Proposed changes to the first EU Omnibus Simplification Package are a welcome initiative to streamline sustainability reporting and due diligence requirements. The aim is to boost European business competitiveness and unlock investment potential, while maintaining commitments to climate targets under the EU’s Green Deal. However, challenges remain over Scope 3 emissions reporting. By Hervé Chapron, Semarchy.
Recommendations include delaying implementation, reducing the number of companies in scope, and making compliance easier for companies still in scope. The proposal also gives companies additional breathing room to align with new regulations and develop a strategic approach to sustainability reporting.
One of the most daunting hurdles faced by companies under the Corporate Sustainability Reporting Directive (CSRD) is managing Scope 3 compliance—tracking indirect emissions generated throughout their extended value chains.
`Unlike Scope 1 and Scope 2 emissions, which stem directly from a company’s operations and are increasingly manageable, Scope 3 emissions often represent the largest share of an organisation’s carbon footprint. These indirect emissions are challenging to categorise and quantify due to supplier opacity, inconsistent data standards, and sprawling global networks.
As a result, Scope 3 emissions remain a persistent “blind spot” for business leaders and sustainability officers alike, placing organisations at mounting risk of noncompliance, reputational harm, and investor backlash. As the indispensable custodians of corporate sustainability data, data managers are central to building the robust transparency frameworks needed to prevent these risks and drive meaningful ESG outcomes.
The Scope 3 reporting dilemma
Global supply chains’ inherently complex and multi-tiered nature adds to the escalating challenge of accurately reporting Scope 3 emissions today. With supply networks often spanning multiple continents, organisations must grapple with partners operating across diverse regulatory frameworks, varying digital maturity levels, and different time zones.
Recent research underscores the scale of the issue. Our survey of over 1000 business leaders in the UK and France found that, while most companies (89%) are collecting ESG data, an astonishing 83% still feel unprepared for CSRD audits. This gap highlights the urgency of resolving the primary blockers hindering compliance. Key obstacles include difficulties collecting consistent supply chain data, creating digitally tagged and machine-readable ESG reports, and overcoming data fragmentation.
Why Scope 3 remains elusive
Despite rising awareness of environmental responsibilities and increasingly robust ESG reporting strategies, Scope 3 emissions continue to evade accurate quantification. A key roadblock is the fragmented nature of supplier environmental data, which usually resides in isolated silos scattered throughout complex supplier networks. Without centralised, integrated systems, businesses struggle to obtain reliable emissions information.
Exacerbating this problem is the persistent lack of standardisation across different companies, sectors, and regions. With suppliers independently managing diverse and incompatible reporting frameworks, consolidating emissions data becomes particularly challenging. Most ESG datasets remain trapped in disparate, manually entered spreadsheets prone to human error and stored in disconnected, incompatible systems.
Supplier collaboration
Addressing the complexity of Scope 3 emissions hinges on meaningful supplier collaboration. Effective collaboration goes beyond simple data requests—it involves proactive outreach, providing education and resources to help suppliers improve their ESG capabilities, establishing shared measurement protocols, and jointly implementing audits or assessments. By engaging suppliers as true partners, companies can ensure they receive accurate, timely, and consistent emissions data.
A critical enabler of collaboration is adopting sector-wide data standards, such as the EU’s Product Environmental Footprint (PEF) framework and the widely recognised CDP questionnaires. These standardised instruments streamline reporting practices, reduce complexity, and cultivate a shared language across diverse supplier networks. Equally important are incentive models that reward upstream suppliers for transparency and measurable progress.
Building a digital foundation for Scope 3
In many instances, companies already hold much of the data needed. The challenge lies in deploying suitable digital systems and governance frameworks to ensure data accessibility, quality, and cost-effectiveness at scale.
Companies can significantly improve data consistency, scalability, and traceability by investing in centralised data platforms that integrate real-time data streams across internal systems, external sources, and global supply chains. Advanced solutions like master data management (MDM), supplier onboarding systems, and AI-powered data reconciliation further improve the accuracy and reliability of emissions data, especially in cases where supplier data is fragmented and inconsistent.
Effectively deploying such technology requires careful planning and clear implementation steps, starting with comprehensive data audits to understand existing data availability, quality, and gaps. Subsequent steps include tech upgrades, supplier onboarding process improvements, and setting clear ESG-focused KPIs and governance protocols for continuous evaluation and improvement.
Future-proofing ESG
Achieving CSRD compliance is not an endpoint but the start of a broader supply chain transformation. Businesses that approach compliance as a checkbox exercise will likely struggle to adapt as future sustainability policies and regulations emerge. Instead, they should take proactive steps now by building robust and flexible transparency frameworks to minimise compliance risks.
However, supply chain transparency extends well beyond regulatory reporting—it’s a critical ingredient in long-term business resilience. Companies that can track and manage environmental impact across complex supplier networks will optimise their risk management capabilities and become more resilient. Moreover, transparent ESG reporting bolsters investor confidence.
In all sectors, the business case for transparency is clear. Manufacturers must tackle scrutiny of carbon-intensive processes, retailers rely on vendor traceability to ensure compliance and ethical sourcing, and logistics firms need detailed emissions data for route optimisation. In each case, stronger ESG transparency and integrated data capabilities enable companies to navigate regulations, maintain a competitive advantage, and build trust.
Gateway to sustainable growth
Meeting Scope 3 emissions requirements can feel overwhelming, but it’s necessary and achievable with the right data strategy. Rather than viewing it solely as a compliance burden, organisations must embrace transparency as a powerful lever for growth. To achieve this, senior executives and data leaders must commit now to building scalable, collaborative ESG frameworks powered by advanced digital solutions that consistently and accurately facilitate emissions tracking and reporting.
