In the so-called “most sustainable cities,” per capita consumption-based emissions constitute far more than per capita Scope 1 emissions. Similarly, evidence suggests that, among US firms, an increasing proportion of Scope 3 emissions compared to Scope 1 points to outsourcing. Without proper accountability outside of Scope 1, both responsibility and emissions are misplaced. Incentives should be put into place to improve transparency and re-evaluate how we define what makes a city or company “sustainable.”

What do the most sustainable cities have in common? Apparently, that their Greenhouse Gas emissions from consumption constitute far more than their Scope 1 emissions on a per capita basis. This probably comes as little surprise. When you picture a sustainable city, you might imagine a place with clear air and high quality public space (i.e., a consumer city that imports rather than produces many of its goods and services). But maybe this relationship should be shocking. Shouldn’t the most sustainable city be the one that is circular and self-sustaining, internally managing its food, water, and energy needs?

Based on data and rankings from Corporate Knights Sustainable Cities Index, we find that among the cities ranked highest in sustainability, per capita consumption-based emissions constitute as much as 12x their per capita Scope 1 emissions[1]. In other words, in cities deemed the most sustainable—including Stockholm, Oslo, and Copenhagen—direct emissions (Scope 1) tend to make up a very small portion of total per capita emissions. This particular ranking is not unusual, as these places consistently appear at the top of sustainable city lists. And it’s not to say these cities are not sustainable—after all, some (though not all) do have low per capita consumption-based emissions. But maybe there’s more to unpack about the relationship between direct and indirect emissions.

Before diving into why we should care about what counts as sustainable, it’s worth noting and understanding a parallel that exists at the corporate level. A recent study found that, among US firms, the proportion of Scope 3 emissions relative to Scope 1 is rising. Further evidence suggests that firms are outsourcing their emissions to foreign suppliers (controlling for factors like operating efficiency and assets). There are a number of reasons a company might outsource emissions, such as maintaining social reputations domestically and avoiding regulatory stringency.

So, why does it matter that the per capita emissions of “sustainable” cities are largely consumption-based, and that companies are outsourcing emissions? As lecturer Marcelle McManus puts it, just because they are meeting certain targets, doesn’t mean they aren’t responsible for emissions elsewhere. Without the proper incentives to drive accountability, companies and cities may be less likely to invest in green technology or reduce emissions locally. Furthermore, these factors make it possible for companies and cities to hide (intentionally or unintentionally) behind their impressive Scope 1 performance (which is the most observable), while remaining silent on Scope 3, where much of their emissions lie.

The answer to these challenges lies in regulatory and reputational incentives. Regulatory changes—like the SEC’s proposed climate risk disclosure rule—can mandate the disclosure of upstream and downstream Scope 3 emissions. Not only would this compel companies to reassess efficiency within their supply chains, but also, it could reveal reputational incentives (as observable efforts expand to include Scope 3).

Additionally, it is worth re-evaluating what we consider “sustainable” and paying more attention to hidden emissions. Perhaps the most sustainable cities and companies are not the ones we think they are.

[1] The report defines scope 1 GHG emissions as those occurring within the city boundaries. Consumption-based emissions are those (1) from final consumption and (2) embedded in both domestically produced and imported goods and services that ultimately are consumed within the city.