DATE PUBLISHED: August 10, 2023
Are European Companies Ready for Scope 3 Disclosures?
Under new European Union (EU) sustainability reporting rules, companies will be required to make a deep assessment of their Scope 3 emissions.
- The EU’s Corporate Sustainability Reporting Directive (CSRD) calls on companies to disclose information about the integration of climate-related impacts, risks and opportunities into their business strategies. While climate disclosures (including emissions) are subject to a company’s own materiality assessment, companies will have to provide a detailed explanation if they conclude that climate change is not material to their business.
- Scope 3 emissions represent the majority of most companies’ GHG emissions. Data collection and accounting for this type of emissions require a thorough understanding of a company’s value chain.
- The adoption of the first set of European Sustainability Reporting Standards (ESRS), with first reports required for financial year 2024, calls for an intensification and acceleration of Scope 3 disclosure practices. Less than 30% of companies globally disclose meaningful disaggregated data for Scope 3 GHG emissions, according to ISS Corporate Solutions data. While European companies are significantly ahead of the global average, over 50% haven’t disclosed disaggregated Scope 3 emissions other than business travel and employee commuting. As expected, large companies are well ahead of mid- and small-cap companies.
Scope 3 GHG Emissions Disclosures
Percentage of companies disclosing at least one Scope 3 category
other than business travel, employee commuting