Companies’ commitments to climate plans may be overshadowed by ongoing challenging market conditions as consumers endure immediate concerns about the global cost of living crisis and renewed geopolitical and macro uncertainty. Practices such as purchasing carbon offset certificates without reducing emissions and carbon leakage are common in many corporate environments. Challenges remain as standards are often voluntary and do not apply universally.
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Governments will crack down on corporate greenwashing in 2023
Greenwashing scandals remain in the headlines, as many corporations are accused of over-emphasizing the sustainability credentials of their products and services. However, in 2023 the first re-evaluation of the implementation of the Paris Agreement will occur. Government scrutiny over greenwashing and regulation around ESG disclosure will therefore have to increase in 2023.
The EU introduced the European Green Deal (EGD) in September 2022, ahead of the first re-evaluation of the implementation of the Paris Agreement in 2023. The EGD aims to help tackle misleading ESG claims made by corporations by requiring them to substantiate these claims against a standard methodology. Businesses that do not change misleading environmental claims or prioritize the delivery of ESG pledges will face increasingly severe fines as tighter regulations come into play.
Scope 3 emissions
Tighter regulation will require businesses to become accountable for their Scope 3 emissions. These refer to all indirect emissions in a company’s value chain and encompass both Scope 1 and 2 emissions. While companies discuss and disclose Scope 1 and 2 emissions, Scope 3 is often ignored. These emissions represent a huge proportion of the carbon footprint, but measuring, tracking, and accounting for them is challenging as it requires cooperation and transparency between all stages of the value chain.
However, regulators are now taking an increasing interest in monitoring Scope 3 emissions. The US, EU, and New Zealand recently proposed a mandatory requirement for listed companies to begin disclosing their Scope 3 emissions. Further improvements in standardized methodology between sectors and supply chain partnerships will be essential in 2023 for businesses to become accountable and to continue their commitment to reach net zero by 2050.
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By GlobalDataAdopting a unified, internationally standardized approach is a needed first step. Much remains to be done. Read more here: Tech, Media, and Telecoms 2023
