What's Scope 3 Good For?

Abstract

While the number of reports about emissions “data gaps” grows, just where this data comes from and how it is (mis)used by market actors has been underexplored in the legal literature. This Article discusses how Scope 3 data is collected and shared in practice, as well as its broader adoption as a metric for financial risk and corporate governance. The varied uses of emissions data demonstrate that this information is broadly material to investors, requiring standardization and assurance. For these reasons, the SEC should not back down on requiring the disclosure of relevant Scope 3 emissions. Corporate claims of lack of control and access to data should be met with skepticism for large companies, especially in light of recent technological advances related to emissions monitoring and trends in supply chain contracting. However, the usefulness of Scope 3 data depends upon its use-case — a fact that has been relatively underappreciated — as well its granularity and the availability of other contextual data. This Article outlines some critiques and qualification of the uses of Scope 3 data, highlighting how U.S. financial regulators can improve upon the early approaches of other jurisdictions.

Keywords: emissions, disclosure, Scope 3, SEC, securities regulation