KEY TAKEAWAYS
Research shows majority of companies do not currently include Scope 3 emissions in reduction targets, a future requirement for SFDR compliance
Scope 3 emissions have proven much more difficult for companies to account for than Scopes 1 or 2, both of which are under their direct control. The lack of standardized methodology and the need to rely on modeling have until now led to a limited and cautious integration of Scope 3 data into investment processes.
Taking a step back, Scope 1 covers direct emissions from owned or controlled sources (e.g., company vehicles, fuel combustion). Scope 2 covers indirect emissions from the generation of purchased electricity, steam, heating and cooling consumed by the reporting company. Scope 3 includes all other indirect emissions that occur in a company’s value chain (e.g., business travel, investments, employee commuting).
Our analysis shows that 66% of companies that report emissions data to CDP have reduction targets in place, but only 21% have targets that include Scope 3 emissions. By not including Scope 3 emissions, companies greatly reduce the scale of emissions targeted for reduction as an estimated 80% of emissions globally are classified as scope 3.
