With net-zero commitments in mind, many regulators have been exploring mandates requiring that businesses report their greenhouse (GHG) emissions. However, some companies in the U.S. and Canada are choosing to go beyond the legal requirements, voluntarily disclosing the carbon cost of doing business. 

Angela Adduci, Senior Advisor, Policy, at the BMO Climate Institute, sat down with Oriana Confente, a specialist focused on BMO’s Climate Smart GHG accounting tool, to discuss why voluntary emissions reporting makes sense—and why it may be worth doing more than the minimum. Oriana took part in BMO’s Climate Fellowship Program, which enables employees to work with the Institute on projects to advance climate solutions.

What trends are you seeing regarding emissions reductions and voluntary reporting? 

The 2023 BMO Climate Institute Business Leaders Survey showed the share of U.S. companies with climate mitigation plans rose sharply to 38% from 28%. In Canada, 27% of respondents said they now have a plan to address climate change, up from 24% previously. In line with this, a recent S&P Global Report said that emissions disclosures have been rising steadily over the past five years among U.S. firms, with half of the 2,590 companies in its analysis reporting Scope 1 and Scope 2 emissions in 2022.¹ 

Are emissions reporting requirements the same for all companies? 

No. The regulatory landscape is diverse, and requirements can vary by industry, revenue, and the geographies a business operates in. For example, any company with more than US$1 billion in revenue a year that operates in California will need to comply with the state’s Climate Corporate Data Accountability Act (SB 253). That law requires reporting Scope 1 and 2 GHG emissions from 2026, and Scope 3 GHG emissions from 2027. 

How does a business find out what its emissions reporting requirements are? 

Sustainability consultants and industry organizations can help identify which policies may apply to your business operations. Businesses can also check government websites, such as the U.S. Environmental Protection Agency or the Government of Canada website, and online training resources, such as webinars offered by the EPA, to stay up-to-date on legislation. 

Why should business leaders measure and disclose emissions even when they're not legally required to do so? 

Climate strategy should be part of every business’s strategy. Three-quarters of Fortune Global 500 companies are already reporting their annual GHG emissions² and nearly half have a net-zero target.³ All companies should consider planning ahead so they aren’t caught by a sudden change in regulatory requirements to disclose emissions. Reporting requirements will likely increase over time, and being unprepared to meet evolving disclosure requirements from Canadian and U.S. regulators could lead to fines, legal issues, or commercial losses. Be proactive by learning about the climate risks associated with your business operations through voluntary reporting. 

Voluntary disclosure can also lead to a reputational boost for companies, supported by consumer demand trends. A 2024 survey of 20,000 consumers around the world showed that on average they are willing to spend 10% more for sustainably produced or sourced goods, and 85% say they have experienced the impact of climate change in their daily lives.⁴ 

In addition, going above and beyond reporting requirements can also support net-zero objectives and potentially expose climate risks for organizations. After all, risks are more effectively managed when they can be measured, and measuring impact is the main point of climate disclosures.  

Another benefit worth noting is the identification of areas for cost savings and enhanced efficiencies. In many industries, GHG accounting is approaching the same level of sophistication and integration as financial reporting. When you can account for GHG emissions comprehensively and look across an enterprise for meaningful reductions, you can also potentially unlock opportunities to save your company money.

Are there any other financial benefits to voluntary emissions reporting? 

For most companies, decarbonization is a sound business approach. A quarter of companies surveyed by the Boston Consulting Group reported annual decarbonization benefits worth at least 7% of sales, while more than half believed emissions could be reduced by 10% to 40% at a net-cost saving.⁵ Indeed, pursuing decarbonization can potentially minimize waste and energy costs.
 
In addition, there are federal and regional incentives in place in both the U.S. and Canada, including the Clean Technology Investment Tax Credit (Canada) and the Greenhouse Gas Reduction Fund (USA), to incentivize and reward climate action. 

What are some initial steps for companies new to reporting?

GHG accounting, or sometimes called carbon accounting, is key to building a robust climate strategy. This involves identifying the main sources of emissions by an organization and tracking them over time. Companies will need to appoint someone or to assemble a team whose responsibility it is to acquire the emissions data, assign reduction goals, and engage the rest of the organization on best practices to meet sustainability objectives. Some organizations appoint a Chief Sustainability Officer whose mandate includes these areas. 

In my experience working on BMO’s GHG accounting tool Climate Smart, many organizations at this stage will need to determine if they have people with the right skillsets in house or if they need to consider external support, such as sustainability consultants.   

This is an important early step toward forming a business climate strategy. There are many steps needed to take for companies to voluntarily disclose their emissions, but I believe doing this will help businesses achieve a competitive advantage in a changing marketplace. 
 
Citations:
1.    S&P Global. (2024, Mar 12). After SEC rulemaking, assessing the US climate disclosure landscape.https://www.spglobal.com/esg/insights/featured/special-editorial/after-sec-rulemaking-assessing-the-us-climate-disclosure-landscape
2.    Climate Impact Partners. (2023, Sept 19). Commitment Issues: Markers of Real Climate Action in the Fortune Global 500. https://info.climateimpact.com/hubfs/ClimateImpactPartners_FortuneGlobal500_2023_FINAL.pdf
3.    Climate Impact Partners. (2024, Sept). Quiet Climate Action: How climate actions and commitments are holding strong despite deadlines coming into focus and scrutiny rising around definitions. https://info.climateimpact.com/hubfs/Climate%20Impact%20Partners%2c%20Quiet%20Climate%20Action%2c%202024%201.pdf
4.    PricewaterhouseCoopers. (2024, May 14). Consumers willing to pay 9.7% sustainability premium, even as cost-of-living and inflationary concerns weigh: PwC 2024 Voice of the Consumer Survey. PwC. https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2024-voice-of-consumer-survey.html#:~:text=Personal%20actions%20consumers%20say%20they,red%20meat%20intake%20(22%25
5.    Boston Consulting Group. (2024, Sep 17). Charlotte Degot, Diana Dimitrova, Hubertus Meinecke, Chrissy O’Brien, Yvonne Zhou, and Hassan Siddiqui. Boosting Your Bottom Line Through Decarbonization. https://www.bcg.com/publications/2024/boosting-bottom-line-reducing-carbon-emissions