Topic: Scope 3 Emissions and Regulatory Risk

Scope 3 emissions refer to indirect greenhouse gas emissions that occur in a company’s value chain, both upstream and downstream, excluding direct operations (Scope 1) and purchased energy (Scope 2). These emissions often represent the largest portion of a company’s carbon footprint, encompassing activities such as supplier operations, product use, transportation, and waste disposal. Regulatory risk associated with Scope 3 emissions is increasing as governments and regulatory bodies worldwide intensify climate policies to meet net-zero targets. Companies may face stricter reporting requirements, carbon pricing, or supply chain regulations that mandate disclosure and reduction of Scope 3 emissions. Failure to manage these emissions can lead to legal penalties, reduced investor confidence, and reputational damage. Additionally, as stakeholders demand greater transparency and accountability, companies must integrate Scope 3 emissions into their climate strategies to mitigate regulatory risks and align with evolving environmental standards. Proactively addressing Scope 3 emissions can also unlock opportunities for innovation, cost savings, and competitive advantage in a transitioning low-carbon economy.