The measurement and reporting of Scope 3 Greenhouse Gas (GHG) emissions needs to be much more comprehensive and prevalent, says ACCA (the Association of Chartered Certified Accountants) in a report called "The Carbon We’re Not Counting: Accounting for Scope 3 Carbon Emissions."
The report asserts that global businesses will find it increasingly difficult to evaluate the nature, extent and value of GHG emission-associated risks and opportunities without high quality Scope 3 information. Scope 3 is classified as emissions that are a consequence of the activities of the company, but occur from sources not owned or controlled by the company.
However, ACCA and the report’s author, Dr Alan Knight, are concerned that none of the many regulatory or voluntary accounting and reporting programmes require Scope 3 accounting and reporting.
Dr Alan Knight says: “Over the last 10 years, much has been done to codify and promote the measurement and reporting of GHG emissions. But few companies have taken up the challenge of measuring and reporting Scope 3 emissions. This is holding back the much needed innovation demanded by the low carbon economy.”
Rachel Jackson, head of sustainability at ACCA commissioned the report and believes that the accountancy profession has a large part to play in changing the status quo. “Corporate understanding of the risks and opportunities associated with GHG emissions must be wholly realised, so that accountants can advise on their impact on performance and value. Scope 3 emissions must be measured and accounted for – by omitting them the datasets remain incomplete, and our much-needed transition to a low carbon economy will be slower,” says Jackson.
The report also recommends that:
•Governments, intergovernmental agencies and other standards and policy setters should consider making Scope 3 mandatory as it is currently voluntary.
•Scope 3 information and analysis should begin to be brought into the investment and appraisal process.
According to Knight, credible and complete carbon accounting is the best way forward. There are lots of opportunities for market-leading innovation in this field and we hope this report will inspire people to take up the challenge.”
Jackson adds that if accountants are to rise to the challenge they need to really understand the implications of Scope 3 emissions and provide the advice that will make the organisations they work with leaders in the low-carbon economy.
GHG Emissions Types
Scope 1: direct GHG emissions - Direct GHG emissions occur from sources that are owned or controlled by the company.
Scope 2: electricity indirect GHG emissions - GHG emissions from the generation of purchased electricity consumed by the company. Purchased electricity is defined as electricity that is purchased or otherwise brought into the organisational boundary of the company. Scope 2 emissions physically occur at the facility where electricity is generated.
Scope 3: other indirect GHG emissions - All other indirect emissions. Scope 3 emissions are a consequence of the activities of the company, but occur from sources not owned or controlled by the company.
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