The International Sustainability and Standards Board (ISSB) recently voted to make reporting Scope 3 emissions mandatory for all organizations. This decision has far-reaching consequences for companies, as Scope 3 emissions are one of the most significant contributors to a company’s carbon footprint. In this article, we will discuss what Scope 3 emissions are, why reporting them is important, and what the implications of this decision are for companies.
What are Scope 3 Emissions?
Scope 3 emissions are indirect emissions generated from activities that are not under the direct control of an organization, but are a result of its operations and activities. These emissions are part of the lifecycle of a product or service and include emissions from the production of raw materials, transportation, use of purchased goods and services, and end-of-life disposal of products. They are often referred to as “value chain” emissions and account for the majority of a company’s carbon footprint, estimated to be around 80% in some cases. Examples of Scope 3 emissions include emissions from the production of goods used by an organization, emissions from business travel, and emissions from the use of purchased electricity. The reporting of Scope 3 emissions is essential as they provide a more complete picture of a company’s carbon footprint and allow it to identify areas for improvement in its operations. Additionally, reporting these emissions helps companies better understand their supply chain’s environmental impact and take action to reduce emissions from suppliers. The reporting of Scope 3 emissions is now mandatory in some countries and organizations, making it increasingly important for companies to accurately measure and report on their Scope 3 emissions.
Why is Reporting Scope 3 Emissions Important?
Scope 3 emissions are significant contributors to a company’s carbon footprint, making up around 80% of total emissions for many organizations. Reporting these emissions is important for companies because it provides a more accurate picture of their overall environmental impact and allows them to identify areas for improvement. Additionally, reporting Scope 3 emissions helps companies better understand their supply chain’s environmental impact and take action to reduce emissions from their suppliers.
What are the Implications of the ISSB Decision for Companies?
The ISSB decision to make Scope 3 emissions reporting mandatory will have significant implications for companies. Companies will now be required to report their Scope 3 emissions, which may require significant investment in data collection and analysis. Additionally, companies will be under pressure to reduce their emissions and may need to make changes to their supply chain to do so. This could include sourcing materials from suppliers with lower emissions, changing transportation methods, or investing in new technology to reduce emissions.
Another implication of this decision is that companies will be held accountable for their Scope 3 emissions. This means that companies will need to be transparent about their environmental impact, which could affect their reputation and competitiveness in the market. Companies may also face regulatory and financial consequences if they are unable to reduce their Scope 3 emissions.
What should companies do?
The ISSB decision to make Scope 3 emissions reporting mandatory is a major step forward in the fight against climate change. By requiring companies to report their Scope 3 emissions, we can better understand the impact of our economy on the environment and take action to reduce emissions. This decision will have significant implications for companies, including increased data collection and analysis investment, pressure to reduce emissions, and increased accountability for their environmental impact.
Overall, this decision is a positive step for companies, as it provides an opportunity for them to better understand and reduce their carbon footprint. By taking action to reduce emissions, companies can not only reduce their environmental impact but also improve their reputation and competitiveness in the market. With the ISSB decision to make Scope 3 emissions reporting mandatory, we can look forward to a more sustainable and environmentally responsible future.
The Global Summit on Scope 3 Emissions Reduction will bring together key industry experts to learn more about reporting strategies & carbon data management in a small-scale, industry-driven event, on 20-21st April 2023 in Amsterdam, the Netherlands. The two-day, hybrid event features in-depth case studies of supply chain transformation, carbon accounting, and networking breaks dedicated to exchanging insights and expertise on tackling Scope 3 emissions. Visit future-bridge.eu and netzero-events.com or follow us on our social media to track other energy use and decarbonization events.
