By: Matthieu Maurin, CEO, Iceberg Data Lab

The corporate world is under increasing pressure to manage its carbon emissions and reduce its environmental impact. From agriculture to oil and gas, to transport, carbon emissions are damaging the air we breathe, the food we eat and the water we drink.

For several years, experts have been warning us of the devastating impacts of climate change, yet the reaction from the corporate world has been slow. While targets are being set by governing bodies, companies are not doing enough to meet them.

A crucial aspect of addressing the corporate impact on climate is often missing from environmental data disclosed by the world’s biggest companies: Scope 3 emissions.

Scope 3 emissions are carbon emissions produced across a company’s supply chain and the downstream impact of its products. They are very rarely calculated by companies, and even more rarely disclosed publicly. This missing data set is caused by three issues: the nature of scope 3 emissions; the scale of them; and the lack of pressure to report scope 3 emissions.

By their nature, Scope 3 emissions extend beyond an individual company’s control, and into the complex world of the supply chain.  Typically, the larger the company, the broader the supply chain. Without the ability to demand emissions data from other actors, it can be difficult, if not impossible, to accurately gauge scope 3 emissions. There have been some recent moves by various international companies to address this. For example, Kingfisher is asking its supply chain partners to all set science-based emission targets. Moves like this will undoubtedly help Kingfisher manager its scope 3 emissions, but without unified action, it will not have a great enough impact to lead to significant change.

Moreover, it is important to note that scope 3 emissions are often the most important source of carbon emissions for a company. As a result, corporate actors can be reluctant to disclose the true scale of their carbon emissions. In an age of greenwashing, false accusations and environmental activism, it is tempting to avoid reporting this data publicly. Modelling from Iceberg Data Lab found that across industries, Scope 3 emissions accounted for over 85% of emissions in the transport, oil and gas, food and agriculture sectors, with food’s Scope 3 emissions standing at a staggering 94% of the sector’s total emissions.

What is most concerning, however, is the lack of minimum compulsory standards ensuring all industries report Scope 3 emissions. It is widely known that tackling the problem of Scope 3 emissions is crucial for the global community to fight climate change. Yet, there is no uniform and comprehensive standard from governments, nor regulatory or certification bodies to report on them.

Governments and regulatory bodies also have a crucial role to play in addressing Scope 3 emissions. They must establish clear guidelines and standards for reporting emissions, and hold companies accountable for their impact, creating a level playing field by ensuring all companies are held to the same high standards.

This gap in accountability hinders global efforts to mitigate climate change and places the burden disproportionately on consumers and individual companies.

This was illustrated by the dwarfed ambition for compulsory Scope 3 reporting from US listed companies to the SEC. The SEC not only reduced the quality of information available to investors regarding climate risks and opportunities, but also weakened the changes in investment patterns to move away from polluting industries and drive capital allocation towards green transition champions.

To solve this problem, companies and investors must seek out transparent, clear data, whilst international bodies must pursue comprehensive global reporting standards on carbon emissions, including Scope 3.

For a company to accurately report on its Scope 3 emissions, it must prioritise accurate data measurement. Environmental data modelling is the foundation of that journey. AI can be used to design and test models and pinpoint where improvements can be made.  Models enable companies to assess the potential impact of multiple mitigation strategies on their overall emissions profile. This approach can drive significant reductions in carbon emissions and foster a culture of accountability and transparency.

This data is invaluable for financial institutions which are the “control tower” of the green transition. Banks, lenders, and investors must utilise Scope 3 emissions data, alongside other ESG data, to drive capital reallocation away from polluting companies and into those powering the transition.

There is an opportunity for our corporate world to unite and fight against climate change. Scope 3 emissions must be systematically accurately measured and reported, which demands transparent and accurate data solutions. Financial institutions, companies, governments, regulatory bodies and even consumers must work together to create a system where everyone is incentivised to disclose their Scope 3 emissions. With concerted efforts and a shared commitment in accelerating the sustainable transition, we can build a greener and more resilient world.

 

About the author:

With over 20 years’ experience in the sustainable finance sector, Matthieu Maurin is CEO of Iceberg Data Lab (“IDL”) an independent green fintech company he co-founded in 2019 with Pierre-Olivier Haye. IDL provides quality, science-based environmental data solutions for financial institutions, enabling clients to measure the impact of their investments and accelerate their sustainable transition journeys by reporting transparently on their overall biodiversity, climate and environmental impacts.  

Prior to launching IDL, Matthieu was CEO of Carbon4Finance, a specialized independent climate data provider, and a member of the Scientific Committee of the Euronext Low Carbon 100 indexi. Matthieu previously worked within BNP Paribas’ Corporate and Investment Banking branch for over 10 years, serving clients in the energy sector. At BNP Paribas, Matthieu participated in the development and origination of green loans and to the CSR Screening tool, which gave him a deep understanding of the client demand for tech-enabled environmental data solutions and the lack of satisfactory data providers on the market. Matthieu began his career at Electricité de France.  

Matthieu holds a Bachelor’s degree in Engineering and Risk Management from Grenoble INP University, and a Master’s degree in Safety from École Nationale Supérieure d’Arts et Métiers 

[1] https://live.euronext.com/en/product/indices/QS0011131735-XAMS/market-information  

Iceberg Data Lab 

Founded in 2015, Iceberg Data Lab (“IDL”) is an independent and innovative green fintech company providing quality, science-based environmental data solutions for financial institutions, enabling clients to measure the impact of their investments and accelerate their sustainable transition journeys.  Leveraging AI and Big Data, IDL’s extensive suite of products measure and monitor crucial metrics such as the carbon and biodiversity footprints of portfolio companies, across all sectors and all geographies, to provide a holistic life cycle analysis (including Scope 1, 2 and 3) of their environmental impact.  IDL’s diverse dataset covers over 2,300 different products across and services, supporting clients in their decision-making processes, including driving investment and risk management strategies, building indexes and funds, and developing Environmental Impact Reporting.