In a new report, produced by Insightia, a Diligent brand, 63% of the largest 500 U.S. public companies have voluntarily reported on Scope 3 emissions. U.S. organizations are taking steps to address their environmental, social, and governance (ESG) responsibilities, particularly when it comes to Scope 3 reporting. This growing trend is driven by increasing pressure from regulators, standard setters, and investors who are advocating for mandatory Scope 3 reporting.
The report sheds light on the global accountability for emissions reporting and the increasing demand for mandatory Scope 3 reporting. The report discusses the implications of Scope 3 reporting in the U.S., the pressure faced by emissions-intensive sectors, and the importance of clear insights and benchmarking for optimized shareholder engagement
The Need for Enhanced Climate Disclosures
Leaders in U.S. organizations are having to navigate the diverse and evolving landscape of ESG-related requirements. This approach becomes even more crucial for high-risk sectors such as energy and utilities. By taking the initiative to address ESG-related risks and opportunities, organizations can optimize their performance and contribute to sustainable practices within their industries.
The mounting pressure to enhance climate disclosures emphasizes the importance of obtaining clear and consistent insights into climate performance. Organizations must be able to benchmark their ESG data against industry peers to measure progress accurately and identify areas for improvement.
Such insights enable companies to meet the expectations of regulators, investors, and other stakeholders, who are demanding greater transparency and accountability in emissions reporting.
Global Implications of Scope 3 Reporting
The momentum behind Scope 3 reporting is not limited to the U.S. alone; it is a global phenomenon. Emissions-intensive sectors, including energy and aerospace/defense, face sustained pressure to enhance their net-zero commitments.
In the U.S., shareholder proposals related to climate change have gained significant support, with the energy and aerospace/defense sectors garnering average support of 32% and nearly 37, respectively, in the first five months of 2023. Moreover, 63% of the 500 largest U.S. public companies have already taken the initiative to voluntarily report on Scope 3 emissions, demonstrating their commitment to emissions reduction.
Increasing Pressure on Issuers for ESG Disclosure
While average support for environmental and social shareholder proposals may have shown a slight decline in recent years, the number of proposals that pass remains elevated. Moreover, there is a growing trend of withdrawing ESG requests for agreements.
In 2022, 26 environmental and social shareholder proposals received majority support at S&P 500 companies, compared to 18 and 30 in 2020 and 2021, respectively. This indicates the continued pressure on issuers to enhance their ESG disclosure practices and align with stakeholder expectations.
As regulators, standard setters, and investors call for mandatory reporting, organizations are having to prioritize addressing ESG-related risks.
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