In the face of mounting global climate concerns, the urgency for transparency in emissions disclosures has never been greater. Recent findings highlight that a significant portion of China’s major listed companies are lagging in their reporting of Scope 3 emissions—those indirect emissions that arise throughout their value chains. This lack of comprehensive disclosure poses a major challenge in the global efforts to meet climate goals.
Despite growing awareness, nearly 80% of China’s major listed firms have not yet reported any Scope 3 emissions, according to a recent study by industry experts Zhang Nan and Li Dianyi. Their research reviewed the practices of 667 large Chinese companies, revealing a critical gap in climate disclosure practices.
Scope 3 Emissions: A Key Missing Link
Scope 3 emissions represent a crucial area of a company’s carbon footprint, as they account for emissions across its entire value chain—from the sourcing of raw materials to product use and disposal. While 84% of the firms in the study disclosed Scope 1 and 2 emissions, only 22% reported on Scope 3 emissions. The discrepancy is especially stark within firms listed on the CSI 300 Index, where only 21% disclosed Scope 3 emissions compared to 51% on the Hang Seng Composite LargeCap Index (HSLI).
Globally, Scope 3 disclosures remain underdeveloped as well. Research from Morgan Stanley Capital International indicates that, globally, 47% of listed firms reported upstream Scope 3 emissions in 2024, while only 28% disclosed downstream emissions. This global trend highlights that China’s listed firms are significantly behind in terms of climate transparency.
Regulatory Push for Emission Disclosures
The issue of Scope 3 reporting has become a focal point in international climate governance. In 2023, the International Sustainability Standards Board (ISSB) introduced the first global standards for corporate sustainability disclosures, including requirements for Scope 3 reporting. These standards have paved the way for consistent and comparable emissions data across industries.
China has also begun to address the issue. In 2024, the country shifted from voluntary to mandatory sustainability disclosures for listed companies, with major stock exchanges in Shanghai, Shenzhen, and Beijing encouraging firms to report Scope 3 emissions. Meanwhile, the Hong Kong Stock Exchange has taken a more stringent approach, mandating that all HSLI firms adopt ISSB-aligned reporting by 2026. By 2028, all large listed companies and significant non-listed financial institutions in Hong Kong will be required to fully comply with ISSB standards.
Moving Beyond Reporting: Setting Concrete Emission Targets
While many Chinese firms are taking steps toward Scope 3 reporting, most are still selectively disclosing emissions, focusing on easier-to-quantify factors such as employee commutes or business travel. More impactful areas, such as emissions from purchased goods and services, remain underreported—only 7% of firms disclosed emissions in this category.
The challenge for these companies is not only to improve the accuracy and transparency of their emissions data but also to set measurable, ambitious goals for reducing emissions. Fewer than 5% of companies in the study had set Scope 3 emissions reduction targets, and only 3% aimed for net-zero emissions. This highlights the significant gap in firms’ commitment to long-term climate action.
The Path Forward: Recommendations for Action
To bridge the gap in Scope 3 disclosures, experts Zhang and Li offer several recommendations. First, companies must adopt standardized accounting frameworks, such as the Greenhouse Gas Protocol, to ensure their emissions data is both accurate and comparable. Once disclosures are made, firms should prioritize high-impact emissions sources and work toward more detailed and accurate reporting methods, gradually shifting from generalized data to specific supplier-based measurements.
Setting clear emission reduction targets with concrete action plans is crucial. These targets should be aligned with global climate goals and be regularly updated to track progress. Additionally, firms must foster collaboration across their entire supply chain to encourage emission reductions at every stage. By working closely with suppliers to collect accurate emissions data, companies can enhance the reliability of their own Scope 3 disclosures.
Collaboration for a Zero-Carbon Future
Ultimately, reducing Scope 3 emissions is not a task companies can undertake in isolation. Building a zero-carbon value chain requires cooperation across the supply chain, as well as with stakeholders and innovators working on green technologies. Identifying and addressing emission hotspots, sharing knowledge, and promoting collaboration are essential steps in accelerating the transition to a low-carbon economy.
The call to action is clear: to mitigate future regulatory risks, improve competitiveness, and contribute to the global fight against climate change, Chinese firms must urgently prioritize Scope 3 emissions disclosures and work toward a greener, more sustainable future.
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