Sphera’s latest report examines the challenges and best practices for measuring and disclosing Scope 3 emissions in sustainability and ESG reporting
CHICAGO, IL (April 9, 2024) – Disclosure of corporate value chain emissions, also known as Scope 3 emissions, is increasingly required for sustainability reporting for companies in multiple jurisdictions, according to the 2024 Scope 3 Report from Sphera, a leading global provider of ESG performance and risk management software, data and consulting services.
The new report examines the challenges associated with Scope 3 assessment and reporting and identifies best practices for managing emissions reporting and data management. Its findings are based on Sphera’s Scope 3 survey. Of the 43% of survey respondents whose companies disclose greenhouse gas emissions (GHG), over half (52%) disclose their emissions across all Scopes (Scope 1-3). Another one-third (30%) of survey participants indicated that their company plans to report on Scope 3 in the future.
“Executive leadership teams who are preparing for Scopes 1, 2 and 3 emissions reporting will outpace their peers in terms of addressing sustainability and staying ahead of stakeholder demands,” said Paul Marushka, Sphera’s CEO and president. “Organizations need a combination of software solutions, data and expertise to build a successful Scope 3 reporting practice, which is increasingly in demand. An integrated approach to sustainability management provides businesses with a holistic view, which is especially helpful in complex realms such as Scope 3 emissions data collection and reporting. It also fosters collaboration with suppliers and enables data collection and transparency throughout the value chain — which is crucial in ensuring accurate Scope 3 reporting.”
The State of ESG and Sustainability Reporting
The current and upcoming international ESG reporting regulatory landscape is placing more demands on companies to assess, improve and disclose sustainability performance. According to 46% of survey respondents, their company is required to comply with current or upcoming ESG and sustainability regulations. However, differences in regulation requirements across the United States, European Union and the globe can complicate reporting for companies operating in multiple jurisdictions.
Regardless of regulations, 49% of respondents indicated they voluntarily submit sustainability and ESG reports. Even small businesses are beginning to address GHG emissions, with 26% of small businesses surveyed reporting they are doing so, albeit at the Scope 1 and 2 levels.
Quality data is the most important aspect of accurate, credible and effective sustainability reporting. Inaccuracies in data — and consequently, inaccuracies in reporting — can lead to breaches in customer trust and penalties from regulatory bodies. For companies required to report and others that voluntarily report, spend-based data alone is no longer sufficient. Instead, multiple, complementary data sources can be leveraged to create a complete picture of an organization’s emissions.
The Importance and Challenges of Scope 3 Reporting
As the traditional focus of corporate reporting, Scopes 1 and 2 have a more mature data foundation for their measurement and assessment in comparison to Scope 3. Because Scope 3 emissions occur outside of a company’s own operations across its value chain, lack of direct control or ownership of Scope 3 emissions is challenging for businesses looking to collect internal and external data, ensure data quality and consistency, access life cycle emission factors and calculate performance with confidence. In addition, noncompliance with Scope 3 reporting comes with penalties and problems including financial risks, reputational damage and pressure from stakeholders.
Scope 3 emissions can account for the majority of a company’s carbon footprint. Therefore, assessing and reducing Scope 3 emissions — even with its inherent challenges — plays a foundational role in a science-based decarbonization strategy. And it requires collaboration from multiple departments, including product, supply chain, finance and sustainability departments.
For companies looking to build a successful Scope 3 reporting practice that integrates efforts across the organization and produces measurable, actionable and auditable results, an integrated sustainability solution helps executive teams operationalize their programs to drive meaningful sustainability performance improvement. Learn more about how Sphera can help organizations navigate this complex data collection, assessment and reporting responsibility for Scopes 1-3 at www.sphera.com.
Report Methodology
The findings in the 2024 Scope 3 Report are based on Sphera’s Scope 3 survey, which was conducted globally among sustainability professionals in 2023. The survey received responses from 262 professionals, who provided insights into the complexity of Scope 3 measurement and reporting.
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About Sphera
Sphera is the leading provider of environmental, social and governance (ESG) performance and risk management software, data and consulting services focusing on Environment, Health, Safety & Sustainability (EHS&S), Operational Risk Management (ORM), Product Stewardship and Supply Chain Risk Management (SCRM). For more than 30 years, we have served over 8,400 customers and a million-plus users in 95 countries to help companies keep their people safe, their products sustainable and their operations productive. Learn more about Sphera at www.sphera.com. Follow Sphera on LinkedIn.
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