Most Scope 3 emissions not accounted for by decarbonisation drives

14 August 2023 Consultancy.uk 4 min. read
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Businesses around the world are becoming more transparent about their emissions than ever before, according to new research. However, while disclosures to carbon monitoring schemes rose by more than 50% in the last year, only a third of admitted Scope 3 emissions are actually accounted for in corporate decarbonisation measures – showing a gap between firms’ stated intentions, and their actions.

Even as businesses look to prove their sustainability credentials to increasingly discerning customers, many are failing to track the largest source of their emissions. While companies appear to be acting more consistently on Scope 1 and Scope 2 emissions (direct emissions from buildings or assets owned or controlled by a company; and the use of electricity, heat or steam), many are failing to bring the bigger challenge of Scope 3 emissions to heel.

Indirect Scope 3 emissions include all other emissions generated within an organization’s value chain, including upstream and downstream emissions. They occur as a result of the activities of an entity, but from sources not owned or controlled by that entity’s business. A study by Capgemini in 2022 found that while these estimated emissions account for up to 95% of a company’s carbon footprint, fewer than one-quarter of organisations were well informed on the emissions sources in their supply chain.

In 2022, the 4 most intensive scope 3 categories represented 93% of the total scope 3 emissions disclosed

A year on, Capgemini has found that firms are working to at least boost the visibility of their emissions. According to the consultancy’s research, there is a rising trend amongst European businesses regarding decarbonisation transparency and commitments – with a 56% increase in emissions disclosures to Carbon Disclosure Project (CDP) over the past three years.

Of the emissions disclosed, a 92% majority from European companies in 2022 were Scope 3, with the use of sold products and purchased goods and services cited as companies’ key hotspots, by 57% and 17% of companies respectively. There was a also a 28% increase in Scope 3 categories disclosed to CDP in 2022, as compared to 2019. However, while this might help firms avoid some accusations of green-washing, with some firms having caught public ire for having allegedly obscured their emissions data, the research suggests firms are not doing nearly enough to act on the data they are publishing.

While 47% of companies reported having absolute emissions reduction targets approved by the Scient Based Targets initiative (SBTi), compared to just 14% in 2019, the approved absolute targets covered only 13% of the total greenhouse gas emissions disclosed by companies to CDP in 2022. This included just 37% of Scope 3 emissions currently being covered by decarbonisation measures.

In 2022, 47% European companies had at least one absolute SBTi-approved target to reduce emissions

Purchased goods and services and use of sold products categories accounted for 74% of scope 3 emissions disclosed in 2022, according to Capgemini. As such, the researchers concluded that this gap reinforces “the urgent need for the companies with the highest emissions impact to set robust reduction targets aligned with 1.5°C pathways.”

Capgemini Invent CEO Roshan Gya commented, “As companies seek to achieve their net-zero goals, it’s imperative for them to set both short- and long-term targets to monitor their decarbonization journeys. New technologies such as low carbon hydrogen and process electrification will need to be implemented at a massive scale. This requires a shift in the regulatory policies and an innovative approach in order to enable the dual transition towards a sustainable and digital economy.”

The news comes after other evidence came to light in 2023, suggesting that many of the world’s major firms were failing to make public science-based emissions targets. The paper by Tata Consultancy Services said that just 11% of the world’s largest companies have currently disclosed their plans.