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Scope ESG has analysed the reporting of so-called scope-3 reporting of greenhouse-gas emissions by the world’s 2,000 largest companies by market capitalisation as it pertains to the entire value chain of their activities: from purchased goods and services in the supply chain to business travel or end-of-life treatment of sold products and investments, particularly important in the case of financial institutions.

Scope found that more than three quarters of the companies studied disclose no information at all. More than two thirds report no or incomplete information even for the less onerous scope-1 and scope-2 standards set by the GHG Protocol. They relate, respectively, to direct GHG emissions and emissions from purchased electricity.

“The gap between the reality of corporate disclosure and regulatory requirements regarding GHG data really complicates the life of investors who are being asked to disclose the main adverse impacts of their investments,” says Diane Menville, head of ESG at Scope. Menville notes that governments are setting tougher GHG emission targets and tightening reporting standards, particularly in Europe.

Corporate disclosure on GHG emission varies hugely from sector to sector. Sectors which have long felt pressure to fully report sustainability-linked data because of the heavy environmental, social and governance impact they have are the most transparent when it comes to climate-related disclosure.

Energy carriers, apparel and mining companies have by far the best disclosure of scope-3 data, at 41%, 36% and 34% respectively. Manufacturing, food, and services are sectors where only 19%, 21% and 22% of companies disclose scope-3 GHG emissions data.

“More specifically, while we do see a trend toward greater transparency, the catch is that there seems to be more progress on scope-1 disclosure compared with scope-3,” says Menville.

“Yet in terms of the transition toward carbon-neutral corporate activity, it is the ‘scope 3’ disclosure which is the most important,” she says. “It is through ‘scope 3’ disclosure that we can compare the carbon intensity of a company’s operations in their entirety – yet the lack of data and uniform reporting standards remain stumbling blocks.”

For example, 38% of utilities companies disclose scope-1 data but only 28% disclose scope-3 information. Among materials companies, such as cement producers, 40% disclose scope-1 data but only 27% disclose scope-3 figures.

“For even one of the most popular and best-defined indicators of climate-linked impacts, it is still very challenging for companies to report data at all, let alone in a consistent fashion,” Menville says.

In addition, Scope’s study of GHG-emissions reporting covers only the largest companies, not small and medium-sized enterprises.

Investors need alternative measures of ESG impacts until the relevant data is easier to collect and requirements for reporting them are more robust.

To learn more about Scope ESG and its methodological approach, particularly regarding scope-3 GHG impacts, please see: Scope offers a new perspective on sustainable finance and corporate ESG impact (scoperatings.com)