Regulatory bodies around the world have begun to seek out and penalize greenwashing. The U.S. Securities and Exchange Commission (SEC) has charged several companies, including Brazilian mining company Vale S.A. and Kansas-based Compass Minerals International, with making misleading statements about their ESG efforts. Australian regulators recently launched the country’s first court proceeding against a company for alleged greenwashing and claimed many more have likely participated in the practice. And the European Union (EU) recently adopted a Green Claims Directive, which takes aim at greenwashing explicitly by providing clearer guidelines on how companies should prove their environmental claims and establishing ground rules for independently verifying businesses’ ESG claims.
Currently, many regulatory bodies, such as the EU, are slated to require organizations to disclose their greenhouse gas emissions on a tiered system: Scope 1 comprises emissions directly produced by the organization’s operations; Scope 2 covers indirect emissions from purchasing oil, gas, and other forms of energy; and Scope 3 consists of any emissions produced throughout the organization’s supply chain.
Tracking Scope 1 and 2 emissions may seem easy enough, but in reality, it’s a complex challenge that many companies struggle with. All too often, vital information is collected manually and stored in systems that can’t communicate. Technology can help break down these barriers within organizations. By their nature, however, Scope 3 emissions are often much more difficult to account for.
Supply chain emissions are on average 11 times higher than operational emissions; they make up over 90% of an organization’s total greenhouse gas emissions, according to the 2020 CDP Global Supply Chain Report. That total includes not only a company’s direct suppliers, but also the vendors in suppliers’ own supply chains as well. To capture such a high volume of data, and to affirm its veracity, is a massive and expensive undertaking.