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Dec 9, 2022

Small Business At Risk With Emissions Reporting

Plans to mandate ‘scope three’ emissions reporting would be detrimental to small businesses, says a report by the Montreal Economic Institute (MEI). The Canadian Securities Administrators – an umbrella group for all provincial and territorial securities regulators – is looking into mandating the inclusion of all upstream and downstream greenhouse gas emissions (scopes one, two, and three) for publicly listed Canadian companies. Scope one emissions refer to those stemming from the manufacturing process itself. Scope two emissions refer to those associated with operations of the manufacturing facility, such as heating and hydro. Scope three emissions are everything else and includes all indirect emissions that occur in the value chain of a reporting company. In its study, the MEI shows that, despite its application being limited to publicly listed companies, scope three emissions reporting requirements would be imposed indirectly on small businesses working in large business supply chains, as emissions reporting would be required for every stage of a product’s lifecycle. “Mandatory ESG (environmental, social, and governance) reporting requirements would tack on extra costs at every level of the supply chain, including the small businesses that act as suppliers,” says Krystle Wittevrongel, senior policy analyst at MEI and author of the study. “It risks removing small businesses from the big business supply chain.”

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