SUSTAINABILITY SPOTLIGHT | 40 Other CCF standards include the EU Organisation The International Sustainability Standards Board (ISSB) is Environmental Footprint (OEF), as well as the a standard-setting body under the International Financial Global Reporting Initiative (GRI) and Department for Reporting Standards (IFRS) Foundation, whose mandate Environment, Food & Rural A昀昀airs (Defra) guidance is the creation and development of sustainability-related (UK). Additional PCF standards include the EU Product 昀椀nancial reporting standards to meet investors’ needs Environmental Footprint (PEF), BP X30–323 in France, and for sustainability reporting. The ISSB’s work is underway Publicly Available Speci昀椀cation (PAS) 2050. to develop sustainability disclosure standards, including on Scope 3 GHG emissions, backed by the G7, the G20, To estimate emissions, companies use formulas to the International Organization of Securities Commissions multiply the volume of their activities (e.g. purchased (IOSCO), the Financial Stability Board, African Finance materials, transport) with emission factors (EF), which are Ministers and Central Bank Governors from more than representative values that attempt to relate the quantity of 40 jurisdictions. Although not mandatory, the new ISSB a pollutant released into the atmosphere with the activity standard aims to signi昀椀cantly improve carbon accounting releasing the pollutant. Finding the right EF is not an harmonisation – including sectoral speci昀椀cs – to allow easy task because it is necessary to ensure its geographic investors to make more informed green funding decisions. relevance and its scale of application (national/regional or site-speci昀椀c), and that it is well documented. Several Both these initiatives underscore the growing importance public and private EF databases exist and should be of holistic, comparable and auditable reporting to drive selected depending on their application, as they use either sustainability e昀昀orts and meet the increasing demand for generic or geographic/sector-driven emissions estimates. transparency in the business world. Examples of recognised EF databases include: How are companies reducing Scope 3 emissions • GHG Protocol emissions factors databases today? • Intergovernmental Panel on Climate Change (IPCC) Organisations around the world are implementing a • Emission Factor Database (EFDB) range of approaches and actions to reduce their Scope • Institute for Global Environmental Strategies (IGES) List 3 emissions. Table 1 (right) shows selected examples of of Grid Emission Factors actions to reduce Scope 3 emissions, as suggested in the • World Resources Institute (WRI) and World Business GHG Protocol Scope 3 Standard. Council for Sustainable Development (WBCSD) Greenhouse Gas Protocol Calculation Tools A practical roadmap for businesses • US EPA Air Pollutant Emission Factors AP-42 – Life- cycle databases (e.g. ecoinvent). There is no shortage of challenges in reducing Scope 3 emissions, and both SMEs and industry giants struggle to Why must companies measure Scope 3 navigate the complexities involved in this task. emissions? Although current Scope 3 standards push for voluntary However, through extensive research and consultations disclosure, this might change, as governments and with industry leaders and academic experts, the World organisations are increasingly pushing for mandatory Economic Forum’s Industry Net Zero Accelerator initiative disclosure as a basis for climate action planning. Scope 3 identi昀椀ed 12 opportunity areas to help companies in their reporting has garnered increasing signi昀椀cance in light of decarbonisation journey, and these, grouped into four new regulations, such as the following: action levels, inform strategic decisions. Details of these opportunities can be found in the White The EU Corporate Sustainability Reporting Directive Paper The “No-Excuse” Opportunities to Tackle Scope (CSRD) is a pivotal European Union directive aiming to 3 Emissions in Manufacturing and Value Chains, which standardise sustainability reporting practices among serves as a practical roadmap for businesses navigating large companies and listed small and medium enterprises the intricate terrain of Scope 3 decarbonisation and (SMEs) operating within the EU. It signi昀椀cantly expands accelerating their contributions to global climate e昀昀orts. the scope of reporting by requiring companies to disclose detailed information on environmental and social matters, including Scope 3 emissions. This directive came into force on 5 January 2023, with the 昀椀rst companies having to apply the new rules for the 昀椀rst time in the 2024 昀椀nancial year, for reports to be published in 2025.