When it comes to sustainability reporting, only a small number of mid-market companies are doing it, said Grant Thornton recently.
According to a new report by the firm, 14% of mid-market businesses are currently reporting on the Scope 3 emissions that the International Sustainability Standards Board (ISSB) recently voted unanimously to require companies to disclose.
The ISSB announced after its October meeting that it would require company disclosures on Scope 1, Scope 2 and Scope 3 greenhouse gas emissions.
Grant Thornton’s International Business Report asked around 5,000 mid-market businesses in 28 countries what they were reporting in relation to their emissions.
- While over a third (35.2%) were reporting on Scope 1 and 2 emissions as mandatory requirements and just under a third (31.5%) were reporting Scope 1 and 2 emissions voluntarily, only 14.3% were disclosing their Scope 3 emissions.
- Scope 1 covers direct emissions from a company; scope 2 covers indirect emissions from electricity purchased and used; and scope 3 covers all other indirect emissions from the value chain.
- While the ISSB has confirmed what types of emissions are now in scope, it won’t publish any standards, detailing what data companies will need to track and report, until early 2023. However, it has confirmed the use of the Task Force on Climate-related Financial Disclosures (TCFD) architecture as the basis for its standards.
The adoption of ESG reporting is being hampered by the lack of a clear pathway, with the existence of multiple standards, both mandatory and voluntary, and little guidance on what data needs to be gathered and how it should be reported, Peter Bodin, CEO of Grant Thornton International Ltd. pointed out.
“It’s a question of knowing which information to acquire, and what to do with that data. The scenario analysis is challenging, and many businesses don’t know where to start,” said Sarah Carroll, director – sustainability reporting at Grant Thornton International.
This can be especially hard for mid-market companies, which may lack the resource to fulfil reporting intentions, she added.
Preparing for sustainability reporting requirements requires immediate action, and significant investment, according to her.
“Businesses need to invest in resources, invest in training, invest in their people, maybe in a third-party expert,” she said. “They must understand the requirements, understand what Scope 1, 2 and 3 emissions are; and start trying to gather this information. To report in 2023, they need to understand what happened in 2022, even if, in the final standard, the ISSB does not require them to report comparatives,” she noted.