Emerging sustainability regulations have raised the stakes of noncompliance — and the standards for emissions data. Spend-based metrics may have been sufficient when dealing with a few regional suppliers and voluntary reporting tasks. But now supply chains stretch across oceans and regulations demand insight into all Scope 3 emissions — along with demonstrated progress towards decarbonization. In-depth, verified data sources are the new imperative.
The right data makes the path to compliance obvious — and clears the way for businesses to reach new heights. Read on to see why the green age calls for better emissions data across the value chain and where you can find it.
ADDITIONAL INFORMATION
Proving progress: The international Scope 3 reporting challenge
Sustainability is a buzzword that has come to transcend industry and geography. Rising concerns over the environmental impact of supply chain activities from legislators, investors and the public has produced an overwhelming web of regulatory frameworks. These rules stretch across the globe, each with high mandates for emissions disclosures. Once relegated to the company’s direct activities, these standards now include the company’s indirect Scope 3 emissions.
What is an example of a Scope 3 carbon emissions report? Comprising nearly 90% of overall business emissions, Scope 3 includes the emissions produced by all supply chain partners — including suppliers and carriers — and the entire product life cycle, from processing to end-of-life treatment.
Reporting on these metrics has emerged as a high-stakes challenge. Heightened regulations demand companies not only collect data and report on value chain activities but also verify that data and act on it, developing decarbonization strategies and demonstrating improvements over time. When businesses achieve full disclosure, they increase industry credibility and access to capital markets. But when they can’t provide transparent, accurate, on-time emissions reports, fines, legal penalties and reputational consequences follow.
It can seem like a lose-lose situation: noncompliance is a major setback while compliance is complex and time-consuming. Fortunately, high-quality, in-depth data sources like supplier-specific data and product life cycle assessment (LCA) data simplify the fast-developing sustainability challenge — illuminating actionable decarbonization strategies while supporting business goals.
WHAT HAPPENS NEXT
Time, confusion and inaccuracies: The price of stale data
The wave of sustainability regulations demands that companies — especially in sectors with long, complex supply chains like manufacturing and technology — reconsider how to calculate Scope 3 emissions. The most common method, spend-based estimates, came into use in simpler regulatory times and uses online calculators to estimate a company’s carbon footprint based on their procurement spend. This method is the simplest way to obtain Scope 3 emissions data and understandably attractive to companies seeking to minimize the complexity of value chain reporting. But it’s also far under-equipped to meet today’s rigorous reporting and decarbonization requirements, often using outmoded, aggregated data.
Reports from companies struggling with Scope 3 emissions reporting reflect this inadequacy. “I am sure we would be happy to report this [Scope 3 emissions],” says one respondent to a Scope 3 survey published in California Management Review, “but, as a matter of fact, the data basis simply does not allow for that yet.”
For organizations taking on the challenge of how to reduce Scope 3 emissions, data problems come down to four key hurdles:
● Quality: Assuring the quality of Scope 3 emissions data is a constant problem in the modern compliance process. In a Sphera survey, nearly 60% of companies stated that the quality of external data was a primary challenge in Scope 3 assessments. Data inaccuracies can translate to inaccuracies in emissions assessments and trigger regulatory penalties. They also impede a company’s ability to develop realistic emissions targets.
● Availability: A stunning 67% of surveyed companies reported that the availability of external data was another main obstacle in Scope 3 reporting. One driver is that Scope 3 emissions include a wide range of partners, from suppliers to customers, and organizations lack direct control over stakeholder emissions data. These partners may not track relevant metrics or may even face constraints in sharing data because of intellectual property or privacy rules.
● Expertise: Disparate reporting standards and assessment methods call for specialized knowledge. Without a deep understanding of the regulatory landscape and the advantages of different data types, companies may struggle to make sense of their obligations, select the right emissions calculations and map a specific decarbonization strategy for their business.
● Efficiency: Accumulating information from disparate data sources, verifying their accuracy and then depicting a clear story of decarbonization is an immense undertaking. It requires significant time and attention — precious resources that many companies may be unable to invest in compliance. An efficient data-gathering process doesn’t require too much manual input from overburdened procurement teams.
WHAT YOU NEED TO DO
Breadth, depth and reliability: LCA data creates clarity
Streamlining data management and ensuring access to quality metrics means leveraging robust ESG reporting software and comprehensive, verified data sources. Turning away from spend-based data may seem daunting, but the alternatives offer a scalable solution to data disclosure challenges.
LCA data is ideally suited for a regulatory environment that demands proof of decarbonization progress. This data source, as determined by ISO 14044, uses granular greenhouse gas data to help organizations see the impact of each product and process. Crucially, LCA data gives teams the visibility to pick out carbon hotspots then curate a viable sustainability strategy to reduce emissions.
Obtaining emissions data directly from suppliers can also provide the required precision. This approach can be labor-intensive for companies with extensive supply chains, but technology that enables easy supplier collaboration can smooth the process. Additionally, companies should be sure to reach out to upstream suppliers only after engaging Tier 1 suppliers and identifying those emissions hotspots.
HOW SPHERA CAN HELP
Let in-house data illuminate the road to compliance
Supply chain compliance has become a major logistical undertaking, demanding companies prioritize sustainability in new, expansive ways. But the right data and external partners clarify the path forward and turn this dilemma into an opportunity to gain newfound visibility, efficiency and respect.
As a top sustainability and ESG reporting software provider, Sphera’s solutions combine adaptable software, expertise, and in-house LCA data. Everything companies need to succeed in an ever-shifting environment. Sphera’s Managed LCA Content (MLC) is the world’s largest third-party-verified LCA database. With over 20,000 datasets and annual updates, the MLC provides companies with the emissions insights they need to make green decisions at every step in the road, while saving time and resources for other high-value priorities.
It’s time to make decarbonization more than a far-off goal. Let LCA data chart an actionable path to a sustainable future for your business. Discover our full range of Scope 3 insights.
