Globally standardised greenhouse gas emissions standards will be forcing transparency and responsibility on large corporations within the coming years, leading to a material drop in GHG emissions.

While the focus is currently on larger corporations, they depend on thousands of mid-sized organisations in their supply chains, so their disclosure requirements can create new reporting requirements for you. Small to medium enterprises have a huge role to play in lowering corporate emissions, and have key advantages when it comes to getting the job done.

The lion’s share of a business’s emissions usually fall under what is referred to as Scope 3.

Scopes 1 and 2 emissions are fairly limited - they’re restricted to the emissions caused by manufacturing and office facilities that a business owns (leased machinery, vehicles or buildings do not count). In contrast, Scope 3 includes all emissions that a business is responsible for. That includes all emissions from travel to and from work and events, food from corporate get-togethers, office supplies and more.

Read More: Scope 1, 2 and 3: What Are They And What Do They Mean For Your Finance Team

‍

The Mid-cap advantage

Medium sized organisations have two key advantages - flexibility and size. They can be quicker to change and transform than larger corporations, and they won’t have as vast and sprawling an infrastructure that you need to cover. But there are still significant challenges that any mid-sized finance team needs to overcome when making a plan for sustainable change and transition plans. These include:

1. How expansive will your application of Scope 3 savings be? Scope 3 is more flexibly defined than Scopes 1 and 2.  You need to decide exactly how you’ll apply it to your business. For instance, while travel for work events is undoubtedly your corporation’s responsibility, it’s also possible to classify the commutes that your employees make to work under Scope 3. Are you prepared to incentivise your employees to help them travel more sustainably? You also need to start looking at your timeline. How will a more initially emissions-intensive product that generates less emissions over time show up on your reporting? Do you count saved emissions now, or include that in future years’ reporting?
2. Where do you need to find leaders? Depending on the size of your business, you may need to find climate champions in several different departments. Not only to ensure a good overview of your business’ emissions and activities, but to ensure consistent messaging across the entire business, so that the company has a shared understanding of the need for sustainable transformation, and how that transformation will come about.

As a CFO, unless you’re running a very small business, you’re unlikely to be able to keep a constant detailed overview of your financial and emissions activities (nor should you), so figure out how many other climate champions you’ll need, and where they need to be positioned. Could the CFO also become CSO? Here are ways to work together.

‍

What are your upcoming financial objectives?

Before you start planning, you’ll need an understanding of your upcoming financial objectives. It’s a commonly-repeated falsehood that increasing financial returns mean increasing GHG emissions. It also increases resilience. Just like conserving cash, reducing capital expense, safeguarding credit ratings help large organisations survive and thrive in uncertain scenarios, so to understanding and proactively addressing climate risks.

At the same time, regulatory requirements like the ISSB are increasing, plus positive financial incentives to deploy new technologies at scale. Australia's National Science Agency, CSIRO has modelled rapid and plausible decarbonisation scenarios across multiple industries provides insights into opportunities for business. Many organisations have decoupled emissions growth and financial growth - but it took careful planning and implementation.

You’ll need to identify which parts of the business are poised to undergo significant growth, so that you can understand where the highest risks for inflated emissions are.

Keep in mind that while this takes careful planning, the faster you take action, the better your competitive advantage. Here are five actions you can take right now.

‍

FAQs for Scope 3 Emissions and Mid-sized Organisations

1. What are Scope 3 emissions, and why are they important for mid-sized organisations?Scope 3 emissions encompass all indirect emissions that a business is responsible for, including those from travel, procurement, and other activities. For mid-sized organisations, these emissions can make up the majority of their carbon footprint and play a crucial role in sustainability efforts.
2. What advantages do mid-sized organisations have when it comes to addressing Scope 3 emissions?Mid-sized organisations have the advantages of flexibility and agility, making them well-positioned to implement changes quickly. They also have a smaller infrastructure to manage compared to larger corporations, simplifying the process of tracking and reducing emissions.
3. How can mid-sized organisations approach the application of Scope 3 emissions savings?Mid-sized organisations need to determine the extent to which they'll apply Scope 3 emissions reductions within their business. This includes decisions on incentivizing sustainable travel practices for employees and establishing reporting timelines for emissions-intensive products that reduce emissions over time.
4. Where should mid-sized organisations look for climate leaders within their business?Mid-sized organisations should identify climate champions across various departments to ensure a comprehensive understanding of emissions and consistent messaging on sustainability. Consideration should be given to whether roles like CFO can also incorporate responsibilities of a Chief Sustainability Officer (CSO) to foster collaboration in addressing climate challenges.
5. What role do upcoming financial objectives play in decarbonisation efforts for mid-sized organisations?Understanding upcoming financial objectives is essential for aligning decarbonisation efforts with business goals. Contrary to the misconception that increasing financial returns lead to higher emissions, decarbonisation can enhance resilience and compliance with regulatory requirements while unlocking opportunities for innovation and growth.

‍