Scope 3 emissions reporting deadline looms

A recent survey conducted by Censuswide has revealed a concerning trend in the UK business landscape. Almost two-thirds, or 60%, of companies are projected to miss the upcoming EU deadline for reporting Scope 3 emissions, putting them at risk of financial penalties and losing valuable customers. With mandatory disclosure on the horizon, businesses must understand what Scope 3 emissions entail, whether they fulfil the criteria to necessitate disclosure and the urgency of compliance.

Understanding Scope 3 emissions

Scope 3 emissions refer to indirect greenhouse gas emissions generated by a company’s value chain. It encompasses emissions from sources not owned or controlled by the company, including suppliers, distribution networks, and the use and disposal of products. It is an important aspect of assessing a company’s carbon footprint and its impact on the environment.

Applicability and mandatory disclosure

Regulations will apply to qualifying businesses meeting at least two of the following three criteria; €40m net revenue, €20m balance sheet and more than 250 employees. The reporting requirement will be enforced through a first set of sustainability reporting standards, known as CSRD (Corporate Sustainability Reporting Directive). Qualifying businesses must disclose a CSRD report for their 2024 financial year. All EU Member States are required to comply with the CSRD by 6 July 2024.

Survey findings and concerns

The recent survey conducted by Censuswide aimed to understand how prepared businesses are for the upcoming Scope 3 emissions reporting regulations. Out of the 800 firms surveyed, 60% are at risk of missing the reporting deadline. This revelation raises concerns among business leaders, with 27% expressing worry about the implications of non-compliance. Particularly alarming is the fact that 49% of leaders in companies with a turnover of under £1 million are concerned about potential fines and reputational damage.

Customer loyalty at stake

The consequences of non-compliance extend beyond fines and regulatory implications. The survey also revealed that customer loyalty is at stake. Nearly half, or 49%, of the surveyed consumers stated that they would switch to other brands if the companies they currently shop with are fined for non-compliance. Additionally, 17% of consumers indicated that they would never purchase from these companies again. These findings underscore the significance of meeting the reporting requirements to maintain customer trust and secure long-term relationships.

The role of asset managers

Businesses that fail to meet the reporting deadline or provide inaccurate data risk financial penalties that could have a substantial impact on their bottom line. In this scenario, asset managers play a vital role in supporting company leaders. By collaborating with asset managers, businesses can ensure that their leaders are well-informed about the reporting requirements and equipped with the knowledge and resources to navigate the complexities of Scope 3 emissions reporting. Asset managers can guide leaders in developing effective strategies, optimising data collection processes, and aligning sustainability efforts with the reporting framework.

As the deadline for mandatory Scope 3 emissions disclosure approaches, UK businesses must prioritise compliance to avoid potential fines and customer attrition. Understanding the intricacies of Scope 3 emissions, identifying the sectors and businesses affected, and acknowledging customer sentiment are essential for maintaining a competitive edge in today’s environmentally conscious market. 

By engaging with asset managers, businesses can tap into expertise and guidance, ensuring accurate reporting and demonstrating a commitment to sustainability. Through proactive measures, businesses can navigate the challenges of Scope 3 emissions reporting, safeguard their financial viability and customer relationships, and contribute to a more sustainable future.

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