Singapore Government well poised to begin tracking its Scope 3 emissions, say experts

Scope 3 emissions refer to indirect greenhouse gas emissions incurred by a company as part of its value chain. ST PHOTO: GIN TAY

SINGAPORE – The Government could soon be well poised to start calculating and reducing its Scope 3 emissions – which often form the bulk of companies’ and entities’ greenhouse gas emissions – especially with plans for a greener procurement strategy and new measures to improve sustainability reporting.

This comes after the Government announced plans to publish an annual report to track the public sector’s efforts, progress and plans in rolling out its sustainability agenda from financial year 2023.

Under the report, the Government will start with reporting its Scope 1 and 2 emissions, and electricity and water consumption, with reference to international standards and frameworks.

However, there are no plans for now to disclose its Scope 3 emissions, Minister for Sustainability and the Environment Grace Fu said in response to a question from Mr Leon Perera (Aljunied GRC) in Parliament on Feb 24, though the Government will refine its framework as it strives to reduce public sector emissions.

Scope 3 emissions refer to indirect greenhouse gas emissions incurred by a company as part of its value chain, such as business travel by employees, the use of its sold products or the emissions from its purchased goods and services. 

For example, for oil and gas companies, a significant portion of total carbon emissions is from Scope 3 emissions from industrial installations, airlines and motorists who are large consumers of their products.

Scope 1 emissions refer to direct emissions incurred by a company, say, from its facilities or transport vehicles, while Scope 2 refers to indirect emissions such as the electricity or heating it buys from power generation companies.

According to data from global research non-profit World Resources Institute, Scope 3 emissions can account for 75 per cent of companies’ greenhouse gas emissions, on average.

However, experts The Straits Times spoke to said the new measures announced during the recent Budget debate could lay a foundation for the Government to begin accounting for its Scope 3 emissions, and take steps towards reducing them.

Noting that the Government is a huge purchaser of goods and services from small and medium-sized enterprises (SMEs), Ms Cherine Fok, partner of professional services firm KPMG’s ESG (environmental, social and governance) arm, said that having greener procurement requirements can help bring about a downstream impact on SMEs.

Starting from FY2024, the Government will implement up to 5 per cent of tender evaluation points for sustainability-related considerations for construction projects worth at least $50 million, and information and communication technology projects worth at least $10 million.

Both sectors make up more than 60 per cent of the value of government procurement contracts. Some examples of construction projects worth at least $50 million include business parks, industrial buildings, larger roads and MRT works.

“This signals that the public sector is taking leadership in building the right mindsets and behaviours,” said Ms Fok.

More support will be given to SMEs to help them decarbonise and better manage their carbon footprint as part of the Enterprise Sustainability Programme run by Enterprise Singapore, Minister of State for Trade and Industry Alvin Tan said in Parliament on Feb 28.

Enterprise Singapore will work with the Accounting and Corporate Regulatory Authority and industry partners to develop programmes to help SMEs embark on sustainability reporting.

Mr Joan Julia, carbon accounting lead for Asia at consulting firm Jacobs, said the measures are timely as SMEs often have limited financial and human resources, or little expertise in sustainability reporting or emissions tracking.

This makes it challenging for them to understand the relevant standards or methodologies, and it is even more difficult for them to calculate and report on their emissions accurately, he added.

Mr Praveen Tekchandani, partner of climate change and sustainability services at Ernst & Young, said SMEs’ ability to do so would be crucial, otherwise they might face the rising costs of inaction in the face of an economywide green transition.

For instance, SMEs intending to raise capital may experience differentiated rates for projects that are ESG-aligned, versus those that are not.

In addition, getting SMEs to measure and report their own Scope 1 and 2 emissions could make it easier for multinational corporations and the Government to calculate their Scope 3 emissions when purchasing from SME vendors, he said.

Ms Joan Yap, a sustainability consultant with Singapore Consultancy, said the measures will certainly bring about progress in helping the Government to track its Scope 3 emissions. But it will take a few reporting cycles for the data to be “sufficiently accurate and standardised”.

She added that there should also be an alignment of Scope 3 reporting standards and methodologies with international frameworks.

While it remains challenging for companies and entities to track their Scope 3 emissions, there has been a rising trend in recent years of companies publicly reporting and committing to assess their Scope 3 emissions, said Mr Julia.

He pointed to the Carbon Disclosure Project – a global non-profit charity which calls for businesses to disclose their greenhouse gas emissions – which has reported an increase in the number of companies reporting Scope 3 emissions in their public datasets.

Mr Julia noted that according to the World Resources Institute, the number of companies reporting Scope 3 emissions rose from 936 in 2010 to 3,317 in 2021.

Said Mr Tekchandani: “Sustainability is a journey for all organisations and we have observed that companies here have different levels of maturity in managing their ESG plans.

“For a start, it is not common for listed companies in Singapore to report their Scope 3 emissions completely. However, as their sustainability reporting maturity progresses, companies do start to report on Scope 3 emissions that are material, and what can be influenced to reduce their greenhouse gas emissions.”

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