Research shows unclear accounting standards and lack of incentives are barriers to corporate scope 3 action

• A new survey has found that only half of big corporates across the United States and Europe feel fully prepared for future regulations around Scope 3 emissions.
• Businesses cite a lack of clear guidance from international standards and a lack of understanding of verification service providers as barriers to action.
• Faced with a climate emergency, companies need clarity and commercial incentives to move beyond reporting to demonstrate real decarbonization impact.

New York, 20 September 2023 – The lack of clarity surrounding international standards and service providers, opaque supply chains, lack of economic incentives and the difficulties of collecting on-the-ground data are the biggest challenges preventing companies from reducing their Scope 3 emissions, according to a survey published today. 

Scope 3 emissions are those not produced by an organization itself but those that it is indirectly responsible for in its value chain. A poll of 500 sustainability leaders at large companies across the US and Europe, conducted by Opinium on behalf of SustainCERT, reveals that only half (52%) feel fully confident that they are ready for future regulatory change.

While nearly 70% of those polled are reporting their Scope 3 emissions, and a further 22% plan to do so in the next year, there are significant barriers to going beyond simply reporting to real decarbonization.

88% of the companies polled have a science-based target for reducing emissions across scopes 1-3. While a majority (68%) said they implement Scope 3 emissions reductions projects in order to reach those targets, and a further 24% said they are planning on implementing projects in the next 12 months, it’s clear there remain challenges around how businesses do this and allocate the necessary resources.

Nearly 40% of respondents said that prioritizing their own direct emissions (Scope 1 and 2) is the main barrier to Scope 3 action. Other reasons include limited control and influence over suppliers, challenges over costs, allocation of resources and impact achieved, the complexity of measuring Scope 3 progress and a lack of understanding of Scope 3 emission reduction projects. 

Of those implementing projects to reduce Scope 3 emissions, the main challenge faced by businesses is justifying the investment in these and prioritizing them against other direct emission reduction projects (for Scope 1 and 2).

Reaching ambitious science-based targets requires going beyond reporting to decarbonization, and companies say there is a lack of clarity around the regulatory landscape, and a lack of commercial incentive to go further on their decarbonization journey. While a large proportion (57%) of corporates recognize that third-party verification of their emission reduction projects is critical to that ambition, there are many who only verify because their investors (43%) or customers (40%) demand it. One in four cited a lack of competitive advantage to additional investment in Scope 3 emission reduction projects.

Marion Verles, CEO of SustainCERT, who commissioned the poll, said:

“It’s clear that despite the best intentions of many businesses, the global framework for taking decarbonization action is not up to the task. Companies need clearer guidance, meaningful regulations and help in making the business case for a drastic reduction in emissions. Targets are nothing without action.

“The climate emergency is already with us, and we need corporates to step up and make real, positive impact. Verification demonstrates climate impact is real and trusted – so regulation making this mandatory will support climate action being credible, but regulation won’t go far enough in supporting genuine action.

"Businesses need clarity on how to scale up action, and commercial incentives to help explain why systemic change is necessary.”