Requirement for Climate-related Disclosures
“In February of this year, we received the most recent IPCC report which, if you remember, sounded a red alert for humanity. We are facing a climate disaster,” said Ellie. “And the scientists that are measuring climate change are seeing that the changes are happening much more quickly than we thought.”
Fortunately, there’s a movement towards treating sustainability with the focus that it requires.
For example, the U.S. Securities and Exchange Commission is examining the need for climate-related disclosures by companies and has made some recommendations. There are other regulations coming from Europe, specifically in Germany, around mapping out the entire supply chain for large companies.
Scope 3 emissions are the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly impacts in its value chain. A large firm, for example, may not impact the environment directly, but its suppliers could.
The majority of businesses are ready to help. A challenge, however, is that people aren’t exactly sure what they should be measuring and how to measure it. It’s a highly new, highly dynamic, highly complex space.
Obtaining Scope 3 Data
So how do we get data about Scope 3? During her presentation, Ellie shared a variety of options:
- ESG. The performance of a company can be scored in the areas of environment, social, and governance, and that score can be used to inform how financial incentives and penalties can be directed. Unfortunately, the simplicity of this approach may fail to align with the inherent complexity of supply chains.
- Government Statistics. Information collected by government agencies can be helpful. It is, however, typically aggregated across industries — an ability to zoom in on the practices of, say, one supplier of copper in Kazakhstan, could be challenging.
- Proprietary Data. Various third parties collect a wealth of data that is both granular and even robust. But it can be expensive, and there’s the need to integrate it into multiple other datasets.
In Ellie’s opinion, there’s an even better way forward.
“What if we actively empowered our own supply chains, our factories, and so on, to tell us what they were doing in the Scope 3 domain?” she asked. “We could begin to map out what’s really happening, and where, and what the opportunities are, and how it connects to other types of issues, like social impacts. “
Common Action advocates creating an ontology that could power a small app that would allow simple and elegant representations of data, resources and processes and distribution, and other activities that rely on some kind of resource and produce some kind of impact.
You can learn more about this app and how it can be used to obtain Scope 3 data on supply chains by watching the full Graph + AI Summit session.