Category: Articles
The Growing Global Mandate for Reporting Scope 3 Emissions: Which Countries Are Leading the Way
In the world of corporate sustainability, measuring and managing greenhouse gas (GHG) emissions has become a top priority. Most companies are familiar with **Scope 1** (direct emissions from owned or controlled sources) and **Scope 2** (indirect emissions from purchased electricity), but **Scope 3 emissions**—the indirect emissions that occur throughout a company’s value chain—are often the most challenging and substantial to measure. These include everything from the emissions produced by suppliers to those resulting from the use of products by consumers.
As the global push for transparency and accountability in climate action grows, more countries are introducing regulations that either mandate or strongly encourage companies to report their Scope 3 emissions. So, which countries are leading the charge in requiring Scope 3 emissions reporting, and why is this critical for businesses worldwide?
What Are Scope 3 Emissions?
Scope 3 emissions cover a wide array of indirect emissions that occur throughout a company’s value chain. Examples include:
– Emissions from the production of purchased goods and services.
– Emissions from waste disposal, business travel, and employee commuting.
– Emissions generated from the use of sold products or services.
Often, Scope 3 emissions represent the majority of a company’s carbon footprint. For example, in the retail sector, Scope 3 emissions from supply chains and product use can be 11.5 times higher than direct (Scope 1 and 2) emissions. This makes Scope 3 reporting crucial for companies looking to take comprehensive climate action.
Why Scope 3 Reporting Is Becoming Essential
For companies, the inclusion of Scope 3 emissions in their sustainability reporting is no longer just about voluntary transparency; it’s becoming an expectation from investors, customers, and regulators. More comprehensive emissions data allows for better decision-making, improved risk management, and alignment with global climate targets like the Paris Agreement.
Governments around the world are now moving toward mandatory climate-related disclosures, and Scope 3 emissions are increasingly part of these requirements. Here are some of the key countries and regions leading the way in Scope 3 emissions reporting:
Countries and Regions Requiring Scope 3 Reporting
1. **European Union (EU)**
The **European Union** has been at the forefront of climate action with initiatives like the **Corporate Sustainability Reporting Directive (CSRD)**. Effective from 2024, the CSRD requires large companies and publicly listed firms to disclose their entire carbon footprint, including Scope 3 emissions. This is part of the EU’s broader strategy to meet its climate targets and ensure businesses are accountable for their environmental impact.
2. **United Kingdom (UK)**
The **UK** mandates large companies to disclose climate-related financial information under the **Task Force on Climate-Related Financial Disclosures (TCFD)** framework. While Scope 3 emissions are not explicitly required for all companies, they are strongly encouraged as part of a company’s full GHG reporting. Many UK businesses, particularly those in sectors like finance and manufacturing, are already voluntarily disclosing their Scope 3 emissions.
3. **United States (Proposed)**
The **U.S. Securities and Exchange Commission (SEC)** proposed new climate disclosure rules in 2022 that would require publicly traded companies to report on Scope 1, Scope 2, and, in some cases, Scope 3 emissions. While not yet finalized, this proposal represents a significant shift in the U.S. toward more rigorous climate-related disclosures, including indirect emissions. Large corporations with substantial value chains would be required to report their Scope 3 emissions if these are deemed material to their operations.
4. **Canada**
Canada’s climate disclosure rules, aligned with the **TCFD**, require Scope 1 and Scope 2 emissions reporting, with Scope 3 reporting encouraged. Canadian companies, especially in sectors like finance and energy, are increasingly reporting Scope 3 emissions voluntarily to meet investor expectations and demonstrate leadership in sustainability.
5. **Japan**
Japan encourages companies to disclose their environmental impact, including Scope 3 emissions, under its **Corporate Governance Code** and other sustainability initiatives. Although Scope 3 reporting is not universally mandated, leading Japanese corporations in industries such as electronics and automotive are already reporting these emissions as part of their ESG strategies.
6. **New Zealand**
In 2021, New Zealand became one of the first countries to require mandatory climate-related financial disclosures, including Scope 1, Scope 2, and, in certain cases, Scope 3 emissions, for large financial institutions and publicly listed companies. This pioneering legislation aligns with TCFD guidelines and underscores New Zealand’s commitment to comprehensive climate action.
7. **South Korea**
South Korea is gradually increasing its environmental disclosure requirements. While Scope 3 emissions reporting is not yet mandatory, many large corporations, particularly in the tech and industrial sectors, are voluntarily disclosing their full emissions profiles as part of broader sustainability efforts.
8. **Australia**
Australia is moving toward mandatory climate disclosure aligned with TCFD standards, although Scope 3 reporting is not yet universally required. Nonetheless, many Australian companies, especially in industries like mining and financial services, are voluntarily including Scope 3 emissions in their sustainability reports to provide a more comprehensive view of their environmental impact.
9. **Switzerland**
In Switzerland, large companies are required to disclose non-financial information, including climate-related data, as part of their corporate reporting obligations. Depending on the materiality of Scope 3 emissions to the business, these may also be reported.
10. **South Africa**
South Africa encourages climate disclosure for publicly listed companies under the **JSE Sustainability Reporting Guidelines** and the **King IV Corporate Governance Code**. While Scope 3 emissions are not yet mandated, companies in resource-intensive sectors such as mining are increasingly disclosing their indirect emissions.
Voluntary Standards and Initiatives
Beyond national mandates, many companies worldwide are voluntarily reporting their Scope 3 emissions to align with internationally recognized frameworks and initiatives, including:
– Task Force on Climate-Related Financial Disclosures (TCFD)
– Carbon Disclosure Project (CDP)
– Science-Based Targets initiative (SBTi)
These frameworks are becoming the global norm for responsible climate reporting, pushing more companies to address their entire value chain emissions.
How CocoonCarbon® Can Help Report Scope 3 Emissions
As companies increasingly face pressure to measure and report their Scope 3 emissions, they often struggle with the complexity and scale of tracking emissions across their entire value chain. This is where solutions like **CocoonCarbon** come in.
CocoonCarbon® is designed to simplify the process of measuring and reporting Scope 3 emissions. By using advanced data analytics and integrated carbon management tools, CocoonCarbon helps businesses gain full visibility of their indirect emissions across various categories, from purchased goods and services to the use of sold products.
CocoonCarbon’s platform makes it easier for companies to:
– Quantify emissions throughout the value chain.
– Comply with regulatory requirements, including those set by governments and voluntary initiatives like TCFD and CDP.
– Set and meet science-based targets for emission reductions.
Whether your company is new to emissions reporting or looking to streamline its existing processes, CocoonCarbon provides the tools to ensure accurate and actionable data that can help drive your sustainability goals.
Notably, CocoonCarbon® has been recognised for its impact in the carbon management space, having been mentioned in a Gartner Report (The Market Guide for Logistics Carbon Accounting and Management Solutions) as a leading solution in climate reporting. This recognition highlights the company’s innovative approach to carbon management and its commitment to helping businesses meet evolving regulatory and stakeholder expectations.
The Future of Scope 3 Reporting
As global awareness of the climate crisis grows, regulatory pressures on businesses to disclose their full carbon footprint—including Scope 3 emissions—are increasing. Many of the current regulations focus on large or publicly listed companies, but it’s likely that these requirements will expand to include small- and medium-sized enterprises (SMEs) in the future. The trend is clear: comprehensive emissions reporting is becoming a baseline expectation, not just a voluntary initiative.
For businesses, this means that proactive management of Scope 3 emissions is not only beneficial for reducing their environmental impact but is also essential for maintaining investor confidence, staying compliant with regulations, and contributing to global climate goals.
Scope 3 emissions reporting is rapidly becoming a cornerstone of corporate climate responsibility. Whether driven by regulations, investor demand, or a commitment to sustainability, companies worldwide are increasingly required to account for the full scope of their emissions, making transparency and action more crucial than ever. With solutions like CocoonCarbon® available to simplify the process, businesses have the tools to succeed in this evolving regulatory landscape.