GHG Restatements: How Did Novo Nordisk’s Scope 3 Emissions Suddenly Halve?

Novo Nordisk’s Emission Restatement: A Shift in Scope 3 Reporting Raises Eyebrows

The recent release Novo Nordisk’s of its 2024 CSRD report has caused a stir in the sustainability reporting community, primarily due to the substantial restatement of their Scope 3 emissions. The pharmaceutical giant halved its scope 3 emissions for 2023, simply by restating the figure due to methodological changes. Is NovoNordisk an outlier, or are these massive changes in carbon accounting to be expected as companies refine their calculations?

NovoNordisk’s restatement has sparked debates around carbon accounting, the reliability of Scope 3 emissions data, and the challenges of providing actionable, reliable sustainability reporting for complex value chains. While this adjustment reflects a refinement of their methodologies, it has raised significant questions for companies in all sectors as they navigate the intricacies of ESG reporting under CSRD and ESRS guidelines.

‍

Why Did Novo Nordisk Restate Its Carbon Footprint?

Novo Nordisk has restated its Scope 3 emissions for 2023 following a refinement of its calculation methodology. The company transitioned from a spend-based approach to an activity-based approach, incorporating supplier-specific data where available.

Spend-based accounting, while commonly used in early emissions tracking, can lead to overestimations, particularly for high-value goods in industries like pharmaceuticals. By shifting to activity-based data, Novo Nordisk aimed to improve the accuracy of its emissions reporting, particularly in Scope 3 categories such as purchased goods and services (category 1) and capital goods (category 2).

The restatement was driven by adjustments to emission factors and volume conversions. Specifically:

• Contract manufacturing categories were moved from spend-based to activity-based calculations.
• Capital goods emissions were refined using updated emission factors, supplier-specific data where available, and new spend-based factors developed from bills of material.
• Upstream transportation and distribution (category 4) and business travel (category 6) were updated with revised emission factors.

As a result of these refinements, previously reported Scope 3 emissions were adjusted downward, as initial estimates had been overstated due to the limitations of spend-based factors. This update reflects broader trends in sustainability reporting, where companies are improving data quality to enhance the reliability of emissions disclosures.

‍

What does this mean for emissions comparability?

Novo Nordisk’s restatement highlights a key challenge in sustainability reporting: how comparable are Scope 3 emissions over time, and how useful is this information for investors and other stakeholders? If companies continually refine their methodologies, adjusting assumptions and incorporating new data sources, year-to-year comparisons become difficult. This raises fundamental questions about whether Scope 3 reporting provides a reliable basis for tracking progress or making investment decisions.

Scope 3 emissions are inherently complex, relying on a mix of spend-based estimates, activity-based data, and supplier-reported figures, all of which are subject to change as methodologies improve. Novo Nordisk, for example, now reports the portion of its Scope 3 emissions calculated using primary data (12%), giving stakeholders insight into the level of accuracy. This type of disclosure, along with standardized data quality indicators such as the Partnership for Carbon Accounting Financials (PCAF) framework, which uses a 1-5 scale to indicate data reliability, could help improve transparency and comparability.

For investors, policymakers, and sustainability professionals, the key question remains: How can Scope 3 data be used effectively if it is in constant flux? One solution is to assess trends in data quality rather than absolute emissions figures. Companies that disclose the proportion of primary data used, the uncertainty associated with their calculations, and the reasons for restatements provide more meaningful insights than those reporting a single emissions figure. As sustainability reporting evolves, improving comparability should be a priority, ensuring that refinements in methodology enhance—not undermine—the usefulness of emissions data.  

‍

What Does This Mean for Other Companies?

For companies deep in sustainability reporting, one thing is becoming increasingly clear: Scope 3 emissions are anything but static, and restatements will likely become more frequent as better data and methodologies emerge. But what can other companies learn from Novo Nordisk’s experience?

• Use Activity-Based Emission Factors When Possible: Whenever supplier-specific data is available, consider shifting from spend-based to activity-based calculations. This will provide a more accurate representation of the emissions tied to actual activities, rather than using broad categories that may not reflect real-world emissions.
• Ensure Transparency in Methodology: Updating Scope 3 emissions data is important, but it’s equally essential to clearly explain the reasons behind any changes. Novo Nordisk’s transparency in explaining its restatement provides stakeholders with the understanding they need to trust the company’s carbon footprint calculations.
• Expect Adjustments and Refine Reporting Practices: Sustainability reporting is a dynamic process. As methodologies improve, companies must be prepared for fluctuations in Scope 3 emissions over time. Reporting will continue to evolve as new methodologies and data sources emerge, so flexibility is key.
• Establish a Consistent Methodology to Ensure Comparability: While restatements are natural as data improves, constant methodological changes can undermine the comparability of emissions data. It’s vital to maintain a consistent reporting methodology, even as adjustments are made.

The Bigger Picture: Restatements and the Maturity of Carbon Accounting

Restatements like the one from Novo Nordisk are not outliers in the world of carbon accounting. In fact, they reflect the natural progression and maturation of GHG reporting. As methodologies evolve and companies refine their emissions estimates, restatements will continue to play a key role in ensuring more accurate, actionable carbon footprint reporting.

Shifting from spend-based emission factors to activity-based reporting always carries a certain degree of uncertainty. However, it represents a more precise approach to understanding and reducing emissions, which can ultimately drive meaningful change in decarbonization efforts.

One of the key takeaways from Novo Nordisk’s restatement is that Scope 3 emissions should be viewed as a work in progress rather than a static data point. With new data sources and improved methodologies, restatements will continue as companies refine their estimates to meet CSRD and ESRS requirements. Expect fluctuations and recalculations as these standards continue to evolve.

‍

Accuracy vs. Transparency

Some might view Novo Nordisk’s restatement as a sign of inconsistency or uncertainty, but in reality, it highlights a more mature approach to sustainability reporting. By refining its emissions estimates and offering transparency about the process, Novo Nordisk signals its commitment to more accurate and transparent reporting—both of which are crucial as companies seek to align with CSRD and ESRS standards.

As companies work to refine their carbon footprint calculations, it will become clear that sustainability reporting is not a one-time exercise, but an ongoing commitment to improving transparency, accuracy, and alignment with global reporting frameworks.

The evolving nature of Scope 3 reporting underscores the fact that GHG emissions are challenging to calculate, but with advances in data collection, supplier engagement, and emission factors, we can expect increasingly accurate reporting and perhaps even more restatements in the future. For sustainability professionals and stakeholders, the key is to remain adaptable and understand that carbon footprints are always estimates based on the best available data at the time.

Want to dive deeper into the first wave of CSRD-compliant reports? Explore the full document for key insights or watch our on-demand webinar where experts break down the first audited reports, share best practices, and tackle critical challenges.

‍