Reporting scope 3 emissions

Hervé Chapron at Semarchy describes navigating the toughest hurdle in compliance with the EU’s Corporate Sustainability Reporting Directive 

 

The European Union’s proposed Omnibus Simplification Package is a timely attempt at lowering the administrative burdens and costs associated with sustainability reporting and due diligence requirements.

 

Designed to cut red tape and ease EU regulations, these proposals aim to boost European business competitiveness, attract investment, and support overall growth, while still upholding the ambitious climate objectives enshrined in the EU Green Deal.

 

Recommended measures include postponing the implementation timeline, narrowing the scope to include fewer businesses, and simplifying compliance requirements for those organisations that remain within regulatory parameters.

 

These flexible provisions enable affected companies to better adapt to new regulatory expectations and invest more strategically in their sustainability reporting capabilities. But despite these changes, how can businesses overcome the biggest challenge that faces them: Scope 3. 

 

 

The persistent Scope 3 reporting challenge

Of all the requirements under the Corporate Sustainability Reporting Directive (CSRD), perhaps the most daunting remains Scope 3 compliance—the measurement and reporting of indirect emissions stemming from multi-tiered, cross-border value chains. 

 

Direct emissions, categorised under Scope 1 and Scope 2, are well-established areas that are less cumbersome to manage. However, Scope 3 emissions typically represent the bulk of an organisation’s carbon footprint and pose significant measurement and transparency challenges. Incomplete supplier disclosures, inconsistent data standards, and the inherent complexity of globalised networks make categorising and calculating these emissions a difficult task.  

 

These factors leave executives and sustainability professionals grappling with serious compliance risks, reputational hazards, and mounting investor pressure. The responsibility thus falls heavily on data leaders within organisations to build transparency frameworks that can support comprehensive Scope 3 reporting.

 

 

Why Scope 3 remains hard to pin down

Even as companies become increasingly aware of their environmental responsibilities and deploy more sophisticated ESG reporting methods, Scope 3 emissions remain notoriously difficult to measure. A primary factor is the scattered and fragmented storage of supplier-related environmental data, often siloed across intricate supplier networks. Firms that lack centralised, integrated systems struggle to gather accurate and reliable emissions data.

 

Adding to the challenge is the widespread lack of agreed-upon data standards across companies, sectors, and regions. Suppliers often adopt diverse and incompatible reporting frameworks, making the consolidation of emissions cumbersome or even impossible. 

 

 

Underlying complexities 

The sheer complexity of global supply chains makes accurate Scope 3 reporting uniquely challenging. Modern supply networks often span numerous business partners across continents, each subject to diverse regulatory norms, varying digital capabilities, and frequently conflicting time zones.

 

Recent findings underscore the daunting nature of these circumstances. A Semarchy survey of more than 1,000 corporate leaders in the UK and France found that while 89 percent of respondent companies are actively collecting ESG data, as many as 83 percent feel inadequately prepared for CSRD audits.

 

This disparity highlights the urgent need to address the difficulties hampering compliance reporting. Obstacles include inconsistent and fragmented supply-chain data, insufficient capability to produce digitally standardised ESG reports, and difficulty integrating disparate data sets. 

 

 

Fostering strong supplier partnerships

Effectively addressing Scope 3 complexities demands deeper cooperation between companies and their supplier networks. Moving beyond simple requests for supplier information, effective partnerships should include proactive outreach efforts, educational support, training programs, joint audits, and collaborative development of shared measurement practices.

 

The adoption of uniform data standards, such as the EU’s Product Environmental Footprint (PEF) methodology and widely recognised CDP questionnaires, is a vital enabler of collaboration. These standardised tools simplify reporting processes, minimise complexity, and foster a common language throughout varied supplier networks. Incentive models that recognise upstream suppliers for transparency and demonstrable progress are equally crucial.

 

 

Assembling a digital Scope 3 basis 

In many cases, organisations already possess much of the required data but lack robust digital systems and governance structures to capture, standardise, and effectively leverage that data. Investing in centralised data platforms that seamlessly integrate real-time data flows from internal systems, external sources, and global supply chains empowers organisations to produce more consistent, scalable, and verifiable emissions reports. 

 

Advanced solutions, such as master data management (MDM), supplier onboarding systems, and AI-driven data reconciliation tools, can further enhance the accuracy of emissions data. This is particularly true when working with fragmented or inconsistent supplier data. 

 

Implementing advanced digital platforms requires adherence to clearly defined steps, starting with comprehensive data audits to understand existing data quality, availability, and any gaps. Subsequent stages involve improvements to the supplier onboarding process, tech infrastructure upgrades, and establishing clear governance protocols and ESG-centric KPIs for continuous evaluation and refinement.

 

 

Making ESG stick

Becoming CSRD-compliant isn’t just a box-ticking exercise. Instead, responsible companies must prepare for evolving sustainability regulations by establishing robust and flexible transparency frameworks now, thereby mitigating future compliance risks.

 

Moreover, transparency in environmental operations provides long-term strategic advantages. Businesses adept at measuring, tracking, and managing their entire emissions footprint will become inherently more resilient, facing less reputational and operational risk. Greater transparency also builds investor confidence, as stakeholders increasingly expect real-time ESG visibility, accurate data methodologies, and effective sustainability governance.

 

The business case for transparency is clear across all sectors. Manufacturers must address intensified scrutiny of carbon-intensive processes, retailers depend on supplier traceability to demonstrate compliance and responsible sourcing, and logistics providers require precise emissions data to optimise routes. In each sector, stronger ESG transparency and integrated data capabilities lead to greater compliance, increased competitiveness, and enhanced consumer trust.

 

 

Transparency as a growth opportunity 

Although addressing Scope 3 emissions may appear daunting, the right data strategy can transform the challenge from a compliance burden into an opportunity for sustainable growth. Leadership must shift their perspective and prioritise building scalable and collaborative ESG frameworks, enabled by advanced digital solutions, that allow for consistent emissions tracking and reporting.  

 

By strategically focusing on digital technologies, strong supplier partnerships, standardised reporting, and robust governance and data management processes, companies can effectively tackle Scope 3 challenges and accelerate business growth. 

 

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Hervé Chapron is SVP Sales and General Manager, EMEA, at Semarchy

 

Main image courtesy of iStockPhoto.com and Userba011d64_201