There Is No Net Zero Without Scope 3 Accounting
Just this month, the U.S. Securities and Exchange Commission (SEC) adopted new climate change risk disclosure requirements. Originally, the requirements called for U.S.-listed companies to disclose Scope 3 emissions relating to greenhouse gas (GHG) emissions within a business’s supply chain. However, by the time the vote occurred this year, the Scope 3 requirements had been dropped. Some SEC officials were likely concerned that mandating disclosures across the board could make the rule more vulnerable to legal challenges which, if successful, could tie the agency's hands when writing other rules.
While I understand the hesitancy of legal challenges, now is the time to be bold when it comes to climate change – especially on Scope 3. The absence of clear guidelines creates a murkiness and uncertainty that industries cannot afford. This news is the latest example of a troubling phenomenon among lawmakers, regulatory bodies, company commitments to net zero, and the very definition of what people argue net zero is – the removal of Scope 3 emissions elimination and reporting requirements. We must be clear: Net zero is zero Scope 1, 2, and 3 emissions. Anything other than that is just energy-efficient measures.
As we push towards a net zero future, a plethora of numbers are shaping critical discussions, plans, regulations, and targets: 2030, the year the Paris Agreement outlines as the year that emissions must be cut by 50%; 1.5, the degrees in Celsius that the industry agrees is a critical turning point for the impacts of climate change on our world; and zero, the ultimate goal for net emissions. But we are losing sight of another important number required for a net zero future: three. Simply put, there is no pathway to net zero without Scope 3 emissions accounting.
Scope 3 covers all emissions in the value chain. This includes emissions from supply chain activities, employee commuting, a product's end-of-life treatment, and so forth. And they pack a big punch; for many businesses, Scope 3 emissions count for roughly 70% of their value chain’s total carbon footprint. So why is this data being neglected? Scope 3 emissions and the factors contributing to them are something companies feel like they have much less control over. In many cases, a company won’t even know the extent or make-up of their value chain emissions, making it tempting to ignore them completely.
This is why mandating Scope 3 disclosures is of paramount importance. Businesses no longer have the luxury of ignoring the impact their supply chain has on communities and the climate. We are only six years away from the Paris Agreement deadline. While there is room for optimism in light of the news that U.S. emissions fell almost 2% in 2023 – reversing two years of flat or increasing output, we must accelerate reductions by a factor of three to meet the U.S. climate goals. This will not happen if Scope 3 emissions continue to be ignored.
Thankfully, there are trusted and proven ways to measure Scope 3 emissions. My organization, the Global Network for Zero, leverages the Greenhouse Gas Protocol for our net zero certification process – one of the most trusted and widely used mechanisms for measuring Scope 3 in the world and used directly or indirectly through a program by 92% of Fortune 500 companies. The protocol has created a comprehensive, global, standardized framework for measuring and managing emissions from private and public sector operations, value chains, products, cities, and policies to enable GHG reductions across the board.
Protocols like this are mission-essential for any organization. Emissions assessments are the most critical thing an organization can do before making a commitment and formulating a plan. Baseline performance must be measured since what gets measured gets done. What gets done gets improved. What gets improved gets replicated. And what gets replicated transforms the market and our climate.
We need to be clear about what we face: Climate change is the single largest existential threat of our lifetime. When it comes to such a threat, we need to be ambitious and I urge leaders around the globe to mandate meaningful, comprehensive change. There is still time to embrace the value that comprehensive emissions reporting can bring to businesses and the marketplace.
Sarah Merrics is co-founder and Chief Strategy Officer of the Global Network for Zero and former Chief of Staff at the U.S. Green Building Council.