Filling data gaps in environmental performance disclosure

Standard-setting bodies like the International Sustainability Standards Board (ISSB) are changing the global landscape for climate disclosure. The ISSB released its first standards this summer, and as companies prepare to implement them, research from S&P Global Sustainable1 finds that climate disclosure varies widely around the world.  

As we covered in the first blog in this series, gaps remain in company-level disclosures across all major financial indices. 

Although disclosure of Scope 1 and Scope 2 operational greenhouse gas (GHG) emissions is reasonably high for developed markets, disclosure across the remainder of the value chain is low across the board. For example, only 8% of companies in our covered universe disclosed Scope 3 downstream GHG emissions data that was of sufficient quality, or that required some adjustment by S&P Global Sustainable1 to ensure comprehensiveness and comparability.

Disclosure levels are higher for the S&P 500, but we still see significant gaps that would require estimations.

The use of robust data modeling techniques is therefore essential to fill in the gaps, especially across environmentally-intensive business activities. Our Environmentally-Extended Input-Output (EEIO) model splits the world economy into more than 450 distinct business activities based on the North American Classification System (NAICS). The model calculates environmental impacts per million USD in revenue for each business activity, which can then be used to anticipate the most material impacts for a company based on its discrete business activities. Our EEIO model combines industry-specific environmental performance data with quantitative macroeconomic data on the flow of goods and services between different sectors in the economy, enabling users to estimate environmental impacts for a company’s own operations and across its entire global supply chain at a granular level.

S&P Global Sustainable1 also uses production-based modeling for certain material sectors to improve the accuracy of our estimations. In a world where company disclosures around sustainability topics can be inconsistent, our approach to filling in the gaps helps complete the picture across financial portfolios and corporate supply chains.

Learn More

Learn about how our approach to checking and cleaning environmental data to correct disclosure errors and inconsistences in the next blog in this series.