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The Net Zero Asset Owner Alliance (NZAOA) – representing firms managing a staggering $9.5 trillion in assets – has called on governments worldwide to implement mandatory Scope 3 emissions disclosures. These indirect emissions, originating from a company’s value chain, often dwarf direct emissions and represent a critical component in the fight against climate change.
As regulatory frameworks tighten and stakeholder expectations escalate, this push could transform the landscape of environmental accountability, making high-quality emissions data a non-negotiable requirement for businesses globally.
Scope 3 emissions frequently constitute the majority of a company’s total greenhouse gas (GHG) footprint. For instance, CDP reports that Scope 3 sources, including supply chain and product use, can produce emissions 26 times higher than a company’s direct operations. Similarly, Wood Mackenzie estimates that for oil and gas firms, Scope 3 accounts for 80–95% of total emissions.
Despite their significance, these emissions remain vastly underreported. This gap stems from fragmented accounting standards, inconsistent methodologies, and voluntary reporting frameworks. To address these challenges, the NZAOA argues that top-down regulatory mandates are essential for driving credible and comparable Scope 3 data, enabling asset owners to better align investments with net-zero goals.
The NZAOA’s recent paper lauds the EU’s Corporate Sustainability Reporting Directive (CSRD) as a leading example of robust climate regulation. By 2029, the CSRD will require businesses operating within or trading in the EU to disclose Scope 3 emissions, setting a precedent for other regions.
However, the Alliance warns against fragmented approaches that could lead to divergent standards across jurisdictions. It urges policymakers to adopt unified, science-based frameworks to ensure data consistency and comparability.
While regulatory mandates are crucial, the NZAOA also underscores the role of asset owners in demonstrating leadership. Udo Riese, the Alliance’s lead on monitoring, reporting, and verification, said, “Our paper highlights the need for credible and comparable Scope 3 data, or else we will not see necessary carbon reductions in the real economy.”
To ease the reporting burden, the NZAOA suggests a phased approach:
Failure to disclose could carry significant consequences. The Alliance warns that asset owners may increasingly favour issuers with robust Scope 3 targets and credible reporting, potentially leading to capital reallocation away from lagging firms.
For asset managers, the shift toward mandatory Scope 3 disclosures presents both challenges and opportunities:
This is where SI Engage comes in. Our cutting-edge platform equips asset managers with tools to streamline Scope 3 data collection, analysis, and reporting. From integrating third-party emissions estimates to automating compliance workflows, SI Engage helps you stay ahead in a rapidly evolving regulatory landscape.
As global emissions hit record highs in 2023, the need for robust climate action has never been more urgent. The NZAOA’s call for mandatory Scope 3 disclosures sends a clear message: the financial sector should lead the charge in holding businesses accountable.
Whether through regulatory mandates, investor engagement, or technological innovation, the path forward demands collective action. By embracing transparent, standardised emissions reporting, asset managers can drive meaningful change – both for the planet and their portfolios.
For more on how SI Engage can support your net-zero journey, explore our software and book your trial here.
