Singtel's not so deep Scope 3 cuts

These past few months I have been on numerous panels across Singapore and Australia discussing the complex topic and approach to Scope 3 emissions. It is an evolving topic of concern that many companies have especially with the new upcoming ISSB IFRS S2 climate related financial disclosures becoming mandatory.

I commend the The Business Times for going forensic on our latest Singtel Group Sustainability Report 2024 (https://www.dhirubhai.net/pulse/singtels-not-so-deep-scope-3-cuts-the-business-times-ulkqc/). Companies need to expect this level of scrutiny and maturity of analysis from its stakeholders given the importance of transparency and the complexity of some ESG topics.

Also, by always taking a leading position on adopting the emerging standards such as Science Based Targets initiative, FSB Task Force on Climate-related Financial Disclosures (TCFD), full Scope 3 disclosures, pro-forma IFRS S2 disclosure format, and having had our key data externally assured over the past decade, it has always opened Singtel up to early scrutiny and challenge. I always see these challenge as an opportunity to learn, improve and to also educate and raise awareness for a complex topic because many other corporates will struggle with the same challenges.

So this reply to The Business Times is done in the spirit of strengthening dialogue to build collective knowledge for emerging key ESG issues such as Scope 3 emissions. It is not meant to be a point-by-point response but to cover some of the key thematic areas raised in the commentary.

1) Real Scope 3 reductions versus methodology improvements

As Scope 3 methodology and emissions factor databases improve and mature, there will be constant changes and improvements in accuracy. This can only be a good thing given the lack of availability and sometimes accuracy of many emission data bases. Recognising this, Singtel has taken a practice to provide detailed explanation in Page 16 of our sustainability report for what drives every year on year change in each of the 15 categories of Scope 3.

?

As pointed out by The Business Times, some are improvements in methodology as we advance moving from generic spend and sector based emissions factors to company level emissions. Where available we use product level emissions factors for those suppliers that have likewise advanced their emissions information. This is what we term a "hybrid methodology" that recognizes the different stages of maturity of our supply chain for their emissions disclosures. Our details will explain what comes from a) methodology improvements, b) from changes in emissions factors c) changes in scope as well as d) real reductions from efforts and initiatives of the business. In pages 82 - 88 of the report, we go a step further through the external auditor to provide details of the basis for key metric disclosed.

We encourage all companies to take the same approach of transparency. We believe that even if not published stakeholders will ask for such information.

2) On the issue of restatement.

In the evolving maturity of Scope 3, restatement is not as straight forward as compared to financial data restatement. This is again an issue of maturing practice and standards. In Page 32 of our report which provides trended data on all key environment and climate metrics, we footnote all the areas where we have included restatements for previous years whether due to omissions, even errors, change in scope and where available change in methodology.

But in Scope 3, it is not always possible to provide restatements to previous years when it comes to improvements in methodology. As an illustration, in a prior year eg 2022 we may only have had spend data and the only information available by a supplier could have been their company emissions. In a current year of reporting 2024, we may now have specific equipment shipment data, and specific product level emissions from the vendor. To try and adjust the baseline retrospectively in this example is not meaningful because the current product emissions factor of the vendor will not have been the same as their emissions factor of 2022 (eg they may not have the info for prior equipment models). Also to go back historically to trace down specific details of shipment would be beyond reasonable effort at this stage of Scope 3 reporting maturity.

?In such circumstances, we take the prescribed practice where "if restatement of historical data are not provided, companies should explain the changes to provide contextual information for interpreting current disclosures" which is what we have done in Page 16 of the report.

We also take the practice of fully re-baselining and resetting targets every few years as we expect baseline changes to be more material on a cumulative basis. Which is why Singtel has also completely updated our new baseline of Scope 1, 2 and 3 emissions to 2023 (from previously 2015), and updated new targets for our emissions which was approved by SBTi in December 2023. We are the first telco in Asia to demonstrate re-baselining and resetting of SBTi targets in Asia to even more aggressive level for 2030 and even advancing our Net Zero targets to 2045 as we build confidence from our progress on emissions understanding and reduction.

In summary, I use the above two elaborations to illustrate the challenges and complexity of Scope 3 reporting. But against these challenges there are still opportunities for "better practices" until the full "playbook" of Scope 3 accounting matures to the extent of financial accounting standards. It is for this reason, the new IFRS S2 standards also start with limited assurance, moving to reasonable assurance over time as it will take time globally for companies to mature.

Singtel recognises the challenges and sometimes ambiguity of Scope 3. We also recognise that many companies will be using simple spend-based approaches leveraging third party carbon platforms. While initially easier, it needs to be recognised they suffer from some of the same challenges of methodology and accuracy of emissions factors. It is for this reason, Singtel together with PwC and in collaboration with the Singapore Business Federation will work and support effort towards the development of a National Emissions Registry which will help especially smaller companies on their emissions accounting journey. This will not be easy, and it will not be overnight. But the sooner we start pushing the boundaries even if we get challenges, the earlier the world will be a better place.

For the stakeholders like media, investors and even regulators, it is important to recognise corporates are building new muscles, and there is always teething pain in doing so. The constructive dialogue will be critical to encourage pragmatic progress. Because on the reverse, unreasonable challenge sometimes leads to corporates doing the bare minimum just for compliance, and even green hushing.

?You can read more at our recently released Singtel Group Sustainability Report 2024 at

https://cdn.aws.singtel.com/sustainabilityreport/SR-2024/download/downloads/Singtel-Group-Sustainability-Report-2024.pdf.

We welcome further feedback on both our report and on my comments, as it has been how we have improved our sustainability strategy and disclosures over the years.

?#IFRS #Scope3 #ISSB #SustainabilityReporting #TCFD #ClimateAction #SingtelLeadSeries

___________________________________________________________________________

The following is an addendum to my original response above. I wanted to scrutinise through the sequence of our own sustainability report whether at any stage Singtel was trying to "headline" its major Scope 3 reductions without sufficient context, or whether at any point of making reference to Scope 3 reductions would it be unclear to the reader the basis of the reductions. The sequence below is self-explanatory - there was no evidence of trying to make "headline claims" that were misleading, and at all points there were sufficient cross-references to the basis of changes.