource-intensive as companies rely heavily on their supply chain. Having all measurements (Calculated or Reported) from suppliers in this supply chain in a single portal reduces this time and resources.
• Scope 3 emissions calculation models may not be sufficiently fine-tuned to support the best management decisions or identify different opportunities for a company to reduce carbon emissions. The idea is precisely to standardize the calculation model.
• Develop statistically reliable capture data that is representative of the reality of the sector.
• The aim is to increase the quality and reliability of the data collected due to the lack of monitoring of the supply chain.

The regulatory landscape in scope 3 is also undergoing a global shift, as countries around the world are beginning to require emissions data disclosure from large companies:

• Task Force on Climate-related Financial Disclosures (TCFD). The TCFD framework requires companies to disclose their climate-related risks and opportunities. Although not mandatory, the TCFD encourages companies to disclose Scope 3 emissions. TCFD-aligned reporting is already mandatory in the UK, with more countries and regions expected to follow, including the EU, Colombia, Chile and the US.
• Corporate Sustainability Reporting Directive (CSRD). The EU announced that it will bring sustainability reporting in line with financial reporting. The new CSRD framework will be implemented in a phased approach from 2024, requiring companies to be more detailed in their sustainability reporting. As regards environmental reporting, EU companies must have measured a footprint of their entire value chain (scopes 1, 2 and 3) and set targets (based on science).
• US Securities and Exchange Commission (SEC). The SEC proposed a new rule for the disclosure of climate-related risks. As part of this, registrants will have to “disclose information on their direct GHG emissions (Scope 1) and indirect emissions from purchased electricity or other forms of energy (Scope 2).” Companies with a “material” value chain or a Scope 3 target will also have to disclose their emissions from upstream and downstream activities.
• International Sustainability Standards Board (ISSB). In 2022, the ISSB unanimously decided that companies will henceforth be required to disclose their Scope 1, 2 and 3 GHG emissions as part of its “Climate-related Disclosure Standard” (IFRS S2). It has also published a set of guidelines and measures to help companies report on their Scope 3 emissions and is expected to provide a framework for their measurement.

Some of the benefits of implementing scope 3 control with Comsu Solutions are:

• Assess where emissions occur in your value chain. Factors that contribute to carbon emissions can also create carbon risks and opportunities, so you can plan to mitigate resource and energy risks and their associated costs.
• Understand which suppliers are leading and which are lagging in their sustainability performance.
• Use Scope 3 data to inform decisions related to purchasing, product design, and logistics.
• Increase supplier engagement and relationships, helping them implement sustainability initiatives.
• Find innovative solutions to create more sustainable products.
• Encourage employee engagement to reduce emissions from business travel and commuting.
• Drive your climate strategy by setting Scope 3 carbon reduction targets or science-based targets.
• Increase the credibility of your brand’s climate action among investors, customers and other stakeholders.

References

• Clarity AI. Clima 14 de abril de 2022 Patricia Pina, Jean-Charles Prabonneau, Jaime Oliver
• The Carbon Trust – An introductory guide to Scope 3 emissions
• Corporate Value Chain (Scope 3) Accounting and Reporting Standard – Greenhouse Gas Protocol
• EPA US – Scope 3 Inventory Guidance