Capgemini Report Examines Scope 3 Regulation Impact

Capgemini's report reveals the role of geopolitics, greenwashing and regulation on sustainability efforts.
The "A World in Balance 2024: Accelerating Sustainability Amidst Geopolitical Challenges" report dives into the impact of these global pressures on sustainability.
The study surveyed over 2,100 executives from 727 large organisations worldwide, along with insights from 6,500 consumers.
The findings show geopolitical tensions and conflicts are affecting business operations and hindering sustainability progress. As resources are diverted and international cooperation stalls, sustainability initiatives face new challenges.
Its not all doom and gloom, however; there are many projects still gaining momentum.
The geopolitical impact on sustainability
Geopolitical tensions, including US-China relations, the war in Ukraine and the European energy crisis, are adding complexity to sustainability strategies.
The report shows that 64% of executives believe geopolitics is now a major factor influencing sustainability investments.
In the US, many executives are concerned about future government funding for climate projects. Almost three-quarters of American executives reported receiving federal support, such as through the Inflation Reduction Act or CHIPS Act, to fund sustainability initiatives.
However, geopolitics isn’t always a hindrance. Sometimes, crises can accelerate change. For instance, the war in Ukraine prompted Germany to accelerate its renewable energy targets, aiming for 100% renewable energy by 2035.
Despite the challenges posed by geopolitics, business leaders are pressing ahead with sustainability initiatives.
Cyril Garcia, Head of Global Sustainability Services and Corporate Responsibility at Capgemini, emphasises this, saying:
“This year’s report shows sustainability projects continuing to build momentum in 2024 despite current headwinds.”
Meanwhile Rory Burghes, Head of Sustainable Futures at Capgemini, notes the growing commitment of companies to meeting their carbon goals.
He points out that 84% of executives are on track to meet their emissions targets, a significant leap from previous years.
In addition to this, businesses are adopting more sustainable practices, with a 22% rise in sustainable efforts like circularity, sustainable design and biodiversity from 2022 to 2024.
Consumer scepticism and greenwashing concerns
The report also found that as businesses ramp up sustainability efforts, consumer trust is lagging behind.
Capgemini’s report reveals that three quarters of consumers expect companies to take a more prominent role in reducing emissions, yet more than half believe companies are greenwashing their efforts.
This growing distrust is particularly strong among younger consumers. Among Gen Z and millennials, concerns about greenwashing rose by 26% and 22%, respectively, compared to 2023.
Executives are not ignoring this shift.
Six out of 10 surveyed expressed concerns about how the public perceives their sustainability claims, up from just 11% the previous year. As Rory says, “The best way to build trust and credibility with consumers is by demonstrating tangible outcomes.”
To tackle greenwashing, new regulations are emerging across the globe. From the EU’s Green Claims Directive to the US’s Green Guides, governments are stepping up to ensure transparency in corporate sustainability efforts.
These policies aim to hold companies accountable and reduce misleading sustainability claims.
Regulation driving sustainability innovation
While businesses acknowledge the pressure of new regulations, they also see it as a key driver of innovation. Three-quarters of executives surveyed agree that regulations are essential to reaching global climate goals.
More than 60% stated that without regulatory frameworks, their organisations would not have initiated many of their sustainability projects.
As companies continue to navigate complex global pressures, many are leveraging advanced technologies like AI and big data to better manage resources and minimise environmental impact.
Rory believes this technological push will give businesses a competitive edge and allow them to achieve their sustainability goals faster.
In the words of Kristen Siemen, Chief Sustainability Officer at General Motors, “Regulations, transparency and standards are critical, allowing everyone to talk a common language.
"The possibility of over-regulating does concern me, however. If there were more consistency across countries, we could spend more time working on outcomes.”
With the increasing integration of sustainability into business strategy, the future points towards a greener, more resilient economy, driven by both regulatory frameworks and technological innovation.
Organisations struggling with Scope 3 emissions reporting
Scope 3 emissions reporting remains a tricky issue, especially for organisations that must comply with the CSRD in 2025
Many organisations are unprepared to tackle Scope 3 emissions disclosures, a crucial aspect of sustainability reporting.
With the European Union's Corporate Sustainability Reporting Directive (CSRD) looming, set to take effect in 2025, businesses are feeling the pressure to improve their reporting processes.
Max-Christian Lange, Deputy Head of Sustainability at Deutsche Bahn, Germany’s national railway company, emphasises the challenge ahead: “We have this year to prepare for CSRD reporting, which is resource-intensive and costly.
"However, this process will enhance the quality and quantity of our sustainability data, allowing for better comparisons of performance both within and across sectors.”
Lagging behind on Scope 3 emissions
According to a survey of 316 organisations, 44% must submit their first CSRD report in 2025, based on 2024 financial data. However, these organisations are least prepared when it comes to reporting Scope 3 greenhouse gas (GHG) emissions. Only 38% say they are ready to report Scope 3 downstream emissions, while 86% are confident in their Scope 1 reporting.
Scope 1 and 2 emissions, which cover direct emissions from company-owned sources and indirect emissions from purchased energy, are relatively straightforward to track. But Scope 3 emissions, which include all other indirect emissions occurring across the value chain, present a much bigger hurdle.
Many companies are grappling with this challenge, and the complexity is driving them to invest heavily in carbon credits. A staggering 93% of those surveyed plan to ramp up their investment in carbon credits over the next 12 to 18 months as they prepare for their 2025 reporting obligations.
Major obstacles to Scope 3 reporting
A senior executive from a US-based financial services company shared how their organisation is handling emissions reporting: “We are in good shape on Scope 1 and Scope 2. Our main challenge lies in Scope 3, especially our investment-related emissions in category 15.
"The Partnership for Carbon Accounting Financials (PCAF) is the only available guidance, but it does not cover all business aspects. This gap makes it challenging to accurately measure and report emissions.”
The complexity of Scope 3 reporting is evident across industries. An executive from a large European telecom echoed these concerns, highlighting the scale of their emissions:
“98% of our emissions are Scope 3, presenting two key challenges: limited influence over major suppliers and the complexity of managing and engaging with thousands of suppliers to achieve our sustainability goals.”
This lack of control over suppliers makes it incredibly difficult for companies to accurately measure and reduce their Scope 3 emissions. Many businesses struggle to engage their supply chains and gather the necessary data, leading to incomplete or inaccurate reports.
Tools and strategies for overcoming Scope 3 challenges
Some companies, however, are beginning to explore solutions that could ease the burden of Scope 3 emissions reporting.
Ann Tracy, Chief Sustainability Officer at Colgate-Palmolive, discusses how her organisation is managing this process; “The manual and time-consuming nature of carbon accounting is a significant challenge.
"To address this, we are in the early stages of implementing the Watershed sustainability data platform, which will enhance our Scope 3 accounting and automate some processes.
"We are currently collaborating with suppliers, focusing on reducing upstream Scope 3 emissions.”
Automation and data platforms like Watershed are becoming essential tools for companies looking to streamline their sustainability reporting.
By partnering with suppliers and focusing on upstream emissions, Colgate-Palmolive aims to make meaningful progress in reducing its overall carbon footprint.
Tracy also offers advice for other consumer packaged goods (CPG) companies looking to improve their sustainability efforts.
“First and foremost, it starts with your company’s purpose: how can the right sustainability and social impact strategy help advance your purpose and business objectives?
"Next, education is crucial. It’s essential to ensure that operations and supply chain teams understand the strategy, the purpose behind the changes being implemented, and feel included in the journey.
"Beyond that, fostering partnerships is vital. Collaboration, knowledge exchange, and idea sharing across the value chain externally and within our Colgate teams, including legal and technology departments, can significantly accelerate progress.”
As businesses brace for the CSRD’s reporting requirements, it’s clear that Scope 3 emissions are a major challenge. But with the right tools, partnerships and strategies, organisations can better manage these disclosures and work towards a more sustainable future.
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