Despite the challenges that come with gathering, vetting and disclosing the data necessary to produce and disclose net-zero transition plans, investors are growing tired of companies’ slow-walking disclosures and planning due to the complexity involved, particularly with Scope 3 emissions. As a result, management teams and boards should expect a heightening intensity and specificity in engagements and on earnings calls related to various scopes of emissions, goals and plans.
More than 1,000 companies globally have committed to setting or have already set science-based targets to reduce emissions, including Scope 3 reduction goals for the majority of these companies depending on the sector, as of November 2021, according to the Science Based Targets Initiative (SBTi).
The SBTi requires companies to disclose Scope 3 emissions when the emissions represent 40% or more of total emissions. This is about 95% of companies that disclose to the SBTi, said SBTi co-founder Cynthia Cummis.
“There’s more and more pressure for science-based Scope 3 targets,” Cummis said. “When we started, Scope 3 was very new. It was not a common practice, so we were quite flexible about the approach and didn’t have the same level of ambition as Scopes 1 and 2. But over time we’re ramping up ambition for targets. There’s more pressure on us to do that, and over the next year, we will be developing more ambitious and clear targets.”
Scope 3 emissions are those that can be attributed indirectly to a company such as from its supply chain, customers or business travel. Please see the companion story “Investors Probing Companies’ Scope 3 Emissions.”
Sources said companies will need to request emissions data from suppliers. According to Danielle Fugere, president and chief counsel at As You Sow, their engagements with companies on the issue revealed that most are already asking for the data but largely struggle with getting the information and vetting it for disclosure purposes in a timely manner.Agenda – Investors Side-Eye Excuses on Supply Chain Disclosure