According to a new report by CDP, an environmental disclosure platform, nearly 60% of companies have failed to report on at least one supply chain emissions category, despite approaching regulatory requirements for disclosure across the value chain. In 2022, only 41% of companies reported on a single Scope 3 category, while over 70% reported on direct Scope 1 and 2 emissions. The report highlights challenges that hinder Scope 3 reporting, such as limited data transparency and traceability, low quality and granularity of data, and a lack of automation. tools for data extraction.
So what lies behind this?
There could be several reasons why nearly 60% of companies fail to report on even one emissions category within their supply chain. Here are some possible explanations:
Lack of Awareness
Some companies may not be aware of the importance of reporting on supply chain emissions or the potential impacts of their operations on the environment. They may not have the necessary knowledge or resources to collect and report on this data.
Lack of Capacity
Some companies may not have the capacity to track and report on all emissions categories within their supply chain, especially if they have complex and global supply chains. This could be due to a lack of expertise, data management systems, or other resources.
Incomplete Data on Supply Chain Emissions
Even if companies are aware of the importance of reporting on emissions across their supply chain, they may face challenges in obtaining complete and accurate data from their suppliers. This could be due to a lack of transparency or cooperation among suppliers, or difficulties in tracking emissions across the entire supply chain.
Regulatory Environment
Companies may not be required to report on all emissions categories, or there may be a lack of clear regulatory guidance on reporting requirements. This could lead to inconsistencies in reporting practices across different companies and industries.
Strategic Priorities
Some companies may prioritize other sustainability issues over emissions reporting, based on their specific business strategies and stakeholder expectations. They may choose to focus on areas such as energy efficiency, waste reduction, or social responsibility instead.
With that said, how we can improve on the current rate of action?
Increase awareness
Raising awareness about the importance of emissions reporting across the supply chain can help to motivate companies to take action. This should involve educating companies about the environmental impacts of their operations, the benefits of reporting, and the potential risks of failing to report.
Provide resources
Companies often lack the resources and expertise to collect and report on supply chain emissions data. Providing guidance and resources, such as reporting frameworks, tools, and best practices, can help to make reporting more accessible and feasible for companies.
Make reporting mandatory
Government regulations or industry standards should make emissions reporting mandatory as opposed to voluntary. This would create a more level playing field for companies and help to ensure that all businesses are held accountable for their environmental impacts.
Create incentives
Offering incentives, such as recognition, awards, or financial benefits, could encourage companies to report on their emissions across the supply chain. This can help to increase motivation and recognition for companies that are taking action to reduce their environmental impacts.
Increase stakeholder pressure
Stakeholders, such as investors, customers, and NGOs, should put more pressure on companies to report on their supply chain emissions. This could include requesting disclosure of emissions data, engaging with companies on environmental issues, or divesting from companies that fail to take action on sustainability.
Overall, reporting on carbon emissions categories within the supply chain can be a complex and resource-intensive process, and there are a variety of reasons why companies struggle to do so. However, as public awareness of environmental issues grows and stakeholder expectations evolve, there will surely be increasing pressure on companies to improve their reporting practices and take more action to address their environmental impacts.
Meanwhile, encouraging more companies to report on their supply chain emissions requires a multifaceted approach that involves raising awareness, providing resources, creating incentives, and increasing stakeholder pressure. By doing so, we can help to promote greater transparency and accountability in corporate sustainability practices, and work towards a more sustainable future.
Find out more about Permutable’s work to more accurately predict company emissions here or get in touch to find out mor