Emissions Measurement in Supply Chains: Business Realities and Challenges WHITE PAPER NOVEMBER 2023 Images: Getty Images Contents Executive summary 3 Introduction 4 1 Sectoral snapshots 5 1.1 Agriculture and food 9 1.2 Mining 11 1.3 Steel 12 2 Implications 14 2.1 Features of well-functioning measurement systems 15 2.2 Existing initiatives point in the right direction 16 2.3 Key questions for future dialogue 16 Contributors 18 Endnotes 19 Disclaimer This document is published by the World Economic Forum as a contribution to a project, insight area or interaction. The findings, interpretations and conclusions expressed herein are a result of a collaborative process facilitated and endorsed by the World Economic Forum but whose results do not necessarily represent the views of the World Economic Forum, the OECD, or Business at OECD (BIAC), nor the entirety of their Members, Partners or other stakeholders. © 2023 World Economic Forum. All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, including photocopying and recording, or by any information storage and retrieval system. Emissions Measurement in Supply Chains: Business Realities and Challenges 2 Executive summary Measuring and reporting emissions in supply chains can be a key lever for decarbonization globally, but inclusive discussions are needed to standardize approaches Increased visibility of supply chain emissions can make a critical contribution to decarbonizing the global economy. It can inform corporate decisions around procurement, product design and research and development (R&D), as well as financial decision-making by investors. These promises cannot be realized if market actors are unable to meet reporting requirements, or if the resulting data are not trustworthy. Policy-makers must therefore carefully navigate the question of supply chain emissions measurement. In addition to measuring, reporting and addressing their direct emissions (Scope 1) and indirect emissions from purchased energy (Scope 2), companies are increasingly facing far-reaching expectations to track emissions from upstream and downstream activities in their value chains (Scope 3). Scope 3 reporting has largely been voluntary, driven by consumer, buyer, investor, employee and civil society expectations, among others. However, a number of regulatory initiatives are underway to make this a mandatory requirement. Commonly used reporting standards provide some guidance, but challenges remain as reporting approaches proliferate; companies determine different emission boundaries, and use different calculation and allocation methods; data can be costly, inaccurate or unavailable; and certification mechanisms are not yet well established. The complexity of global supply chains exacerbates these challenges. Business interviews also highlight sectorspecific challenges to measurement and reporting. For example: – Agriculture and food: Farm production is fragmented; differences in geography and biological systems affect emissions, which complicates estimates; comparability is difficult where calculation methods vary; and small producers lack the capacity to provide data. – Mining: Downstream emissions reporting remains elusive due to the lack of verified data, varied standards and limited incentives to work with downstream actors; and for iron-ore and coal producers, the steel industry is an important customer but has several different standards. – Steel: There is a lack of common standards and incomplete reporting; production processes and technologies vary, as do their environmental impact; as a share of total emissions, Scope 3 is lower and downstream reporting not well developed. As there is no one-size-fits-all approach, industry initiatives have played an important role in testing different measurement approaches and gradually bringing about alignment among members in some sectors. Especially where supply chains are complex, concerns about substantial costs and other burdens remain. Questions also arise on how emissions that fall outside companies’ direct management or ownership should best be addressed. Well-functioning, interoperable systems for measuring emissions can support decarbonization of the global economy. They must balance accuracy with feasibility, particularly for small and medium-sized enterprises (SMEs) and firms in developing countries. Otherwise, there is a real risk that measurement