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Learn more about the importance of Scopes 1, 2 and 3 emissions in sustainability reporting and how your organization can measure and report your carbon footprint.

In the world of sustainability reporting and ESG analysis today, carbon emissions are particularly significant. They can be quite complex to calculate, but contribute greatly towards your organization’s sustainability agenda. If you have already decided to be a more sustainable business and have taken the first steps towards that goal, consider tracking and reducing your carbon footprint. This starts with tracking your Scope 1, 2 and 3 emissions. 

The Greenhouse Gas Protocol (GHG) is the world’s leading organization that sets the standards for carbon emissions reporting. It introduced the concept of “scopes” to help classify direct and indirect emissions, improve transparency and simplify emissions reporting for different types of businesses and organizations. These “scopes” are carefully defined to prevent the double-counting of emissions from one company’s emissions sources when calculating its carbon footprint.

Scope 1

Defined by the GHG Protocol as “direct GHG emissions occur from sources that are owned or controlled by the company,” scope 1 emissions can be divided into key categories:

1. Static Combustion: Static or stationary combustion refers to combustion of fuels in stationary equipment at facilities, such as boilers, furnaces, burners, turbines, heaters, incinerators, engines, flares, etc. Examples of fuels include coal, crude oil, diesel, liquefied petroleum gases (LPGs), natural gas and propane gas.
2. Refrigerant: A refrigerant is a compound typically found in either a fluid or gaseous state used in the refrigeration cycle of air conditioning systems and heat pumps. In most cases, refrigerants undergo a repeated phase transition from a liquid to a gas and back again. 
3. Mobile Combustion: These are all vehicles owned or leased by your organization that burn fuels producing greenhouse gasses. It encompasses the combustion of fuels in transportation devices such as automobiles, trucks, buses, trains, airplanes, boats, ships, barges, vessels, etc.

Scope 2

Scope 2 emissions are defined as the “GHG emissions from the generation of purchased electricity consumed by the company.”  These are all indirect, owned GHG emissions released in the atmosphere, from the consumption of purchased electricity, steam, heat and cooling and they physically occur at the facility where electricity is generated. Some key categories include:

1. Purchased heat and steam: These account for heat and steam purchased by the utility from an independent generation facility.
2. Purchased electricity: This refers to the extraction, production, and transportation of fuels consumed in the generation of electricity, steam, heating and cooling consumed by the reporting company.

Scope 3

Scope 3 includes all indirect, unowned emissions that occur in the value chain of a reporting company and are not included in Scopes 1 and 2. Examples include purchased goods and services, business travel, employee commute, waste disposals, leased assets, franchises, etc.

Although scope 3 emissions may not fully be in your company’s control, they likely represent the biggest portion of your emissions inventory. This is the broadest emissions category, where the majority of an organization’s emissions come from and are also the most challenging to track. 

But they can also offer big opportunities for carbon footprint reduction. Some of these benefits include:

• Cost reduction and energy efficiency improvements in your supply chain
• Clarity on which suppliers are leaders in sustainability performance and on how to develop initiatives to help improve the others
• Product energy efficiency improvements

A good way to go about measuring Scope 3 emissions is to use the GHG Protocol’s Scope 3 Standard that details the requirements and practical guidance for Scope 3 reporting. This guide will help assess your organization’s Scope 3 emissions inventories comprehensively and allow you to start devising emissions reduction plans.

All in all, reporting carbon emissions is not an easy task. It’s a time consuming and meticulous process that demands close expertise. However, as regulations become increasingly stringent and stakeholders increasingly push for a net-zero economy, the benefits of calculating and cutting emissions across all Scopes are beneficial, for your business as well as the environment.

Rimm’s Carbon Calculator, which is a feature in myCSO Essential, is making this process easier. By estimating carbon emissions for organizations using advanced machine learning algorithms, it’s one step in the emissions reduction journey for your organization.

Learn more about myCSO and get access to the carbon calculator today!

A sustainability report is an effective way to communicate your company’s commitment to sustainability. Find out about the essential components of a sustainability report below!

Publishing a sustainability report is a great way for companies to disclose their ESG practices. 

Sustainability reporting in the corporate setting is an important factor to improve a company’s green initiatives and its relationship with investors and clients in building trust, in line with stakeholders’ demand for transparency and accountability.

With this increase in demand, many organizations can benefit from sustainability reporting, which helps make organizations’ decision-making processes more efficient and, in turn, enables them to reduce risk.

Whether you’re just beginning your own journey with sustainability or looking to improve your sustainability report, it definitely helps to know what the main components are.

Let’s dive into what each of these components entail!

Navigating through the report… 

1. Contents
   A sustainability report covers a wide range of topics. The length and contents of the report will vary depending largely on the company size and industry. Having a clear contents page that highlights the main topics and sub-topics is a great way to provide readers with an overview of the scope of your sustainability report. 

What is your report about? 

2. About This Report
   This section of the report serves as the introduction, where companies can outline their company background, chairman’s/CEO’s statement and the framework(s) with which the report was generated. The chairman’s statement is vital as it communicates your company’s mission, purpose and commitment to sustainability. Stating your chosen sustainability framework and/or standard here clarifies from the beginning which guidelines your disclosures are in alignment with. Be sure to also state the reporting period as not all companies report within the same timeframe.

What are the relevant topics under sustainability to your company? 

3. Sustainability approach and materiality assessment
   This next section should summarize your company’s main strategy and focus in terms of environment, social and governance (ESG). To ensure that your company reports on the most important sustainability topics relevant to your company and industry, include a materiality map, which you can obtain from conducting a materiality assessment. The results should rank the topics by significance, showing your stakeholders that you are focusing on issues that matter to them, which can also improve overall engagement.

How is progress measured, how is your company performing and what next? 

4. Metrics, progress tracking and targets
   After identifying the material topics, the subsequent sections of the report should detail how well your company performed in these areas. Highlight your company’s progress and targets using the appropriate metrics and outline any policies and management approaches your company has in the reporting period. This is where you can also highlight any successful projects and initiatives related to any of your material topics that have made a positive impact on society. Try to be as detailed as possible to provide readers transparency and minimize any ambiguity that may give way to greenwashing!
   
5. Risk assessments
   Taking it a step further, your performance evaluation should also include any risk assessments conducted by your company in the material topic areas. This encompasses the identification of climate risks, strategies to address these risks, and opportunities involved that could potentially affect your company in the short, medium and long term. Providing more context to your company’s preparedness for the future, helps to highlight your adaptability and resilience to stakeholders.

Has your report been verified?

6. Third-party assurance or auditing
   Once the above components are ready, you may wish to audit your report to boost your credibility. If your company has gone through an external review or validation process, include an assurance statement to provide verification on the accuracy and reliability of your sustainability report.

One last thing…

7. Appendix
   Finally, your report should include an appendix. In this section, be sure to include an index that clearly maps out each material topic disclosure to its topic disclosure reference in your chosen sustainability framework(s). This will help readers easily see how your reporting aligns with the chosen framework(s) and where the overlaps are. In addition, you may also choose to include any supplementary information on your report in the appendix, such as your materiality and benchmarking methodologies.

Want to know more about the benefits of good ESG Reporting?

Read our previous post on the ‘5 Key Benefits for Corporates Practicing Good ESG Reporting.’

Understand the difference between sustainability, ESG and CSR reporting. We’ve made it simple with our basic guide!

Today’s alphabet soup of sustainability jargon and buzzwords is a challenge to navigate. ‘Sustainability,’ ‘ESG’ and ‘CSR’ are often confused and used interchangeably despite having different contextual implications. While there is a considerable overlap in definitions and scopes, replacing one of these key terms with another is inaccurate and misleading.

Let’s unpack these terms…

Sustainability: officially defined in the 1987 United Nations (UN) Brundtland Commission as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.” This is the most widely recognized definition of sustainability but can be defined differently depending on context.

Within the business context, sustainability refers to the act of balancing three interconnected pillars: environmental, social and economic. Considering these three pillars, a key endeavor in corporate sustainability is to manage an enterprise in the long term without causing extensive damage to the environment or adopting socially harmful practices.

• The environmental pillar encompasses practices and actions that aim to minimize negative impact on natural ecosystems, support biodiversity and maintain or restore natural resources and climatic cycles.
• The social pillar includes meeting the needs of, supporting and engaging with stakeholders, including communities, employees and consumers.
• The economic pillar seeks to meet the needs of the company by managing risks, maintaining profitability and enhancing resilience.

ESG: a framework that helps measure a company’s sustainability and societal impact, using metrics that matter to stakeholders, particularly investors. It encompasses environmental, social and governance factors that help evaluate a company’s risk exposure with the aim of improving investment decisions.

ESG is typically underpinned by a financial motivation by corporates and investors as they seek to improve the valuation of the business.

Incorporating ESG is critical for sustainability reporting and facilitates a structured process that involves conducting a materiality assessment, collecting insights from stakeholders, developing a measurable roadmap and set of key performance indicators (KPIs), setting goals and tracking progress.

CSR: a self-regulating business model promoting companies’ social accountability and engagement in volunteering or ethically-oriented practices. By practicing corporate social responsibility (CSR), companies can be more conscious of their impact on society.

To incorporate good CSR practices, businesses can consider improving its company culture, impact on the environment and relationship with the local community. They can then motivate their employees to be more engaged and become part of the solution.

According to the Corporate Governance Institute, what makes CSR distinct from ESG is its focus on informing stakeholders about the values and goals of the business, including corporate volunteering, reducing carbon footprint and engaging with charities. 

Both CSR and ESG can be used by a company simultaneously. CSR provides a framework for the company to communicate internally with employees, while ESG provides measurable goals.

As the ESG movement continues to grow, organizations may knowingly or unknowingly fall under these three characteristics. Learn how you can avoid these mistakes!

Earlier this month, Rimm Sustainability held its first in-person event in our Singapore office, focusing on the topic of the 3Fs (Free-riders, FOMOs and Fakers). The event centered around a panel of experts engaging in an honest and insightful discussion about why most companies are not doing ESG right and how we can turn the tide. We had the pleasure of inviting Russ Neu (Social Collider, CEO), David Ward (Nurturing Co., CEO) and Ravi Chidambaram (Rimm, CEO) to share with us their wealth of experience and knowledge surrounding ESG and what genuine, positive impact means to them.

Moving the needle in ESG requires the 3Fs to understand the real implications of their actions and what genuine impact would entail. Inaction or token actions can have self-imposed, adverse impacts in the long run, especially with recent trends indicating that stakeholders increasingly value genuine, positive impact.

More widespread recognition that legislation is evolving and corporations need to take responsibility for creating a positive impact can improve companies’ approaches to ESG. Greater transparency, which can be achieved through third-party audited sustainability reports or certifications from established external organizations, can mitigate the risks of greenwashing. Moreover, while regulations, fines and penalties can play a role in eliminating the free-rider problem, free-riders will soon find themselves behind the curve in light of recent ESG trends

Here’s a brief summary of what our panelists had to share.

Key takeaways:

• Fake forms of sustainability can be distinguished from genuine sustainability practices through tangible, quantitative means for identifying greenwashing (e.g. third-party audited sustainability reports).
• One of the key challenges in ESG is ensuring accurate measurements of relevant ESG performance metrics. It is important for companies to understand and map out the relevant indicators to use when collecting data as a first step – you can’t manage what you can’t measure.
• There are many scenarios and time horizons to make meaningful contributions in sustainability. It’s never too late to get started, but it will take time for meaningful contributions to make an impact.
• Companies or investors can strengthen the call-to-action within this space by educating themselves on the benefits of embedding strong ESG practices. This will provide SMEs with the tools to improve measurement and tracking, creating impact and increasing transparency.
• While these benefits and tools vary tremendously across companies, regions and industries, it is encouraging that engagement levels have increased noticeably in recent years.

“Any company that begins the process of ESG is a good company. That’s great, you are starting somewhere. But you need to build capabilities where you can track the data more accurately, more comprehensively, and apply that data to ESG objectives.”
– Ravi Chidambaram

Our team at Rimm Sustainability would like to thank everyone who attended the event. We hope to see you at our next one!

Good ESG reporting can give companies a competitive edge in their industries. Find out how your company can benefit from a well-written ESG report.

Good ESG reporting is indeed a competitive advantage if done right. Sharing how well your company engages in good environmental, social and governance practices not only improves transparency on the various risks, opportunities and challenges your company faces, but also assures stakeholders of your company’s operations and values.

Here are five key benefits of publishing a well-written ESG report:

1. Strengthen brand perception
   As brand perception heavily depends on a company’s relationship with its stakeholders, effective and open dialogue is key. Many companies are disclosing their ESG commitments, backing their claims with measurable data on their actions, to align their brand with good ESG practices. ESG reporting allows companies to publicly share their business activities in relation to ESG, which can positively affect how people view them. With measurable data to track your ESG performance, ESG reporting can set you apart from competitors, boost your company’s image as a responsible and meaningful brand, and appeal to stakeholder interests in the long run.
   
2. Attract consumers
   With the growing trend of green consumerism, publishing an ESG report can attract more consumers. A recent survey highlights that 70% of consumers care about the impact brands are having on environmental and social issues, and 46% pay attention to these efforts before purchasing and supporting a brand’s products. In particular, young consumers are more dedicated to sustainability, with 83% of millennials and 78% of Gen Z-ers looking for businesses that are socially and ecologically conscious (below).
   
   
   
   Source: PwC (2021)
   
3. Enhance employee engagement
   ESG concerns are important to the current talent pool, both personally and professionally. In order to attract and retain employees, companies must be aware of ESG issues and be proactive in developing programs and practices that appeal to their employees. Focusing on sustainability and ethical business practices creates a sense of purpose and meaning for their employees, which boosts motivation and nurtures a stronger sense of loyalty. Satisfied and enthusiastic employees are also more productive and yield better results. Communicating practices and values through publishing an ESG report can help to attract potential employees and maintain a robust talent pipeline.
   
4. Attract investors
   Over the years, ESG investing has become more mainstream. Despite major disruptions, such as the Covid-19 pandemic, investments flowing into companies with good ESG performance continue to grow.
   In 2020, Larry Fink, CEO of BlackRock, the world’s largest asset management firm, wrote in his CEO letter, “Our investment conviction is that sustainability- and climate-integrated portfolios can provide better risk-adjusted returns to investors. And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”  Investors believe that companies that take sustainability and climate concerns into consideration generate a better risk and return profile.
   Having a clear ESG strategy and demonstrating consistency in reporting are important factors in investors’ decision-making process. Companies that do not issue ESG reports risk missing out, as hesitant investors could pass them up, and may even lose existing investors.
   
5. Stay ahead of the curve in a fast-changing regulatory landscape
   Governments around the world are tightening their regulations and implementing laws to penalize companies that do not comply with ESG regulations. Many stock exchanges – including in the EU, Singapore, Indonesia, India and Hong Kong – are mandating sustainability reporting for listed companies in loan, investment and insurance activities.
   Governments also require transparency in supply chain operations. The EU’s Circular Economy Action Plan requires company disclosures on supply chain activities. According to Harvard Business Review, multinational corporations are increasingly pledging to partner only with suppliers that meet social and environmental standards. More MNCs are placing greater emphasis on having a sustainable supply chain of suppliers and distributors and are conducting audits to ensure their entire value chain.

In sum, reporting on your company’s ESG performance positions you strategically to reap the benefits of a range of competitive advantages.

Want to know more about how you can practice good ESG Reporting?

Read our previous post on ‘5 Best Practices for ESG Reporting’.

ESG reporting is an essential sustainability practice for organizations. Understand the basics of reporting and the best practices you can use.

Environmental Social Governance (ESG) is a huge buzzword that continues to gain momentum. The term refers to three different aspects of corporate sustainability, Environment, Social and Governance, which have been used to categorize indicators that measure a company’s sustainability.

What is ESG Reporting?

ESG reporting is a business practice that allows companies to measure and communicate their commitment to and progress towards their ESG-related goals and initiatives, boosting transparency. Typically publicized across companies’ websites and social media, ESG reports can be used both internally within the company and externally for stakeholders – from employees and investors to local communities – to understand where a company stands with regard to its ESG performance.

“More than 90 percent of S&P 500 companies now publish ESG reports in some form, as do approximately 70 percent of Russell 1000 companies.” – McKinsey

A well-written ESG report should be a reflection of your company’s sustainability initiatives, performance and impact on stakeholders. Be sure to highlight the risks and opportunities that play a significant role in impacting your company’s long-term business performance, as well as your approaches to risk management, and account for diverse perspectives. Remember, your report should convey the company’s ability to create value over time!

Here are 5 best practices we recommend:

1. Identify the most relevant metrics you should disclose.
   Not all metrics are relevant to every organization and industry. You will first need to determine what sustainability factors are material to you. According to the Global Reporting Initiative (GRI), materiality refers to the relevance or importance of topics that best reflect an organization’s economic, environmental and social impacts, or influence the decisions of stakeholders. Knowing which topics are material to your organization will ensure that you always prioritize reporting on factors that matter the most to your stakeholders.
2. Choose the right sustainability standard or framework
   There are many science-backed, credible international standards and frameworks to comply and align your reporting with, such as GRI and the Sustainability Accounting Standards Board (SASB). These frameworks not only help you avoid biases in reporting by providing a fixed set of topics and metrics that need to be disclosed but also help you stay ahead of increasingly stringent regulatory trends. Explain your choice of disclosures with reference to your selected standard(s) and use an appendix to map out your disclosure with the relevant topic in your chosen standard or framework.
3. Collect and communicate your data accurately
   Compiling all the data needed to produce a report can seem like a daunting task. Fortunately, there are many automation services out there to help you transform your ESG data into a report format and make future data collection and analysis easier. First communicate with the right departments within your organization to ensure that all the information is accurately collected and appropriately formatted.
4. Verify your data to boost your credibility
   Third-party verification and validation of reported information is an important step in reducing your company’s risks of greenwashing. Featuring a description of your company’s internal and external review processes enhances transparency with stakeholders on the reliability of your reported data. This can come in the form of an assurance statement in your report to let your stakeholders know that all the information provided has been checked before publishing.
5. Review your practices and progress every year
   ESG Reporting is not just a one-off affair. Continuously reviewing your policies and practices and staying updated on your industry’s materiality factors annually will help build your track record on sustainability. Stay up-to-date with sustainability and ESG trends on an industry, national, regional and global level to improve your ESG-related strategies and initiatives for the future.

Read our previous blog post to learn more about the differences between sustainability, ESG and CSR reporting.