It’s estimated that close to 50,000 companies will have to comply with the Corporate Sustainability Reporting Directive (CSRD), which requires the disclosure of information on climate-related impacts, risks, and opportunities in business strategies.
This includes reporting on Scope 3 emissions, which are more challenging to calculate due to their indirect nature but often account for a higher proportion of the overall emissions.
What are Scope 3 emissions?
Scope 3 captures all the other indirect emissions not included in Scopes 1 and 2. Scope 3 emissions are divided into upstream emissions, associated with things the organisation purchases, and downstream emissions, associated with what the organisation sells. This includes the emissions produced by suppliers and customers when they’re using the company’s products or services.
In total, there are 15 categories that encompass the landscape of value chain emissions.
Why do Scope 3 emissions matter for CSRD?
Scope 3 emissions account for over 70% of the average company’s total emissions and being able to manage Scope 3 emissions can enable the organisation to work towards attaining net zero by 2050.
As mandatory climate-related reporting continues to accelerate globally, organisations are facing increasing pressure from three key stakeholders.
Investor pressure
Banks and investors are demanding more information to assess ESG criteria. A low sustainability score may indicate a higher risk rating and the lack of such information could potentially affect access to capital and the cost of borrowing.
Regulatory pressure
The CSRD is set to be phased in from 2024 and this means that in-scope organisations would be required to make disclosures on the risks and opportunities that arise from social and environmental issues and the impact of their business on people and the environment. The CSRD requires in-scope organisations to follow disclosure and reporting standards that might capture both EU and non-EU groups.
Supplier pressure
Suppliers are also looking to reduce their carbon footprint and should work together to identify areas of sustainable sourcing, cost savings, and reducing inefficiencies across the value chain. Organisations can foster collaboration with suppliers and create mutually beneficial sustainable initiatives by quantifying and tackling Scope 3 emissions.
What it means for the supply chain
Having access to the right data is the first step to improving supply chain sustainability. This can be done through data collaboration with supply chain partners, third party providers and a logistics technology stack that supports integrations.
The Cargobase platform is one such logistics solution for enterprise shippers. It offers a carbon visibility feature that automatically calculates and tracks carbon emissions of each shipment for inbound and outbound flows, simplifying carbon emission reporting for upstream and downstream activities in the value chain.
Start taking action now
Measuring the Scope 3 emissions may be challenging but having carbon visibility serves as a benchmark for companies to understand the key sources of emissions and enable them to make better decisions towards a net zero goal.
Learn more about how Cargobase can help with carbon visibility in your supply chain. Book a consultation today.