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Companies subject to climate regulation must select the appropriate carbon accounting protocol. Here are the two key protocols and how they align to major climate regulations.
As climate regulations become more complex, the basics — like carbon accounting — become ever more important. A company’s initial steps, such as choosing the appropriate accounting protocol, are crucial for aligning with current and future regulation.
Here, we outline the two major carbon accounting protocols in use by companies today, and how these are used by some of the most wide-reaching climate disclosure regulations.
There are two major carbon accounting protocols in use by corporations today: the GHG Protocol, and ISO 14064. Both offer a high-quality approach to accounting for your carbon emissions, and both are regularly revised, relying on inter-industry expertise to inform best practice.
A pioneering emissions protocol, the GHG Protocol is the most widely recognized standard for measuring and managing emissions. Meant to increase consistency and transparency while simplifying and reducing the costs of compiling a GHG inventory, it identifies, explains, and provides options for GHG inventory best practices.
Multinational corporations favor it because it seeks to standardize reporting globally and provide stakeholders with transparent, credible data. It also suits those that need sector-specific tools and guidelines.
ISO 14064 is a more concise document, emphasizing consistency, transparency, and a structured management system over detailed calculators and sector-specific guidance. The document establishes minimum standards for compliance with best practices and provides a framework for third-party verification.
ISO Certification can add third-party verification and certification to emissions reporting, which is useful for companies in highly regulated sectors that contract with governments or participate in carbon markets that require certification.
Regulatory frameworks impact the type of reporting protocol companies choose. You’ll want to ensure the standard you report to is compatible with any relevant regulations, such as the International Sustainability Standards Board (ISSB) standards, the EU’s Corporate Sustainability Reporting Directive (CSRD), or the U.S. SEC’s climate disclosure rules.
These regulations often mandate specific reporting requirements, including Scope 1, 2, and sometimes Scope 3 emissions. By choosing the right protocol for your carbon accounting, you lay the groundwork for transparent and credible carbon reporting that meets both internal goals and external expectations.
Here are some of the most wide-reaching climate disclosure frameworks and regulations that are either in effect or expected to soon take effect around the world.
Twenty total jurisdictions, representing over half the global economy, are adopting the ISSB standards created to ensure global consistency. In line with GHG Protocol standards, ISSB requires Scope 1 and 2 reporting for all companies and non-operational Scope 3 reporting when it is material to the company’s carbon footprint and significant to stakeholders.
Similar to the ISSB standards, the SEC’s proposed regulation includes Scope 1 and 2 reporting in line with GHG Protocol standards. It mandates Scope 3 emissions reporting if emissions are material to investors.
The CSRD is an EU directive that extends GHG requirements already mandated for EU companies, including Scope 1, 2, and 3 emissions in line with GHG Protocol standards. It’s stricter than the SEC’s proposed reporting mandate since it includes many more ESG factors than simply emissions and includes small and medium-sized enterprises within its reach. Non-EU companies take note: companies are subject to this regulation when operations surpass a net turnover of €150 million annually in the EU.
The CDP (formerly known as the Carbon Disclosure Project) is a global disclosure system that requires companies to report on their greenhouse gas emissions (in line with GHG Protocol standards), climate-related risks, and strategies for managing those risks. Companies that are subject to the CDP include publicly traded firms, large private corporations, and certain high-impact industries, such as energy, utilities, and manufacturing. Additionally, institutional investors and major corporations often mandate CDP reporting for their suppliers to ensure comprehensive climate risk management across their value chains.
Carbon accounting is the foundation for carbon transparency and climate disclosure. For companies navigating the complex web of climate regulations, getting carbon accounting right is a critical first step. Companies should select carbon accounting protocols wisely in order to tailor their reporting practices to meet both current and anticipated regulatory demands.
Ensuring that your reporting practices are up-to-date and compliant not only supports transparency and accountability but also positions your company favorably in the eyes of stakeholders and regulatory bodies. By proactively investing in carbon accounting and staying ahead of regulatory movements, companies can enhance their environmental stewardship and mitigate risks associated with climate-related disclosures.
Coral’s straightforward carbon accounting platform makes it easy for an entity to track its emissions. All you need to do is upload your data (such as invoices and utility bills), and our platform calculates the emissions associated with those activities. With Coral, users can reduce the time and effort investment involved in this process by about 90%.
With AI-assisted technology dedicated to operational carbon accounting, Coral makes it easier for companies to practice smart carbon management — which is the first step to taking credible action. If you need help implementing carbon accounting best practices in your organization and want to learn more about our end-to-end environmental performance management solutions, contact Coral today.
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