What They Don’t Want You to Know About C02 Emissions

According to a new study, corporations are not detailing the full scope of their carbon footprint—many claim to be ‘green’ despite a lack of reporting on Scope 3 key categories. The research is an industry-university collaboration between climate risk analysis firm EMMI and researchers at Griffith University and the University of Otago.

While CO2 reporting is currently voluntary, corporations are under pressure to disclose and reduce greenhouse gas emissions (GHG).

The Greenhouse Gas Protocol is used as a global standard to measure a company’s total carbon footprint. There are three reporting levels:

  1. Measuring the GHG emissions directly produced by a company during business activities, for example, corporate fleet emissions
  2. The measurement of emissions associated with the production of energy purchased from an external supplier such as electricity providers
  3. Scope 3 measures indirect emissions not previously accounted for, such as upstream and downstream emissions from a company’s entire value chain.

Professor Ivan Diaz-Rainey, Griffith Department of Accounting, Finance and Economics, and an international expert in climate and sustainable finance, said firms are strategic in Scope 3 reporting and potentially underpin greenwashing. He claims that Scope 3 emissions represent the highest proportion of total emissions but are the least likely to be reported on. Some, however, are moving towards mandatory disclosures, driven by the Task Force on Climate-Related Financial Disclosures (TCFD), and increased pressure to make Scope 3 mandatory.

UNSW Climate Change Research Centre adjunct fellow and co-founder of EMMI, Dr. Ben McNeil, said that while Scope 3 emissions for companies were difficult to quantify, they are critical in understanding how companies were financially exposed to carbon pricing and their decarbonization pathways. He indicated that their machine learning approach to estimating Scope 3 emissions is valuable to know whether a company has ‘material’ financial exposure to a net-zero world where carbon is legislated and priced.

Lead researcher, University of Otago Research Fellow Dr Quyen Nguyen, said researchers used machine learning to improve the prediction of corporate carbon footprints, indicating where policymakers and regulators should concentrate their efforts for greater disclosure. Companies are reporting on specific categories within Scope 3 that are easier to calculate instead of categories that really matter, like the use of sold products.

Today, approximately 60 percent of firms report Scope One and Two emissions.

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