IBM Adds Scope 3 Emissions Analysis Capabilities to ESG Data Platform
Mark Segal September 21, 2023
ESG REPORTING/ ESG TOOLS, SERVICES
IBM Adds Scope 3 Emissions Analysis Capabilities to ESG Data Platform
Mark Segal September 21, 2023
IBM announced the integration of natural language processing (NLP) in its ESG data collection, analysis and reporting platform IBM Envizi ESG Suite, significantly enhancing the solution’s ability to capture, calculate and analyze organizations’ Scope 3 greenhouse gas (GHG) emissions.
The new features come as companies globally face increasing regulatory pressure to report on their Scope 3 emissions, or those originating in their upstream and downstream value chains, with emerging sustainability reporting standards including the EU’s CSRD and the IFRS’ ISSB standards requiring Scope 3 disclosure . While Scope 3 emissions often account for the majority of many companies’ carbon footprint, they are typically the most challenging to track and report as they occur in areas outside of the companies’ direct control. Alongside the release of the new features, IBM announced the results of a survey of global business leaders which found that only 38% currently measure Scope 3 emissions.
IBM acquired Envizi in 2022, as part of its efforts to enhance its AI-powered ESG solutions capabilities. While the IBM Envizi suite already offers coverage for all Scope 3 emissions categories, the company said that the integration of NLP’s text classification capabilities will help to “enable a leap forward in efficiency and accuracy.”
IBM added that the new functionality will enable the categorization of spend data drawn from financial or ERP systems, which it described as one of the key challenges facing organizations with managing Scope 3 emissions data.
The company said that it has also added a spend-based emissions factor library to IBM Envizi, harmonized across over 180 countries, aimed at helping organizations produce Scope 3 calculations for purchased good and services quickly, accurately and efficiently.
Christina Shim, Vice President and Global Head, Product Management and Strategy, IBM Sustainability Software, said:
“Growing regulatory requirements and external interests are driving organizations to disclose GHG emissions, including those from Scope 3. As requirements increase and as organizations prioritize enhancing operational insights, so does the need for robust, auditable data management, calculation, and reporting processes. IBM Envizi is now integrated with the new capabilities to help organizations seamlessly garner insights from spend data to facilitate Scope 3 emissions calculations for ESG reporting.”
What’s not entirely clear is who is going to monitor compliance or verify any of the numbers. It’s not like regular accounting of money spent or amounts in a bank. These are phantom flows that are inherently difficult to audit.
What happens if you don’t include scope 3 numbers? Does the EU fine the company for non-compliance? If it’s a non-EU company, does the company even have to file and wouldn’t EU imposed fines be a breach of trade agreements?