Scope 3 emissions preparation causing data overload, suggests study


‘Road to Net Zero’ study profiles difficulties, as many of the largest UK companies begin implementing Scope 3 emissions reporting

Sixty per cent of large enterprises with more than 1,000 employees captured by a new study have begun implementing Scope 1 and 2 direct carbon emissions reporting. Two thirds (66 per cent) of these large UK firms had begun implementing Scope 3 reporting, including indirect emissions from upstream and downstream ‘value chain’ activities.

However, just 1.5 per cent of the organisations with more than 1,000 staff that had begun environmental reporting using a recognised ESG reporting framework, felt they had ‘a strong handle on all our Scope 1, 2 and 3 reporting systems and processes’. Less, just one per cent of businesses with 501 to 1,000 employees, felt they were on top of all Scope 1, 2, and 3 emissions reporting systems and processes.

Commuter emissions solutions provider Mobilityways worked with national market research agency Opinium to complete its in-depth market study of the Scope 1, 2 and 3 emissions reporting progress of over 420 large organisations in the financial services, construction, civil engineering, the NHS, private healthcare, further education and local authority sectors.

Just over half (55 per cent) of the largest UK enterprises who had begun Scope 3 reporting implementation had already ‘studied the impact of our products after use and used this data to redesign how we make our products’. Slightly less, 53 per cent, had ‘audited all their suppliers’ emissions data to verify accuracy using a single universal reporting framework’.

Just over 50 per cent had ‘worked out a way of measuring Greenhouse Gas (GHG) emissions from employee commutes to and from their place of work’. Under half (47 per cent) had completed analysis of ‘all our suppliers and asked them to provide us with relevant emissions data regularly’. Marginally less, 48 per cent, had fully implemented the Greenhouse Gas Protocol’s Corporate Value Chain (Scope 3) Accounting & Reporting Standard.

Average of 3.5 different ESG reporting frameworks in use
The study also explored which ESG reporting frameworks these large companies were using and found that on average they had used 3.5 different ESG reporting frameworks each. However, opinions on which framework was best varied according to the sector they were in. For example, the financial services firms judged the Sustainability Accounting Standards Board (SASB) ESG guidance framework ‘the most useful’ for them: a quarter (26 per cent) of financial services firms favoured SASB over others they’ve used.

Healthcare sector favours TCFD and UN SDGs equally
The healthcare sector equally favoured the Taskforce on Climate-related Financial Disclosures (TCFD) and the United Nations 17 Sustainable Development Goals (UN SDGs). Both of these frameworks were found to be ‘the most useful’ by 19 per cent of NHS/healthcare sector respondents.

Looking across all firms and sectors captured by the new Mobilityways study, SASB came out on top with an average of 21 per cent of firms favouring it. However, the EU Taxonomy framework was ranked bottom with just five per cent of large firms favouring it. Carbon Disclosure Project (CDP) fared little better with just 6.5 per cent of firms finding it to be the most useful framework they’ve deployed to date.

Standardisation shortfall
The lack of standardisation for weighting and measuring emissions performance, especially with regard to Scope 3 was the most significant concern with the environmental performance reporting systems firms were using, as clear evidence emerged of a spaghetti soup of different ESG reporting frameworks, standards and sector certification systems being applied across many large organisations.

56 per cent of 1,000+ employee firms cited this lack of standardisation for Scope 3 reporting as a top concern. While just over half (52 per cent) of the largest firms were having difficulties turning all the emissions data into actionable insights, admitting ‘we don’t really know the story behind the numbers’ yet.

Data accuracy still a worry, especially for supply chain data
Just under half (49 per cent) of large companies expressed concern about the accuracy of existing environmental performance scoring and ratings systems they used. While 47 per cent recorded ‘gaps in provision of our organisation’s and suppliers’ environmental performance records’.

Nearly two thirds (65 per cent) of 1000+ employee firms were able to compare their Scope 1 and 2 reports with a sector average for key factors making up direct emissions. The construction and civil engineering sector respondents fared better still with 72 per cent of this sector reporting they could run their numbers against construction sector averages by emission category to help assess their performance.

When drilling into large organisations which have already implemented Scope 1 and 2 reporting, it became clear that more than a third of these firms were not yet able to run peer group or sector benchmarking for key emissions categories. For example, 36 per cent of the largest firms already doing Scope 1 and 2 reporting admitted they could not benchmark their results associated with GHG Emissions Impact.

Scope 3 benchmarking proving harder than Scope 1 & 2
In terms of Scope 3 benchmarking, it was clear that the 1000+ employee companies were finding it much more difficult to check their performance against sector averages across all key factors than smaller firms with 501 to 1,000 employees.

For example, only 61 per cent of those largest companies were capable of comparing their employee commute emission results with sector averages. While amongst firms employing between 501 and 1,000 staff which had implemented Scope 3 reporting already, 79 per cent were already capable of benchmarking their emissions reduction performance for employee commuting.

There is still some reticence around addressing Scope 3 indirect emissions. Yet those firms that have begun to address this work head on are finding there are massive emissions reductions to be realised. Some authoritative studies have found Scope 3 emissions in some large global organisations can account for as much as 85 per cent of their total emissions.

Julie Furnell, Managing Director of Mobilityways, commented: “Our findings show that less than two thirds of largest firms have begun implementing Scope 3 reporting, and those that have begun doing so are only about halfway through working out how to collect and evaluate all the data they need.

“Settling on the right ESG reporting systems for both them and their value chains is also proving tricky and many firms are using different reporting systems in parallel to suit the needs of different stakeholders they need to report to. They’re midway through a complex journey to gather the right data and report it in a universally comprehensive manner. No wonder some corporations’ annual ESG reports are already running to more than 100 pages!

“We also found that sustainability chiefs calculated that, on average, they expected that 38 per cent of total emissions would come from Scope 3 emissions. That looks like a significant underestimate based on other industry studies.

“But the point is that companies can reduce their Scope 3 emissions very rapidly by addressing Upstream Scope 3 categories such as employee commute emissions which are more in their control than many of their suppliers’ emissions reports. The key is to start measuring what you can fast, thereby working out the scale of the emissions reduction opportunity and then kick off initiatives to chip away at reductions in the categories you can affect. We can even help firms benchmark their employee commute performance against like-sized businesses in a given region of the UK for example.”