Most firms not ready for full carbon reporting

Emissions stemming from products make disclosure tricky

Less than a third of public companies say they are prepared fully disclose their greenhouse gas emissions, if the Securities and Exchange Commission (SEC) soon requires them to.

The regulator is expected to announce its decision imminently on whether groups need to report on Scope 3 emissions – those that stem from everything within a business’s value chain, such as from all the goods it sells and the materials it uses. According to results of a survey this week from Deloitte, only 31% are ready or prepared to do so.

Meanwhile, 58% say that they are ready to report their Scope 1 emissions, while 47% said the same about Scope 2. Those greenhouse gases result from the energy businesses use to operate, and they are overall much easier to track than Scope 3 emissions.

“The companies that hold themselves accountable to their stakeholders by increasing transparency will be more viable – and valuable – in the long term,” the authors of the report wrote.

Deloitte surveyed 300 executives from large US businesses late last year about their preparedness to make ESG disclosures. The Securities and Exchange Commission is expected to soon publish a proposed rule around climate-risk disclosures for securities issuers, potentially making them mandatory.

For climate disclosure broadly, less than a quarter of firms said they are well-prepared for the issue. By comparison, 30% said they are ready for advanced disclosure about human capital management, while 24% said that for board diversity and 22% for cyber risk governance, according to Deloitte.

But Scope 3 emissions will be a challenge for many companies. The top reasons executives cited for difficulty in that category is a lack of data for the end-of-life treatment for their products (45%), fuel- and energy-related activities (40%), processing of sold products (36%), downstream transportation and distribution (35%) and purchased goods and services (32%), the survey found.

“While companies are setting ambitious climate and ESG goals, leaders remain cautious about their ability to deliver on rising disclosure requirements in a consistent, timely way,” the report read.

Nearly a third of respondents pointed to a lack of availability of ESG data, while 25% said the quality of it is a barrier to making disclosures.

However, the way that companies look at ESG issues appears to affect how well-prepared they will be to report on them.

“Senior executives who define materiality from a sustainability perspective are better prepared to report on Scope 3 emissions details than those who define it from a financial statement perspective (36% vs. 25%),” the report stated.