Comparability issues in climate strategy reports

Scope 3 Climate reporting is one of the big debates of 2024 and we need a grown-up discussion about how to address the problems with the data. Our research team has just published some very helpful insights. Key points below:   - It represents the majority of emissions: On average, Scope 3 emissions account for over 80% of overall carbon footprint of companies. - But… reporting is poor quality: In the FTSE All World (ie large/mid caps representing approx. largest 4000 listed companies globally) 45% disclose Scope 3 data, but less than half of them cover the most material categories for their sector. - And reported data is volatile, with over a third of disclosed values varying at least 50% YoY and half varying at least 20%. Changes to reported Scope 3 categories is major source of variation, with almost half of reporting companies in the FTSE All-World Index either adjusting categories (37%) or disclosing for the first time (12%). - Estimated data varies dramatically depending on what models and methodologies you apply. Ultimately, the quality of estimated data is inherently constrained by the quantity and quality of the available reported data. Compared to Scope 1 and 2 estimates, Scope 3 estimation models must work with a third less input data – which, on average, is also almost twice as variable and more than twice as volatile. - There is potentially too much discretion on how to report: Existing standards provide broad discretion on which emissions to include, how to categorise them, and what data and methods to use to measure them – creating a much higher reporting burden for Scope 3 emissions for companies, but also contributing to poor data quality and comparability for investors. - Focusing on top 2 or 3 categories could be the way forward: the two most material Scope 3 categories in each sector and on average cover 81% of total Scope 3 emissions, providing a useful rule of thumb to determine the most material categories for investors and companies. We provide recommendations on Scope 3 for each. Cutting across them, we emphasise the need to systematically focus on the most material Scope 3 categories in each sector to reduce reporting burdens and improve quality and comparability of Scope 3 data.   Read full paper here: https://lnkd.in/erUxsH8d Well done to Félix Fouret Ruben Haalebos Malgorzata Olesiewicz Jack Simmons Mallika Jain Jaakko Kooroshy. Jane Goodland Cornelia Andersson Aled Jones Solange Le Jeune Tony Campos Carolyn Roose Eagle Arne Staal Fiona Bassett Claire Dorrian David Russell Carmen Nuzzo Stephanie Pfeifer OBE Adam Matthews Rory Sullivan Nathan Fabian Tamsin Ballard Sagarika Chatterjee Michael Jantzi Will Oulton Jessica Fries Ella Sexton Ben Caldecott James Close Patrick Arber Faith Ward Andreas Hoepner

The latest Corporate Climate Responsibility Monitor 2025 is a deep, 165-page analysis of the #climate strategies of 55 major global companies (https://lnkd.in/eNKsG7iB). And the results? They are are not great, to say the least. The analysis finds that NONE of the 20 companies assessed demonstrate a climate strategy with ‘reasonable’ or ‘high’ integrity—where integrity reflects the credibility, transparency, and sector-specific robustness of a company’s climate approach. Only a few, such as H&M Group, adidas, and Danone, achieve a “moderate” rating, reflecting early steps toward more credible strategies and sector-specific transition efforts. One word that comes to mind when reviewing the report is messiness. For example, the authors note they can’t calculate a median reduction commitment for 2030 due to persistent structural obstacles—like sector-specific accounting malpractices and incomplete emissions disclosures—that make it increasingly unclear what companies are actually committing to. But this messiness isn’t accidental. It reflects not only flaws in the current assessment and validation systems like #SBTi or #TPI (see pp. 13–14 of the report), but also the deeper dysfunctions of sustainability-as-usual. The problem isn’t just tactical or strategic—it’s #systemic. Companies operate within a framework that prioritizes short-term growth and profit maximization, making anything outside that logic—including meaningful #climateaction—extremely difficult to pursue. This will only change when the system itself changes. Until then, companies will continue to make mostly incremental progress—but it will remain insufficient, because truly sufficient progress would require rethinking and redesigning their #businessmodels. And that kind of transformation still lacks both the leadership courage and the ‘permission’ of financial markets needed to move forward.

Comparability and Comprehensiveness of Environmental Indicators across ESG Frameworks: Environmental indicators play a crucial role in assessing corporate sustainability performance, yet their comparability and comprehensiveness vary across ESG reporting frameworks such as the Global Reporting Initiative (GRI), the Corporate Sustainability Reporting Directive (CSRD), and the IFRS Sustainability Disclosure Standards (notably IFRS S2 on climate-related disclosures).   Resource conservation and industrial pollution are comprehensively addressed in the GRI Standards (e.g., GRI 301–306), which provide sector-specific metrics and detailed guidance on waste, water, and materials. CSRD, aligned with the European Sustainability Reporting Standards (ESRS E5, E2), builds on GRI principles but emphasizes double materiality, requiring entities to disclose both the financial and societal impacts. IFRS, on the other hand, focuses primarily on financially material sustainability risks, offering less granularity on resource use unless it significantly affects enterprise value.   Energy use, GHG emissions, and climate action are covered consistently across all three frameworks. IFRS S2 aligns closely with the Task Force on Climate-related Financial Disclosures (TCFD), ensuring standardized reporting on Scope 1, 2, and material Scope 3 emissions. GRI (302, 305) and CSRD (ESRS E1) go further by mandating disclosures on energy mix, transition plans, and climate targets, providing a more comprehensive view.   Ecological and biodiversity risks show the greatest divergence. GRI 304 and CSRD (ESRS E4) include explicit requirements on biodiversity impacts and location-specific risks, whereas IFRS currently provides limited guidance unless biodiversity risks are deemed financially material. Overall, GRI and CSRD offer broader coverage and comparability across industries due to their stakeholder-inclusive and double materiality approaches. IFRS is narrower in scope but offers high investor relevance. For robust ESG reporting, organizations often need to align multiple frameworks to balance comprehensiveness with financial materiality. In the Indian context, GRI is widely adopted for its stakeholder inclusiveness and sector-specific depth. CSRD offers alignment for EU-linked businesses. IFRS is gaining traction for investor-focused disclosures. A blended approach ensures alignment with global expectations while addressing local regulatory priorities and diverse stakeholder needs. #ESGReporting #ESGframeworks

We are increasingly recognizing the structural problems with Scope 3 GHG accounting? Our latest installment in the "What is GHG Accounting?" series tackles the Scope 3 boundary problem head-on, addressing how we could fix the legacy GHG Protocol value chain approach that lacks clear boundaries and comparability. We propose: 1. A Physical GHG Inventory statement using allocational methods and precisely delimited, industry-specific boundaries 2. A Mitigation Intervention statement using consequential methods to account for avoided emissions and enhanced removals from actions outside the clearly defined physical inventory boundaries A multi-statement approach aims to end the confusion between allocational and consequential accounting claims inherent in the current fuzzy value chain paradigm. Key to the proposed Physical Inventory statement is establishing "clear" boundaries that explicitly identify physical emission sources and removal sinks, and thereby offer an objective basis for evaluating inventory completeness. This is achieved through applying proposed boundary-setting principles like pursuing intra-industry comparability, limiting to proximate physical connections, requiring process-level visibility and quantifiability, screening for significant sources/sinks, and potentially enabling sectoral additivity. The goal is to produce corporate GHG inventory totals and trends that are more accurate, comparable, and sensitive to real changes in company operations. We recognize that this transformation will entail new work, but this can be expediently driven through a bottom-up process with standard setters providing guidance and oversight. I also call out current "comparability illusion" of using GHG Protocol value chain inventories for comparative decisions, highlighting the need for standards purpose-built for specific use cases where comparability is necessary. This ongoing work has significant implications for ongoing debates over corporate net zero standards in SBTi and ISO, as well as mandatory corporate reporting such as under the EU CSRD and California SB 253 - Climate Corporate Data Accountability Act. What are your thoughts on this proposed shift to more clearly delimited Physical Inventory boundaries and a multi-statement framework for corporate GHG reporting? Our next installment will dive more deeply into elaborating options for various statements that serve different intended uses of corporate GHG accounting. #GHGAccounting #Scope3 #ClimateAction #SustainabilityReporting #Comparability #GHGProtocol Derik Broekhoff Matthew Brander Mark Trexler Alexia Kelly Chris Davis Gilles Dufrasne Timothy Juliani Jonathan Crook Dr Injy Johnstone Grant Ivison-Lane Nathan Truitt Roger Ballentine Autumn Fox Emma W. Alberto Carrillo Pineda Hans Näsman Jimmy Jia Alissa Benchimol Erika Barnett Darius Nassiry Kaya Axelsson Scarlett Benson

Important read. European Central Bank has released an opinion paper on the role of CSRD and CSDDD expressing concern on reduction of scope citing business competitiveness today is dependent also on utilising sustainability as an asset. Reporting on it supports better understanding on the return on investment on any such efforts. Here is a summary of the key messages: ⚉ Sustainability Reporting as a Strategic Asset →High ROI on Reporting: Sustainability data enables better risk management, supports investment flows into green sectors, and improves financial stability across the EU. →Informed Decision-Making: Reliable, comparable ESG data supports effective monetary policy, supervision, and financial regulation. →Supports Innovation & Competitiveness: Harmonized ESG reporting aligns with the EU’s long-term industrial and climate goals, e.g., Clean Industrial Deal and Competitiveness Compass. ⚉ ECB’s Strategic Role →Data-Driven Monetary Policy: The ECB needs quality firm-level ESG data to account for climate and nature-related risks in its monetary operations. →Financial Supervision: Incomplete ESG data from banks (due to scope reduction) could impair the ECB’s oversight and undermine market stability. →Systemic Risk Management: ESG data gaps can create blind spots in macro-prudential frameworks. ⚉ Concerns Raised by the ECB →Reduction in Reporting Scope: An 80% cut in reporting entities risks systemic blind spots—especially excluding high emitters and smaller but significant financial institutions. →Voluntary Standards Risk: Without mandatory reporting, there’s potential for greenwashing, self-selection bias, and data fragmentation. →Loss of Sector-Specific Standards: Eliminating these could undermine comparability and weaken risk differentiation for banks and investors. ⚉ ECB Recommendations →Maintain robust ESG reporting for all significant financial institutions, regardless of size. →Introduce simplified standards for “medium-large” undertakings (500–999 employees) to bridge the gap. →Ensure the timely adoption of assurance standards and maintain Commission authority for sector-specific guidelines. →Leverage ESAP and digital access for bulk ESG data use by market participants. #sustainabilityreporting #esg #ecb #greenfinance #csrd #euregulation #sustainablefinance #monetarypolicy #financialstability #climaterisk #corporatereporting #esgdata #duediligence #eucommission #sustainablegrowth European Commission

No more apples 🍎 and oranges 🍊 ... Having assets in multiple countries shouldn't require patchwork climate risk analysis... Just left a call with a sustainability consultant juggling projects across Europe, Asia, and the U.S. Their biggest pain point? Every region has different data, different methodologies, and zero comparability. They lose days trying to stitch together insights that still don’t add up. That’s why we at Mitiga Solutions built EarthScan to deliver truly global climate risk intelligence with the most flexible pricing: – One dataset standardized for every location worldwide. – Global resolutions starting at 90m. – The most comprehensive temporal scales. – Return periods for every hazard. - Identical methodology from Africa to Asia to the Arctic – Outputs you can compare across assets, countries, and portfolios No more hunting for fragmented reports or converting local metrics. ... while making climate data more equitable. 👉 Here's how EarthScan helps consultancies scale global insights, not just local ones: https://lnkd.in/d3XX5t7A #ClimateIntelligence #GlobalData #SustainabilityConsulting #MitigaSolutions #EarthScan #ESGReporting

Is your company ready to report its full climate impact – without offsets, shortcuts, or vague targets? The IFRS Foundation has clarified how greenhouse gas emissions must be reported under IFRS S2. It’s a detailed, high-bar standard – and many firms will find it challenging. For companies preparing 2025 disclosures, this means tougher expectations and far less room for ambiguity. But in my view, it’s also a necessary shift toward real accountability and clarity in ESG. ╦╦╦ In case you missed it, here’s what your organization needs to know: 📌 Report absolute, gross GHG emissions for Scopes 1, 2, and material Scope 3. All 15 Scope 3 categories must be assessed, with gross figures only. This raises comparability and transition risk visibility. 📌 No more hiding behind offsets. If you set emissions goals, you must specify whether they’re gross or net, and explain any use of carbon credits, including type, scheme, and permanence. 📌 Use high-quality data. Primary data is preferred (e.g. meter readings). If you rely on secondary sources (e.g. industry averages), disclose why and to what extent. 📌 IFRS S2 overrides the GHG Protocol in case of conflict, unless local regulations dictate otherwise. 📌 Define your reporting boundary. Disclose your approach (equity share, operational control, or financial control) and separate emissions from consolidated vs. non-consolidated entities. 📌 Financial institutions must report financed emissions (Scope 3, Category 15) and explain their chosen methodology. 📌 M&A impacts must be explained if they materially affect emissions, though restatement isn’t required. ╦╦╦ With IFRS S2 now adopted in over 50 countries – representing 75% of global GDP – this guidance marks a decisive global shift toward standardized, decision-useful ESG data. But let’s be honest: compliance won’t be easy: ╚ Only 30% report all material categories ╚ 70% of companies still lack supplier data ╚ 60% of firms still rely heavily on secondary data ╚ 50% of SMEs are not ready to cover high reporting costs Is your organization ready to meet the new standard? - - - P.S. We're helping others through this – and we can help you, too. Our AERA platform simplifies emissions accounting and data collection across even the most complex value chains – for both corporates and financial institutions.

Yesterday I wrote that the next phase of corporate climate strategy would be quieter than headlines - restated baselines, redefined scopes, sub-targets dropped without comment, language drifting in sustainability reports. A good friend reached out and confirmed that they are already hearing this in their conversations for some time. So we should be able to track this in data. I went looking. I picked 30 of the most-watched corporates across eight sectors in Europe and North America, pulled their disclosures, sustainability reports and current webpages, and coded each on a five-point scale of how far they've moved from their original climate commitments. The five categories: 🟩 Holding: formal targets retained, on-track delivery. 🟨 Minor softening: targets retained, but capex or framing slipping. 🟧 Partial reframing: language softened, performance gap widening, target trajectory becoming implausible. 🟥 Major walk-back: a target outright abandoned or delayed by years. ⬛ Wholesale reversal: full strategic pivot, publicly announced. 23 of the 30 sit somewhere on the walk-back side of the scale. Six are wholesale reversals. Only four are genuinely holding. The cleanest pattern is structural: 2030 is being walked back; 2050 isn't. Endpoints are almost universally retained while interim milestones get reframed. The sector picture is starker. In oil and gas, financial services, aviation, consumer goods, and tech, every company in the sample shows movement away from original commitments. The holders sit in industrial manufacturing, materials, and shipping. Financial services is the most coordinated of the retreats - banks and asset managers exiting climate alliances in near-lockstep over the past 18 months. The more interesting outlier is manufacturing: same sector, but companies dispersed across the entire scale, which is where the next 24 months get most informative. Some caveats worth being honest about. First, this is a selected sample of high-profile corporates, not a random cross-section. The 77% can't be read as "77% of all companies." Second: A walk-back isn't automatically a sign of lack of action or ambition. Many of these targets were set in 2020-21, when both the standards for what counted as a credible climate target and the collective understanding of what was technically and economically possible were substantially less developed. Some of what looks like retreat is genuinely a recalibration to more grounded and realistic targets. And it is consistent with the "Do-Say Gap", that me and my partners have described for some months now. Lastly, the research & classification was done by AI. I'm sure it missed a thing here or there, but I've done enough spot checks to know this is directionally right. The spectrum I described last time - quiet retreat at one end, pragmatic acceleration at the other - has gone from a hypothesis to something measurable.

𝗜𝗦𝗢 × 𝗚𝗛𝗚 𝗣𝗿𝗼𝘁𝗼𝗰𝗼𝗹 𝗣𝗮𝗿𝘁𝗻𝗲𝗿𝘀𝗵𝗶𝗽: 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝗶𝗰 𝗜𝗺𝗽𝗹𝗶𝗰𝗮𝘁𝗶𝗼𝗻𝘀 𝗳𝗼𝗿 𝗖𝗼𝗺𝗽𝗮𝗻𝗶𝗲𝘀 On 9 September 2025, the International Organization for Standardization (ISO) and the GHG Protocol announced a strategic partnership to harmonize global greenhouse gas (GHG) reporting standards. This marks a structural shift in climate reporting governance. The current GHG reporting landscape is fragmented: - GHG Protocol provides the global foundation for Scope 1, 2, and 3 accounting. - ISO 14064 and ISO 14067 provide certifiable, audit-ready standards. - Regulations such as the Corporate Sustainability Reporting Directive (#CSRD) and frameworks from the International Sustainability Standards Board (#ISSB) reference these standards, sometimes with variations in interpretation. The result has been: - Divergent system boundaries - Different Scope 2 and Scope 3 treatments - Audit complexity - Reduced cross-company comparability #ESGReporting #CarbonAccounting #ClimateGovernance Core Objective: Harmonization The partnership aims to: - Align methodological logic (system boundaries, emission factors, calculation approaches) - Reduce duplication in documentation and reporting - Improve global comparability of emissions data - Strengthen auditability and legal certainty - Enhance alignment with regulatory ESG frameworks Increased Focus on Product Carbon Footprints A key development is the stronger harmonization of product-level emissions accounting. This is particularly relevant for: - Scope 3 transparency - EU supply chains - CBAM implementation - Manufacturing decarbonization strategies #ProductCarbonFootprint #Scope3 #SupplyChainDecarbonization Implications for Companies: #Short_term: - No immediate obligation to transition - Existing GHG Protocol inventories remain valid #Medium_term: - Convergence of terminology and definitions - Reduced flexibility in Scope 3 categorization - Clearer documentation and data quality requirements #Long_term: - Unified global reference framework - Simplified audits and assurance processes - Greater investor confidence in emissions disclosures #ClimateDisclosure #CSRD #SustainableFinance Actions Companies Should Take Now 1. Review system boundaries, assumptions, and emission factors. 2. Ensure structured Scope 1–3 data architecture. 3. Strengthen audit trails and documentation processes. 4. Monitor upcoming consultation drafts (expected from 2026). #Conclusion - The ISO–GHG Protocol partnership is a decisive step toward global standard convergence in carbon accounting. - For companies operating across jurisdictions or reporting under CSRD and ISSB-aligned frameworks, this development will reduce long-term complexity while increasing reporting robustness and comparability. 𝐄𝐦𝐚𝐢𝐥: sachin.sharma@sgs.com or 𝐌𝐞𝐬𝐬𝐚𝐠𝐞: Sachin Sharma 𝐁𝐨𝐨𝐤 𝐚 F̳R̳E̳E̳ 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐢𝐨𝐧 𝐜𝐚𝐥𝐥: https://lnkd.in/g23UVEMb