Challenges in Emissions Disclosure Highlighted by Clarity AI Study as Energy Sector Faces Pressure for Transparency

Tracking and disclosing carbon dioxide emissions are central to the energy transition, aiming to reduce these emissions as a crucial first step. Despite efforts by regulators and activists to pressure businesses into comprehensive emissions disclosure, many companies resist fully disclosing their emissions.

A recent study from Clarity AI highlights this resistance, revealing that only a small fraction of energy companies report emissions from oil and gas projects in which they are investors, rather than operators.

The study shows that the vast majority of the largest oil and gas companies do not report “investment Scope 3 emissions,” which could be problematic for investors. Scope 3 emissions encompass indirect emissions resulting from a company’s activities, including those from investment projects.

This non-disclosure raises concerns because investors rely on full transparency to make informed decisions in a transition economy.

Oil and gas companies face particular scrutiny regarding Scope 3 emissions due to their extensive emissions footprint. However, the industry argues that responsibility for emissions from hydrocarbon products lies with their users, not producers. Tracking Scope 3 emissions is resource-intensive, as it involves monitoring every step of a product’s lifecycle from creation to consumption.

Some transition advocates believe that detailed emissions reporting is less critical than direct decarbonization efforts. Patricia Pina of Clarity AI suggests that the lack of detailed reporting might stem from logistical challenges rather than intentional withholding.

The focus for some advocates is on pushing for substantial investments in renewable energy and decisive action towards net zero, rather than obsessing over every indirect emission.

Recent trends show a decline in shareholder support for climate-related resolutions, indicating that investor priorities may be shifting from emissions reporting to financial returns.

This shift aligns with observations that corporate climate commitments, including emissions reporting, have been reassessed. Companies are revising their ambitious targets, reflecting a more pragmatic approach to energy management and acknowledging the complexities of rapid decarbonization.