ESG Reporting – Compliance, Trust, and Transparency

As companies race to keep up with new climate disclosure reporting requirements, staying compliant has become as crucial as sustainability innovation itself. Today’s consumers aren’t just looking for the best products or services; they want to align with brands that advance sustainability initiatives. This growing trend underscores the importance of Environmental, Social, and Governance (ESG) reporting, a powerful tool that not only ensures regulatory compliance but also builds trust and loyalty in an eco-conscious market.

If you are not directly involved in the world of sustainability yet, you must be wondering: What is ESG reporting? It is a framework used by companies to transparently disclose information about their environmental impact, social responsibilities, and governance structures. It includes data on emissions, resource usage, labor practices, community engagement, and ethical management practices.

Companies typically prepare and submit their ESG reports annually. The specific timing can vary depending on their fiscal year and the reporting requirements of regulatory bodies or industry standards to which they adhere. Most companies align their ESG reporting with their annual financial reporting cycle to ensure consistency and completeness of the information provided.

Understanding Emissions – Scope 1, 2, and 3

A crucial component of ESG reporting involves the measurement and disclosure of greenhouse gas (GHG) emissions, which are categorized into three scopes:

• Scope 1 Emissions are the direct greenhouse gas emissions that a company produces from sources it owns or directly controls. These include emissions from company-operated facilities and vehicles, stationary equipment like boilers, furnaces, generators, or other industrial processes within company facilities.

• Scope 2 Emissions are the indirect GHG emissions associated with the consumption of purchased electricity, steam, heating, and cooling. These emissions occur at the facility where the energy is generated, not where it is used. Therefore Scope 2 emissions are generated at company office buildings, manufacturing plants, and data centers that use electricity typically purchased from a utility provider.

Scope 3 Emissions encompass all other indirect emissions that occur in a company’s value chain, both upstream and downstream. They are often the most challenging to measure and manage, as they involve emissions from sources not owned or directly controlled by the company. Upstream activities include emissions from the production and transportation of purchased goods and services, business travel, employee commuting, and waste generated in operations. Downstream activities include emissions from the use of sold products, end-of-life treatment of sold products, and transportation and distribution of sold goods.

 The Role of Biofuels and Biogenic Carbon Emissions

A noteworthy aspect of emissions reporting is the inclusion of biogenic carbon emissions. These emissions are a unique subset of greenhouse gas (GHG) emissions that arise from the combustion or decomposition of biomass (biological materials). Fuels like ethanol, biodiesel, and renewable diesel are produced from biomass-based feedstocks such as corn, soybeans, and other renewable biological sources. When these biofuels are burned, they emit biogenic CO2, part of a shorter, natural cycle, and are continuously recycled between the atmosphere, plants, and soil.

Reporting Biogenic Carbon Emissions

According to the Corporate Value Chain (Scope 3) Accounting and Reporting Standard by the Greenhouse Gas Protocol, biogenic CO2 emissions should be included in a company’s public ESG report, but they must be reported separately from other scope emissions to maintain clarity and accuracy. Here’s why:

• Transparency – Reporting biogenic emissions separately helps stakeholders understand the source and nature of the emissions. It provides a clearer picture of a company’s environmental impact and sustainability practices.
• Accuracy – By distinguishing biogenic emissions from fossil fuel emissions, companies can more accurately account for their total carbon footprint and the effectiveness of their mitigation strategies.
• Regulatory Compliance – Adhering to these reporting standards ensures companies remain compliant with regulatory requirements and industry best practices.

Ready to Dive into your ESG Report?

Navigating the complexities of emissions reporting can be challenging for any organization. Understanding and accurately reporting Scope 1, 2, and 3 emissions, as well as biogenic carbon emissions, requires specialized knowledge and expertise.

Mansfield’s team of sustainability experts can ease this complexity with our corporate carbon accounting solutions. We help businesses streamline their reporting processes, ensure compliance with regulatory standards, and provide transparent, accurate data.

By leveraging our expertise, companies can confidently showcase their commitment to sustainability and meet the growing demands of current and upcoming legislation. Contact us today!