As global institutions prepare to compel companies to disclose their carbon footprints, new findings underscore the point that voluntary disclosure just isn’t getting it done. Data released this month from Morningstar’s Sustainalytics ESG research, ratings and analytics firm shows that in fiscal year 2021 almost 40 percent of companies in Morningstar’s global ESG universe — a dataset that includes more than 16,000 corporations — reported their direct emissions and emissions tied to their energy usage, or scopes 1 and 2. That’s up from 33 percent in fiscal year 2020 – but still leaves 60 percent of companies not reporting on scopes 1 and 2 emissions. Corporate disclosure of scope 3 emissions — or the pollution tied to a company’s supply chains — is even lower within Morningstar’s dataset. Almost 24 percent of companies reported scope 3 emissions in fiscal year 2021, up from 19 percent the year prior. That leaves more than 3 in 4 companies not reporting their scope 3 emissions — despite the fact that these indirect emissions make up more than 60 percent of total emissions in nearly every industrial sector covered by Morningstar. “As a result, investors are unable to accurately analyze and compare the carbon risks and opportunities across a complete universe of diverse company types,” Morningstar writes. It's a particular issue for sectors like consumer goods, manufacturing and real estate, where scope 3 makes up more than 90 percent of emissions. Talk of mandating corporate climate disclosures has been heating up. Last week, the International Sustainability Standards Board announced it had finished the bulk of its sustainability and climate-related disclosure standards and that countries could adopt the rules as early as Jan. 1. Those standards mandate scope 3 emission disclosures, but allow companies to use estimations and delay those disclosures by one year from the reporting dates for scopes 1 and 2. Meanwhile, American companies are awaiting final climate disclosure rules from the Securities and Exchange Commission. The SEC’s proposed rules, however, would not require scope 3 reporting from all entities, and might be scaled back further. Europe is going forward with its disclosure rules, and California has a proposal that would require scopes 1, 2 and 3 reporting from all public and private companies doing business in the state and generating more than $1 billion in annual revenue. Investors, though, aren’t waiting for public policy to catch up. This year continues a trend of shareholders seeking disclosure of greenhouse gas emissions: Investors at Amazon, Bank of America and Goldman Sachs, to name a few, have filed shareholder resolutions to compel the release of that data.
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