When a company with no dedicated disclosure staff is asked for a greenhouse gas emissions report, whose desk does the work land on? It is a manager who doubles as head of general affairs, or a plant manager who has handled the equipment for years. The trouble starts with what to write in the first cell of the table. In the same period, the emissions indicators of Samsung Electronics and SK hynix are compared item by item, and that comparison is used as material for corporate evaluation.
The gap opens at whether a report can be produced at all.
As the date for mandatory ESG disclosure approaches, large companies have moved on to the stage of putting accounting systems in place. This includes the work of building Scope 3 accounting systems that cover suppliers and raw materials. On the other side are manufacturers founded decades ago. Many of them sit inside large companies' supplier networks with no measuring equipment and no dedicated staff.
The older the plant, the more its emissions records remain on paper. The work has to start with digging through electricity bills and fuel purchase slips to assemble twelve months' worth. Handing it to an outside firm costs money.
The system is elaborate in demanding reports and coarse in sharing the means to produce them. If the mandate proceeds as it is, differences in measurement capacity become differences in corporate grades.
There is a counterargument that regulation is a device for making the leading companies move first. The explanation is that for Samsung Electronics or SK hynix to account for Scope 3 they need their suppliers' electricity use and raw material emissions, and once that demand travels down, small and mid-sized companies also come to hold the data.
The demand travels down and the capacity does not. What suppliers receive is a form and a deadline, and the person to fill in that form has to be found inside the company. Firms that can submit data in the requested format stay in the supplier network, and those that cannot are pushed out of the business. Disclosure turns from a device that measures environmental performance into a device that sorts out who is qualified to trade.
How many items suppliers are required to submit, and who provides the tools to fill those items in, set the width of the gap. There are many companies whose circumstances change with one common form and one free accounting tool.
The list of companies that have filed reports will grow longer. Whether a company absent from that list was left out because it emits a lot or because it did not know how to count cannot be told from the list alone. As long as the system cannot tell the two apart, disclosure will record company size in place of performance.
