Despite approaching regulatory requirements across major markets, nearly 60% of companies failed to report on even one supply chain emissions category, according to a new report – Scoping out: Tracking nature across the supply chain by environmental disclosure platform CDP.
CDP, evaluated over 18,700 companies last year, in connection with reporting on Scope 3 emissions coming into force. They typically comprise the vast majority of a corporate’s climate footprint.
Major regulatory reporting regimes – including in Europe, the U.S. as well as global standards – will require supply chain emissions disclosure within the next few years.
The IFRS Foundation, for example, recently announced that its new climate and sustainability reporting standards, which include Scope 3 reporting, will take effect in 2024.
However, despite the ticking clock, the CDP report indicated that only 41% of companies reported on even a single Scope 3 category in 2022, compared to more than 70% reporting on direct Scope 1 and 2 emissions.
Of those reporting on Scope 3 the most-frequently disclosed category was business travel, with 42% of respondents calculating these, while the more impactful and broadly relevant category of purchased goods and services only saw 36% reporting.
Other relevant categories, such as employee commuting and waste generated in operations were reported by 35% and 34%, respectively.
In its report, CDP listed a series of challenges holding back Scope 3 reporting, including limited data transparency and traceability across the value chain, low quality and granularity of data.
Also on the list was a lack of automated tools for data extraction, limited influence over most Scope 3 categories, and the changing regulatory environment.
runs a global environmental disclosure system, enabling investors and other stakeholders to measure and track organisations’ performance in key environmental sustainability areas including climate change, deforestation, and water security.
Although the report said that progress is being made, it is still at the early stage. For example, only 11% of respondents currently include climate-related requirements in their supplier contracts while 36% plan to begin incorporating sustainability key performance indicators (KPIs) into their purchasing processes with contractual supplier requirements within the next two years.
“This year’s report shows that environmental action is not happening at the speed, scale and scope required to limit global temperature rises to 1.5 degrees, with many companies still not acknowledging that their impact on the environment extends far beyond their operations and that of climate change,” said Sonya Bhonsle, global head of value chains & regional director Corporations at CDP.
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