Sustainability - The triple whammy of Scope 3, ISSB Sustainability Reporting Standards and the German Supply Chain Act

OK, It's Friday and while we head towards wine and weekend I though I might get a bit heavy! I've been talking to a few leadership teams in Procurement and Finance and it appears we might need to get a bit closer!!

Why? Sustainabiliity! Specifically the triple whammy of Scope 3, ISSB Sustainability Reporting Standards, and the German Supply Chain Act.

Here's a quick resume:

- Scope 3 emissions: Scope 3 emissions are indirect emissions that occur in a company's value chain, including emissions from purchased goods and services, transportation, and waste disposal. Many businesses are now being asked to report on their Scope 3 emissions as part of their sustainability reporting obligations. This can be challenging, as it requires businesses to track emissions throughout their entire value chain, including their suppliers and customers. Companies may also be expected to set emissions reduction targets for their Scope 3 emissions. Failing to report on Scope 3 emissions can lead to reputational damage, as stakeholders increasingly demand greater transparency and accountability from businesses.

- ISSB Sustainability Reporting Standards: The ISSB Sustainability Reporting Standards (same origin as IFRS for Financial Reporting) are a set of standards for sustainability reporting that aim to provide a common language and framework for businesses to report on their sustainability performance. These standards cover a range of sustainability issues, including climate change, biodiversity, and social and human rights. Adhering to these standards can help businesses to demonstrate their sustainability credentials to stakeholders and gain a competitive advantage. However, implementing these standards can be resource-intensive, as it may require significant data collection and reporting efforts.

- German Supply Chain Act: The German Supply Chain Act, which is set to come into effect in 2023, requires businesses to ensure that their supply chains are free from human rights abuses and environmental harm. This includes conducting due diligence on their suppliers and reporting on any risks and measures taken to address them. Failure to comply with the Act can result in fines and reputational damage. The Act is expected to have a significant impact on businesses with complex global supply chains, as they will need to implement robust due diligence processes to identify and mitigate risks.

The combined impact of these 3 on businesses is huge!

Businesses will need to invest in sustainability reporting and due diligence processes, and may need to rethink their supply chain strategies to meet these requirements and... will almost certainly require a "Team Effort" from Finance and Procurement to achieve it. The good news is that taking action to address these issues will bring benefits, such as enhanced brand reputation, increased stakeholder trust, and improved operational efficiency.

Are you joined up?