In recent years, the landscape of climate disclosure has transformed dramatically. As voluntary frameworks give way to mandatory regulations, they not only mandate corporate climate action but also set the stage for a profound "trickle-down effect" that influences every industry and level of global supply chains.

Here, we explore recent changes in the climate disclosure landscape, and how these will affect companies in all industries and locations.

Climate disclosure regulations are here to stay

A “tsunami” of sustainability regulations is replacing the patchwork of voluntary reporting norms that came before; harmonizing across industry and sector is a challenge many regulators are looking to tackle. 

New and forthcoming regulations, such as the European Union’s Corporate Sustainability Reporting Directive (CSRD), the U.S. Securities and Exchange Commission’s (SEC) climate disclosure rules, and the Carbon Border Adjustment Mechanism (CBAM) — to name a few — are setting the stage for mandatory, transparent reporting on carbon emissions. 

• The European Union’s (EU) Corporate Sustainability Reporting Directive (CSRD) requires transparent climate goal reporting starting in 2025 for 2024’s business activities.
• The Carbon Border Adjustment Mechanism (CBAM) further requires importers to offset the carbon footprints of materials like aluminum and steel they seek to use in the EU. 
• In the U.S., the SEC public disclosure rule requires reporting on companies’ climate risk activities.

How climate regulation creates ‘trickle-down’ decarbonization

With 2023’s UNFCCC COP28 Global Stocktake, there can be no doubt that all sectors and industries will be under the microscope when it comes to climate readiness.

Beyond regulatory pressures, a surge in decarbonization commitments and sustainability alliances, particularly by large corporations, will create a trickle-down effect. Suppliers and entire industries need to measure, report, and reduce their carbon emissions to remain competitive. They must also be sure this data is compliant and audit-ready.

Certain industries will see implementation of mandatory offsetting or emissions trading, enforcing caps on emissions and provoking a demand generated by governments and regulators. These mandates will in turn drive a need for supply of quality, reliable, and traceable offsets and carbon credits.

What we’re seeing now: the trickle-down effect in action

Accordingly, environmental leaders have swept smaller suppliers into their mission. As the upswell in action spreads through entire industries, it trickles down to suppliers seeking to showcase their environmental responsibility.

Investors, consumers, partners, and other key stakeholders are increasingly holding companies accountable for their environmental impact. Companies that demonstrate a commitment to sustainability and maintain a low-carbon profile are better positioned to capture market share and command a premium in the emerging net zero economy.

Meeting new expectations is challenging, but it also poses opportunities for corporations to realize more value through increased investment and access to large contracts. It’s never been more critical for companies to set and adhere to environmental commitments and rapidly reduce their carbon footprints.

High-quality carbon accounting is the bedrock of sustainability reporting, providing the accurate data needed to set realistic targets, track progress, and make informed decisions on the path to decarbonization. No matter your industry, the first step in this process is to understand your operational emissions.

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Climate regulation as opportunity

The ripple effects of stringent climate regulations are far-reaching, reshaping how industries approach sustainability and decarbonization. As larger corporations lead by example and enforce higher standards for their suppliers, smaller businesses are compelled to follow suit, driving a widespread movement towards more rigorous carbon accounting and reporting.

This trickle-down effect, while challenging, offers real opportunities for companies to enhance their environmental responsibility, gain competitive advantages, and align with the growing expectations of investors and stakeholders. Embracing these changes and setting ambitious environmental targets are not just regulatory necessities but strategic imperatives for thriving in the evolving net-zero economy.

Coral gives companies clarity

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.