The End of Market-Based Approaches?
The landscape of sustainability reporting is undergoing a significant transformation, driven by increasing market maturity and regulatory scrutiny. A recent survey by Greenhouse Gas (GHG) Protocol, a leading authority in greenhouse gas accounting, reveals a growing consensus that market-based approaches to emissions accounting, while potentially useful in the short term, should be phased out over time. This shift is fueled by concerns about the long-term effectiveness of these approaches and their potential to obscure the true environmental impact of a company's operations.
The European Securities and Markets Authority (ESMA), the EU's financial markets regulator, echoes this sentiment in its recent guidelines on enforcing sustainability information (GLESI). ESMA emphasizes the importance of high-quality sustainability reporting and provides guidance on ensuring the credibility of reported data. A key focus is the need for companies to establish robust governance arrangements and internal controls to promote accurate and reliable reporting, particularly in the value chain.
The Rise of Primary Data in Scope 3 Emissions Reporting
A major point of convergence between the GHG Protocol survey and ESMA's guidelines is the emphasis on using primary data to enhance the accuracy and reliability of emissions reduction claims. Primary data, directly sourced from suppliers, provides a more transparent and trustworthy picture of a company's Scope 3 emissions, which are indirect emissions that occur in the value chain.
Scope 3 emissions represent over 90% of a company's total greenhouse gas (GHG) emissions*. Accurately accounting for these emissions is crucial for understanding a company's overall environmental impact and setting meaningful reduction targets. The increasing demand for transparency and the growing maturity of sustainability reporting are driving companies to move away from market-based approaches, which can be based on estimates and assumptions, and towards the use of primary data for Scope 3 emissions reporting.
*According to GHG Protocol
While the ideal scenario is to utilize primary data for Scope 3 emissions reporting, it's important to acknowledge that this transition takes time. For many companies, reaching this level of maturity in their sustainability journey can take 2 to 3 years. The good news is that companies can embark on this journey based on their current maturity level and the type of data they have available (averages, percentages, market-based approaches). They can then evolve their processes step by step until they reach the level of using primary data, which is where the market is headed.
VesselBot: Guiding Your Sustainability Journey
VesselBot can help and guide companies through this process. Our platform allows for a seamless transition from using averages or market-based methodologies to incorporating primary data as it becomes available. We can automatically recalculate your baseline emissions as your data matures, ensuring that your reporting remains accurate and aligned with the latest industry standards and best practices.
The Benefits of Accurate Scope 3 Emissions Reporting
Collecting accurate and reliable data on Scope 3 emissions is not just a compliance requirement; it's a strategic decision. By understanding the emissions profile of their supply chain, companies can:
- Identify emission hotspots: Pinpoint the areas in their value chain that contribute most to their environmental impact.
- Prioritize reduction actions: Focus their efforts on the most impactful initiatives to reduce their carbon footprint.
- Improve operational efficiency: Identify opportunities to reduce energy consumption and waste generation, leading to cost savings.
- Enhance brand reputation: Demonstrate a commitment to sustainability and transparency, which can appeal to environmentally conscious consumers and investors.
VesselBot: Your Partner in Accurate and Reliable Emissions Reporting
VesselBot's GHG Emissions Monitoring System is a powerful tool that can help companies navigate the evolving landscape of sustainability reporting. By providing accurate and reliable emissions data for all modes of transportation, VesselBot enables companies to gain a comprehensive understanding of their Scope 3 emissions.
Our system uses actual real-time data and modeled data, achieving high accuracy in emissions calculations. This ensures that companies can make informed decisions based on reliable data to reduce their environmental impact and improve their sustainability performance.
With VesselBot you can:
- Collect: Automatically collect, clean, harmonize, and enrich your emissions data, streamlining the reporting process.
- Measure: Accurately monitor and report upstream and downstream transportation emissions.
- Benchmark: Compare your company's performance to industry averages and identify areas for improvement.
- Optimize: Make data-driven decisions to reduce your Scope 3 emissions and achieve your sustainability goals.
- Evolve: Seamlessly transition from using averages or market-based approaches to primary data as your sustainability reporting matures.
Le'ts Talk
As the market for sustainability reporting matures and regulatory requirements become more stringent, the need for accurate and reliable emissions data is paramount. VesselBot is your trusted partner in this journey, providing the tools and insights you need to navigate the complexities of Scope 3 emissions reporting and drive meaningful change in your value chain. We empower you to not only meet compliance requirements but also to proactively manage your environmental impact and achieve your sustainability goals.