Burges Salmon’s new research argues that businesses must with their procurement processes and supply chain to meet compliance targets.

Scope 3 emissions are quickly emerging as the defining challenge for organisations looking to achieve meaningful sustainability goals. Now, new data gathered by UK law firm Burges Salmon suggests that compliance failures within the supply chain are threatening to undermine efforts to tackle accurate Scope 3 emissions reporting, and therefore wider efforts to decarbonise companies’ value chains.

Scope 3 emissions disclosure

Scope 3 refers to emissions resulting from assets not owned or controlled by the reporting organisation, but that the organisation’s value chain affects. This type of emissions are, according to the US EPA, more than 11 times higher than a company’s operational emissions, and usually equate to more than 90% of its greenhouse gas emissions. 

Driven by increasingly strict legislation, companies are working to develop more stringent and accurate protocols for tracking and disclosing their Scope 3 emissions. 

While many companies are working to develop the application of robust ESG standards into everyday operations, Burges Salmon’s report warns that, across the Energy and Utilities, Technology, Built Environment, Transport and Healthcare sectors, exists a level of unpreparedness that could spell serious problems for the country’s green ambitions. According to the report, 32% of all businesses surveyed are completely unprepared to meet their ESG supply chain disclosure obligations. Among those, only 29%, fewer than 3 in 10, believe their organisation fully understands the legislative and regulatory landscape governing ESG corporate disclosure.

Disclosure is an essential first step toward supply chain decarbonisation

Michael Barlow, partner and Head of ESG at Burges Salmon, commented: “UK companies must first prove their commitment to ESG by complying with a range of mandatory disclosure obligations. Ensuring business partners meet ESG standards requires investment, resources and constant monitoring, and it is clear from our research that most companies still have some way to go.”

Specifically, it seems that larger organisations are the ones struggling to report the environmental impact of their purchasing and supply chain operations. Burges Salmon’s report found that only 45% of large organisations confirmed that they have a dedicated team that deals with ESG related matters. Similarly, only 43% of respondents in those companies reported that their organisation fully understands the legislative and regulatory ESG risks their supply chain may give rise to.

By contrast, evidence from the research shines a light on small and medium sized businesses as those able to provide greater levels of influence in successfully meeting their ESG compliance obligations, with 75% of respondents from this group claiming their organisation fully understands the legislative landscape.

“A small organisation might have more limited disclosure obligations and can be quite on top of it. For large organisations, obligations are more complicated, particularly if they operate across different jurisdictions. What’s more, if ESG teams are too remote from day-to-day operations, there is a danger that ESG remains on the periphery of business priorities” adds Barlow.

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