Scope 3 Reporting and Data Gathering a Looming Challenge for Industry as New Sustainability Regulation is Pending

ABI Research's Industrial & Manufacturing Sustainability Index highlights the importance of robust scope 3 emissions reporting

NEW YORK, May 9, 2023 /PRNewswire/ --The latest Sustainability Assessment by global technology intelligence research firm ABI Research analyzed the sustainability activities of 10 of the world's largest industrial manufacturing conglomerates.  A key finding was the importance of Scope 3 activities, particularly the robustness of data collection and reporting tools, for achieving industrial firm sustainability objectives.

The Greenhouse Gas Protocol defines Scope 3 emissions as all value chain emissions resulting from activities and assets not owned or controlled by the reporting organization. There are 15 Scope 3 categories in total, although some categories may not apply to all companies. According to the Carbon Disclosure Project (CDP), Scope 3 emissions typically account for over 75% of total emissions, with the share often being over 90% for companies in the industrial sector. For Schneider Electric, Siemens, ABB, and Bosch, who were classified as "sustainability leaders", Scope 3 emissions are over 99% of total emissions.

Alex McQueen, Sustainable Technologies Research Analyst, explains, "Large industrials face many challenges in measuring and reducing Scope 3 emissions, as the process encompasses a wide range of activities from suppliers, consumers, and distributors. Measuring Scope 3 emissions requires dedicated resources and expertise, as well as specific data collection and management processes." Large industrial companies may also find it difficult to obtain data from lower-tier suppliers that may not be tracking their CO2 emissions. Additionally, there is no standardized methodology for Scope 3 emissions calculations and disclosures, creating difficulty in assessing the activities of a broad set of suppliers each using different data collection and reporting methods.

As regulation regarding the disclosure of environmental data becomes more prevalent, companies should look to prepare by establishing a robust framework for the measurement and management of emissions data. As a starting point, industrials with a high proportion of Scope 3 emissions should look to identify all relevant Scope 3 emission categories. After that, supplier engagement is key, and industrial firms should seek support from third party organizations, such as CDP Supply Chain and EcoVadis, in requesting and managing supplier emissions data. Companies may also tie in requirements to provide environmental data into supplier contracts and set targets for reducing supply chain emissions.

"Investing in digital tools helps automate the collection, monitoring, and reporting of Environmental, Social, and Governance (ESG) data, and they can also improve value chain collaboration. Since Scope 3 emissions calculations require the tracking of vast amounts of data, leveraging digital solutions is crucial for effective emissions management and reporting," concludes McQueen.

These findings are from ABI Research's Sustainability Assessment: Large Industrial Solution Providers competitive ranking report. This report is part of the company's Sustainable Technologies  research service, which includes research, data, and ABI Insights. Competitive Ranking reports offer comprehensive analysis of implementation strategies and innovation, coupled with market share analysis, to offer unparalleled insight into a company's performance and standing in comparison to its competitors.

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