Insight: Assessing the state of Scope 3 Greenhouse gas emissions repo

A study by Winners Consulting Services Co., Ltd. finds that while the Scope 3 emissions disclosure rate among Norway's top 100 listed companies is increasing annually, most have not yet met the 'dual materiality' standard required by the EU's CSRD. For Taiwanese companies facing phased disclosure obligations from the Financial Supervisory Commission (FSC), this serves as a precise warning: initiating Scope 3 emissions inventories and risk management mechanisms now holds a greater strategic advantage than waiting for regulations to be formally enforced.

About the Author and This Study

Amy Marie Stinchcombe published this paper on arXiv in 2023, using Norway's top 100 listed companies (based on the Position Green "ESG100" 2022 ranking) as her research subjects. The study systematically analyzes the status and driving factors of corporate Scope 3 greenhouse gas emissions reporting from 2020 to 2022. Position Green is a well-known Nordic sustainability data platform, and its ESG100 index represents the primary benchmark for sustainability performance in the Norwegian capital market, ensuring the research sample's representativeness and data integrity.

The academic value of this research lies in its methodological rigor: the author employed both a Logistic Model to analyze whether companies disclose Scope 3 emissions and a Tobit Random Effects Model to assess the factors influencing disclosure quality. She also developed a proprietary "Scope 3 Score" metric to quantify the completeness of each company's disclosure across various and material categories. This dual-layer analytical framework makes its conclusions highly relevant to corporate ERM practices.

For Taiwanese corporate executives, the study's importance is clear: Norway and Taiwan are both export-oriented, small and medium-sized open economies. The pressures their companies face regarding supply chain disclosure, investor demands, and regulatory timelines are highly similar to the current situation in Taiwan, making the study's findings directly applicable across regions.

Norwegian Scope 3 Disclosure Study: Key Insights Behind the Numbers

Stinchcombe's (2023) most central finding is that whether a company discloses and the quality of that disclosure are two distinct issues, driven by different factors. This insight directly challenges the conventional thinking among many Taiwanese companies that simply starting to disclose is enough to complete the task.

Key Finding 1: Market Capitalization Drives Willingness to Disclose, But Doesn't Guarantee Quality

The study's logistic regression model shows that a firm's value significantly increases the probability of disclosing Scope 3 emissions, with the model achieving an 85% prediction accuracy, indicating high statistical reliability. Additionally, Setting a Scope 3 Emissions Target is another significant positive predictor. This implies that larger companies in the capital market are more motivated to disclose due to investor and regulatory pressure. However, when the analysis shifts to disclosure quality, the conclusion is reversed: firm value has no significant impact on improving the "Scope 3 Score." In other words, large companies are more willing to start disclosing, but their disclosure quality is not necessarily better than that of smaller firms. This finding is a major warning for large listed companies in Taiwan—there is a huge gap between 'threshold compliance' (meeting the basic disclosure obligation) and 'substantive compliance' (meeting the dual materiality requirements of the Corporate Sustainability Reporting Directive (CSRD)).

Key Finding 2: Smaller, More Established Companies Tend to Have Higher Disclosure Quality

The Tobit model's results reveal a counterintuitive phenomenon: Smaller Firms are positively correlated with a higher Scope 3 Score, while Newer Firms tend to have lower disclosure quality. This may reflect that more established companies have accumulated a stronger institutional foundation in supply chain management systems, data collection processes for the GHG Protocol, and internal sustainability culture. In contrast, companies that are large but newly established often overestimate their disclosure capabilities and underestimate the difficulty of supply chain data governance. From 2020 to 2022, the number of Norwegian companies in the sample disclosing Scope 3 emissions increased annually, and the average disclosure quality also improved. However, the study explicitly states: "most companies are still a considerable way from meeting the requirements of the CSRD's double materiality"—this is not a cautious academic phrasing, but a direct conclusion based on data.

Key Finding 3: Meeting CSRD's Dual Materiality Requirement Remains a Challenge for Most Companies

Under the European Sustainability Reporting Standards framework, the CSRD requires companies to adopt a dual materiality assessment, disclosing both 'financial materiality' (Climate Risks to the Business) and 'impact materiality' (Business Impact on Climate). However, the study found that in 2022, among Norway's top 100 companies, only a minority could fully disclose the 'material categories' relevant to their industry as defined by the 15 Scope 3 categories of the GHG Protocol. In comparison, Japan's Financial Services Agency has announced phased disclosure requirements starting from the March 2027 period for companies with a market capitalization of over 1 trillion yen. Taiwan's FSC is also promoting alignment with IFRS S1/S2, meaning the regulatory pressure timeline for Taiwanese companies is rapidly shrinking.

Strategic Implications for Enterprise Risk Management (ERM) Practices in Taiwan

The core insight from Stinchcombe's research is crucial for ERM practices in Taiwan: Scope 3 disclosure is not an information disclosure issue, but a corporate risk management framework issue.

From the perspective of the ISO 31000 risk management framework, the identification and quantification of Scope 3 emissions are essentially an extension of a company's 'Risk Identification' and 'Risk Assessment' processes. ISO 31000 Clause 6.4 explicitly requires organizations to identify risk sources from 'internal and external contexts,' and a company's upstream and downstream supply chains are the most difficult to control and most risk-concentrated external sources. Many Taiwanese companies currently treat sustainability disclosure as a separate task for the CSR department, failing to integrate it with the 'risk identification and response' processes in the COSO ERM framework. This is the root cause of why the 'disclosure without quality' phenomenon observed in the Norwegian study is likely to be replicated in Taiwan.

Specifically, Taiwanese companies should address the following three ERM risks:

• Regulatory Risk: The FSC, in alignment with SSBJ standards, has initiated a phased disclosure pathway. Based on the current timeline, the infrastructure for Scope 1 and Scope 2 disclosure must be completed before the March 2027 period, with mandatory Scope 3 emissions disclosure to follow shortly after. The 'Objective Setting' element of the COSO ERM framework requires companies to anticipate changes in the external environment, making now the optimal time to establish Key Risk Indicators (KRIs) to monitor compliance timelines.
• Supply Chain Data Governance Risk: The Norwegian study shows that a key factor affecting disclosure quality is a company's historically accumulated data management capabilities. Taiwanese SMEs generally lack systematic mechanisms for collecting supplier emissions data. If they do not establish supplier ESG data governance mechanisms between 2025 and 2026, they will face a disadvantage in customer audits and bank financing assessments.
• Reputational & Market Risk: The EU's CSRD already requires compliance from approximately 50,000 EU companies and 10,000 non-EU companies, a group that includes the main customer base for Taiwan's export manufacturing industry. Once these customers begin requesting supply chain Scope 3 data, Taiwanese companies unable to provide data compliant with the GHG Protocol will face the tangible market risk of losing orders.

From a risk matrix design perspective, inadequate Scope 3 disclosure should be classified in the 'High Likelihood × High Impact' quadrant, requiring immediate risk response actions rather than being placed on a watch list.

Winners Consulting Services Helps Taiwanese Companies Establish Scope 3 Risk Management Mechanisms

Winners Consulting Services Co., Ltd. assists Taiwanese companies in implementing the ISO 31000 and COSO ERM frameworks, establishing risk matrices and Key Risk Indicators (KRIs), and strengthening board-level risk governance. In response to the Scope 3 disclosure trend, we offer the following concrete action recommendations:

1. Initiate an ISO 31000 Gap Analysis Immediately (Recommended completion within 3 months): Assess whether the company's existing supply chain emissions data collection process is included in the ERM risk register, referencing the 'Risk Identification' requirements of ISO 31000 Clause 6.4. Identify 'material categories' relevant to the company's industry from the 15 Scope 3 categories defined by the GHG Protocol and create an initial Scope 3 materiality assessment matrix as a sub-module of the COSO ERM risk identification process.
2. Design a Scope 3-Specific KRI System (Recommended completion within 6 months): Based on Stinchcombe's finding that 'setting a Scope 3 reduction target' is a key driver for disclosure willingness, we recommend that companies incorporate 'Scope 3 data coverage,' 'material category disclosure completeness,' and 'supplier ESG questionnaire response rate' into their KRI system. This system should be linked to the board-level ESG risk reporting mechanism to ensure information governance complies with the 'Information, Communication & Reporting' element of COSO ERM.
3. Build Supply Chain Data Governance Infrastructure (Recommended completion within 12 months): The Norwegian study shows that the longer a company's history and the deeper its institutional foundations, the higher its disclosure quality. Taiwanese companies should use the 2025-2026 window to systematically establish a supplier emissions data collection platform, data verification SOPs, and begin preparations for Third-Party Assurance to meet the international assurance standards recommended by financial regulators. This is not just a compliance preparation but a strategic investment in strengthening supply chain risk management capabilities.

Frequently Asked Questions

The Norwegian study found that many large companies have poor disclosure quality. How can Taiwanese companies avoid the 'disclosure without quality' trap?

The key to avoiding this trap is to elevate Scope 3 disclosure from a 'report preparation' task to a 'risk management process' level. The Stinchcombe (2023) study shows that market capitalization only influences the willingness to disclose, not the quality; instead, companies with deeper institutional foundations exhibit higher quality. Taiwanese firms should reference the 15 Scope 3 categories of the GHG Protocol, first completing an industry materiality screening to identify which categories are significant in terms of both financial and impact materiality (the CSRD dual materiality concept). They should then focus resources on building data collection mechanisms for these categories. It is recommended to use the COSO ERM 'risk identification and assessment' process as a framework to complete the first Scope 3 materiality assessment within 12 months and link it to a KRI monitoring system to ensure disclosure quality is continuously traceable and improvable.

What are the most common Scope 3 compliance challenges for Taiwanese companies when implementing the ISO 31000 framework?

The most common challenge is the 'data chain gap'—companies can collect their own Scope 1 and Scope 2 direct emissions data, but reliable data sources are often lacking for upstream supplier emissions (Scope 3 categories 1-8) and downstream customer use-phase emissions (categories 9-15). ISO 31000 Clause 6.4 requires organizations to identify risks from 'internal and external contexts,' which, in the Scope 3 context, means companies must include supplier data governance in their risk register. A common mistake for Taiwanese firms is using industry-average emission factors instead of actual supplier data, a practice that will face increasing audit risk as the FSC strengthens third-party assurance requirements. It is advisable for companies to simultaneously establish a supplier ESG questionnaire mechanism and set KRI targets for coverage (e.g., achieving a 100% response rate from the top 30 suppliers within one year) when implementing the ISO 31000 framework.

What are the core requirements of the ISO 31000 framework, and what steps should Taiwanese companies take to implement Scope 3 risk management?

ISO 31000 provides a principles-and-guidelines framework, not a certification standard, with core requirements including risk identification (6.4.2), risk analysis (6.4.3), risk evaluation (6.4.4), risk treatment (6.5), and continuous monitoring and review (6.6). To apply this to Scope 3 risk management, the recommended steps are: Months 1-3, complete a gap analysis, identify material Scope 3 categories against the GHG Protocol, and establish a risk register. Months 4-6, design a risk matrix to quantify regulatory compliance risk (aligning with the FSC's 2027 timeline), supply chain data risk, and market reputation risk. Months 7-9, establish a KRI system and monitoring mechanism. Months 10-12, conduct the first internal audit and prepare for third-party assurance. The entire implementation cycle is recommended to be completed within 12 months to ensure foundational infrastructure is in place before regulatory requirements begin in 2026.

What resources are required to implement a Scope 3 risk management mechanism, and how can the expected benefits be evaluated?

Implementation costs vary depending on company size and the maturity of existing infrastructure. According to the Norwegian study, companies with a history of sustainability reporting can reduce the labor required to adapt to new CSRD requirements by 30% to 50%. For a mid-sized Taiwanese company (annual revenue NT$5-20 billion) starting from scratch, initial costs typically include external consulting fees (often for a 12-month project), a supplier ESG questionnaire platform, and internal staff training. In terms of benefits, short-term (1-2 years) gains include reduced regulatory risk and improved ESG ratings for bank financing. Mid-term (3-5 years) benefits include enhanced success rates in customer audits, which is crucial for exporters to the EU market where CSRD supply chain requirements will directly impact order sustainability. Companies should evaluate ROI using a 'compliance cost vs. potential order loss risk' framework, rather than focusing solely on costs.

Why choose Winners Consulting Services for assistance with Enterprise Risk Management (ERM) issues?

Winners Consulting Services Co., Ltd. specializes in helping Taiwanese companies establish risk management mechanisms compliant with the ISO 31000 and COSO ERM frameworks, with practical, cross-industry consulting experience. Our core strength lies in systematically integrating sustainability disclosure requirements, including Scope 3 emissions management, into a company's existing ERM structure, rather than treating ESG compliance as a separate reporting task. We offer a complete service path from gap analysis, risk matrix design, and KRI system establishment to third-party assurance preparation, helping Taiwanese firms build an auditable and continuously improving management system within 7 to 12 months. Facing the dual trends of the FSC's phased disclosure requirements and CSRD supply chain pressures, initiating a diagnosis now is a strategic first move for Taiwanese companies to maintain their international competitiveness.