Scope 3 in 10-Ks: 4 Companies That Have Been There, Done That
The U.S. Securities and Exchange Commission’s long-awaited proposal on climate disclosures has drawn attention for suggesting that companies disclose Scope 3 emissions if they’re material to the business or part of a company goal.
But some companies already disclose these indirect emissions from upstream and downstream activities in a company’s value chain, not just in sustainability reports but in 10-K filings.
Using Sentieo, the AI-powered financial search engine, we found disclosures of Scope 3 emissions in the latest 10-Ks from:
Footwear maker Allbirds, whose 10-K filed for the year ending December 31, 2021, included 2020 emissions estimates. (It said its 2021 Scope 1, 2, and 3 emissions were still in the verification process.)
Craft marketplace Etsy, which started including Scope 3 emissions in 10-Ks in February 2019
United Airlines, which disclosed Scope 3 emissions data in a table format
Forestry company Weyerhaeuser, whose disclosure came within its narrative on environmental, social, and governance (ESG) practices
“We’ve long held ourselves to ambitious goals,” Etsy CEO Josh Silverman said in a blog announcing Etsy’s goal to reach net-zero emissions by 2030. “Climate change remains an ever-present threat to our environment and humanity, and we are bound and determined to do everything within our power to not only continue to be a carbon neutral company, but to also drive reductions in our overall footprint.”
We expect more to follow these four companies’ lead, even if the SEC doesn’t adopt a final rule in time for the next 10-K season.
ESG terms in 10-K filings
We’ve said before that mentions of certain ESG terms have been popping up more often in 10-Ks. (“Net zero” anyone?)
The increased adoption of ESG language in 10-Ks is more reflective of broader societal concerns and the increased visibility of the role that business plays in society. Some of this has been driven by SEC requirements for enhanced human capital disclosures, for example, and some is related to the growing prominence of ESG investing.
In 10-K filings in 2021, more than 60 mentioned “climate risk” or “climate change risk,” up more than tenfold from six in 2016, according to Sentieo. (See for yourself.)
We are also seeing an increase in the 10-Ks that mention “SASB” or “TCFD,” which seems natural given the influence of the Sustainability Accounting Standards Board and Task Force on Climate-Related Financial Disclosures over ESG disclosures. There were over 100 mentions of SASB or TCFD in 2021 versus zero in 2016, according to Sentieo. (TCFD was established in late 2015. SASB was founded in 2011.)
Not all increases are gradual: we saw a step-increase in 2021 in 10-Ks with language specific to human capital disclosures. For example, the number of 10-Ks with “our most valuable asset,” a business language standard for talking about employees, multiplied to several dozen in 2021, Sentieo found.
Producing your own climate-related disclosures
It may seem daunting to have to include details of greenhouse gas emissions, management of climate-related risks, and transition plans in SEC filings, but ESG leaders are already doing it with the help of smart teams armed with the right technology. Learn from peers in the SEC Professionals Group, and check out resources for how others are tackling ESG reporting challenges.
If you’re interested to see how you can use the Workiva platform or Sentieo to simplify the process of producing climate disclosures with data you can trust, please request a demo.