Today’s sustainability leaders are grappling with a steady influx of ESG compliance requirements. From California’s SB 253 to the EU’s Corporate Sustainability Reporting Directive (CSRD), the requirements are compounding fast and many organizations are struggling to keep up. How can leaders reduce value chain emissions, increase the accuracy of reporting and free up time for more strategic tasks?
In this post, we’ll unpack how an integrated approach that combines centralized technology, collaboration with experts and life cycle data can address these immediate challenges—and drive more sustainable practices over the long term.
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FOR MORE CONTEXT
Rising tide: The evolution of mandatory Scope 3 reporting requirements
Over the last two decades, sustainability emerged as a driving factor in business decisions as corporations face increasing pressure from investors, customers and the public. Everyone wants to know how activities, direct and indirect, affect the environment.
As a result, many organizations have adopted voluntary Scope 3 sustainability reporting initiatives, driven by recommendations and standards from nongovernmental and environmental organizations such as the United Nations Global Compact (UNGC) and the International Sustainability Standards Board (ISSB).
It’s working. These frameworks helped businesses develop actionable climate strategies, and in turn, gain credibility among partners, stakeholders and lenders who have increasingly come to value ethical practices. However, the web of disparate sustainability guidelines has grown so complex that compliance is now an immense undertaking, requiring organizations to tie together emissions factors from potentially hundreds of indirect sources, as well as adopt a flurry of different methods for measuring emissions.
What’s more, evolving global legislation is dramatically increasing mandatory Scope 3 reporting requirements, the EU’s CSRD being the first in a growing list.
Today, teams must monitor emissions, but that’s not all. They must demonstrate improvements and disclose their annual sustainability performance. This includes reporting on the company’s direct activities, as well as emissions from their supply chain partners — a major challenge for those lacking centralized data management and nuanced regulatory understanding.
WHO THIS AFFECTS
Under pressure: The problem for corporate sustainability leaders
Scope 3 emissions arise across the entire value chain and the entire product life cycle, from processing to end-of-life treatment. Tasked with tracking data from 15 categories of upstream and downstream activities — including purchased goods and services, operational waste, employee commuting and transportation — it’s no wonder that many sustainability leaders struggle to gather and organize high volumes of external data.
The pressure is mounting. Nearly 50% of surveyed companies say they are already required to comply with current or upcoming ESG and sustainability regulations, and the number will likely rise in the coming years. As standards evolve, so do the consequences of noncompliance, which can affect stakeholders across the company.
- Financial losses: Noncompliance introduces financial risks from several angles, including fines and legal complications. Likewise, a limited view into supply chain activities causes businesses to miss out on chances to enact cost-saving improvements.
- Supply chain risks: Without complete supply chain visibility, risks such as possible human rights violations or environmental harm can fall under companies’ radar. These threats can subject organizations to brand damage in addition to financial vulnerabilities and legal consequences.
- Investor backlash: The conversation around sustainability is everywhere: splashed across headlines, discussed in boardrooms and influencing lending decisions. If a company can’t demonstrate its commitment to decarbonization, they may lose out on potential financing.
- Reputational damage: Customers and business partners prioritize sustainable practices today. Achieving net zero with Scope 3 management, as a result, transforms compliance reporting into reputation management.
HOW SPHERA CAN HELP
A three-pronged approach: The key to long-term, low-stress compliance
Between collection, validation, external audits and reporting challenges, sustainability teams have more than their share of tedious data management ahead of them to ensure full compliance with mandatory Scope 3 reporting requirements. But what if the data could flow steadily and seamlessly into a single source of truth, one that organizations could see and act on with clarity and confidence? This integrated approach—combining technology, expert insights and high-quality data—can lead the way to a more seamless and sustainable future.
Sphera’s Integrated Sustainability Solution uses a three-pronged approach to streamline internal and external data collection, integrate disparate systems and give sustainability leaders the power to transform the overwhelm of Scope 3 reporting into a potent business opportunity.
- Software SpheraCloud Integrated Sustainability platform synthesizes internal and external data sources in one powerful interface. Doing so empowers companies to easily review and respond to a wide range of reporting frameworks. What’s more, centralizing compliance tasks reduces manual labor and uncovers key performance analytics.
- Consulting: Sphera’s sustainability,ESG and LCA consultants act as trusted advisers in the compliance process, offering insights on nuanced regulatory topics such as SEC climate rules. In addition, we can help quantify Scope 3 emissions, set targets and develop improvement strategies.
- Data: Measuring Scope 3 emissions data takes many forms. Some practices are incomplete. Others are inaccurate. The best data comes straight from suppliers, but gathering it is time-consuming and labor-intensive. With direct access to third-party verified life cycle assessment (LCA) data for Scope 3, Sphera eases this burden by working with 60+ industry associations to compile relevant, accurate data, in addition to creating extensive datasets in-house.
ADDITIONAL INFORMATION
Taking action: Steps toward simplified Scope 3 emissions reporting
Compliance today is too complex — and too important — for a “one and done” accounting of Scope 3 emissions. Scalable solutions reduce complexity, reveal business opportunities and help ESG leaders sleep at night. “Scalable” reflects a commitment to conducting transparent practices — and an opportunity to optimize all aspects of your operation. With Sphera’s integrated solution, companies with even the most complex value chains can take measurable steps towards supply chain decarbonization and lift the burden on their sustainability teams.
Scope 3 reporting can feel overwhelming — but not insurmountable. Sphera enables companies to transform this rising tide of requirements from a cumbersome challenge into an opportunity for growth. Access more Scope 3 insights in our new report.
