The obsolescence curve: Why greenhouse gas reporting faces its biggest test

Global businesses face a regulatory reckoning in 2026 as fragmented carbon accounting standards converge with mandatory disclosure requirements, forcing companies to abandon decades-old measurement practices or risk substantial penalties.

The convergence is already under way. On 9 September 2025, the Greenhouse Gas Protocol and the International Organisation for Standardisation announced a landmark partnership to harmonise their competing standards, ending years of parallel development that created confusion for companies, auditors and investors alike. The announcement signals recognition that the current patchwork of voluntary frameworks cannot support the mandatory disclosure regimes now taking effect across major economies.

Global greenhouse gas emissions reached a record 57.1 gigatonnes of CO₂ equivalent in 2023, according to the UN Environment Programme's Emissions Gap Report 2024, representing a 1.3 per cent increase from 2022 levels. Aviation emissions showed the steepest rise at 19.5 per cent as the sector recovered from pandemic lows.

Yet despite mounting emissions, corporate reporting systems remain poorly equipped to track them accurately. The problem goes beyond methodology to fundamental questions about what companies measure and how they account for it.

A cluster of regulatory deadlines

2026 marks the convergence point for three major regulatory frameworks. California's Climate Corporate Data Accountability Act requires companies with revenues exceeding $1bn to report Scope 1 and 2 emissions by 10 August 2026, covering fiscal year 2025 data. The California Air Resources Board has exercised enforcement discretion for the first reporting cycle, allowing companies to submit best available data without mandatory third-party assurance. Limited assurance becomes mandatory for the 2027 reporting period.

In the US, the Securities and Exchange Commission's climate disclosure requirements face legal challenges, but large public companies must prepare for potential reporting obligations if the rules withstand judicial review and are deemed material to investors.

The EU's Corporate Sustainability Reporting Directive expands its reach in phases, with large companies beginning reporting from 2025. The directive's scope and timeline underwent substantial revision through the EU Omnibus package in early 2025.[1]

Meanwhile, the International Sustainability Standards Board framework has gained traction across jurisdictions representing more than half of global GDP, with Australia, Brazil, Canada, Japan, Mexico and the UK announcing adoption plans.

Table 1: Major GHG Reporting Deadlines and Requirements

Jurisdiction	First Report Due	Scope Coverage	Assurance Required	Revenue Threshold
California (SB 253)	10 Aug 2026	Scope 1 & 2 (2026)Scope 3 (2027)	Not required (2026)Limited (2027+)	$1bn+
EU CSRD	1 Jan 2026	Scope 1, 2 & 3	Limited (2025-26)Reasonable (2030+)	Listed SMEsNon-EU entities
SEC (proposed)	TBD (pending litigation)	If material	Limited assurance	Large accelerated filers
ISSB Standards	Varies by jurisdiction	Scope 1, 2 & 3	Per jurisdiction	Per jurisdiction
California (SB 261)	On hold (litigation)	Climate risk disclosure	Not specified	$500m+

Measurement deficits continue

The technical challenges underlying these regulatory requirements remain substantial. Scope 3 emissions, those generated across a company's value chain dwarf direct operational emissions, yet measurement methodologies rely heavily on industry-average financial proxies rather than actual supplier data.

Companies calculate Scope 3 using expenditure-based methods that apply emission factors to procurement spending. This approach masks significant variations between suppliers in terms of geography, energy mix, manufacturing processes and material sourcing.

Third-party verification exposes reporting gaps. Research shows that companies subject to external assurance initially report higher emissions than those avoiding independent checks, but subsequently show consistent year-over-year reductions in both absolute emissions and carbon intensity. Companies without external verification show no systematic improvement.

Market-based mechanisms for emissions accounting face intensifying scrutiny. Critics argue that renewable energy certificates and similar instruments create accounting flexibility that can disconnect reported figures from physical emissions. The GHG Protocol's current Scope 2 guidance permits companies to claim zero emissions from purchased renewable electricity through market-based accounting, even when grid electricity remains fossil-fuel dependent.

The ISO-GHG Protocol partnership announced in September aims to address these inconsistencies by developing co-branded standards covering corporate, product and project-level accounting. The organisations plan to create a joint product carbon footprint standard to support carbon border adjustment mechanisms being introduced in multiple jurisdictions.

Table 2: Understanding GHG Emissions Scopes

Scope	Definition	Measurement Challenge
Scope 1	Direct emissions from owned/controlled sources (facilities, vehicles, equipment)	Relatively straightforward; requires metering and monitoring
Scope 2	Indirect emissions from purchased electricity, steam, heating, cooling	Market-based vs location-based accounting creates reporting variations
Scope 3	All other indirect emissions in value chain (suppliers, product use, transportation)	Relies on financial proxies; supplier data gaps; accounts for 11.4× operational emissions

Baseline calculations matter

Emissions baselines establish the reference point against which reduction targets are measured, yet methodological choices in baseline calculation can substantially alter reported progress.

BP reduced operational emissions by 8m tonnes after selling oil fields to Hilcorp, moving closer to its net-zero target on paper. The emissions continued at the sold facilities under new ownership, illustrating how corporate accounting boundaries can shift emissions between balance sheets without reducing global totals.

Directors now face personal liability for sustainability reporting accuracy in some jurisdictions. The EU's Corporate Sustainability Reporting Directive integrates sustainability information into annual reports, extending existing director liability provisions to climate disclosures.

Penalties for non-compliance have escalated. California's SB 253 authorises administrative penalties up to $500,000 per entity annually for filing failures, though a safe harbour provision protects Scope 3 disclosures made in good faith through 2030.

Table 3: GHG Protocol and ISO 14064 – Key Differences (Pre-Partnership)

Aspect	GHG Protocol	ISO 14064
Type	Corporate accounting framework	International standard for quantification and verification
Verification	Optional	Designed for mandatory third-party verification
Adoption	CDP, SBTi, TCFD, CSRD	Government legislation and regulation
Flexibility	Detailed sector-specific guidance	Flexible framework adaptable to contexts
Governance	WRI and WBCSD	ISO member bodies (170 countries)

Note: The September 2025 partnership aims to harmonise these frameworks into co-branded standards.

Technology enables precision

Technological advances offer paths beyond current limitations. Satellite-based atmospheric sensors can identify emission sources with increasing precision, while blockchain creates immutable audit trails for emissions data. Artificial intelligence streamlines data collection across complex supply chains, though implementation requires substantial investment in systems and controls.

Smart sensors deployed at facility level provide real-time emissions monitoring, enabling companies to identify inefficiencies as they occur rather than through retrospective annual reporting. This shift from periodic inventory accounting to continuous measurement represents a fundamental change in corporate environmental management.

The challenge for companies lies in building reporting infrastructure able to satisfy multiple regulatory frameworks simultaneously. Organisations operating across jurisdictions must reconcile different boundary definitions, calculation methodologies and assurance requirements.

Recommendations for preparation

Companies should:

·  Assess their current data collection capabilities against emerging requirements. This assessment must identify gaps in Scope 3 measurement, particularly across complex supply chains where visibility remains limited.

·  Establish physical emissions baselines tied to specific assets and operations rather than allocating emissions across products or business units. Physical accounting provides greater transparency and supports science-based target setting aligned with climate scenarios.

·  Engage with suppliers early to improve primary data collection. Industry-specific emission factors and financial proxies should be replaced progressively with supplier-specific information as data quality improves.

·  Consider voluntary third-party assurance before mandatory deadlines arrive. Early engagement with auditors identifies control weaknesses and documentation gaps whilst companies retain flexibility to address them.Track regulatory developments across all jurisdictions where the company operates. Regulatory timelines shift frequently, and companies must maintain awareness of changing requirements.

Table 4: Recommended Preparation Timeline for 2026 Compliance

Timeframe	Priority Actions	Deliverable
Q1 2026	Gap analysis against applicable regulationsAssess current data collection systems	Compliance roadmap identifying jurisdiction-specific requirements
Q2 2026	Establish emissions baselineDocument methodology and assumptions	Verified Scope 1 & 2 baseline with clear boundary definitions
Q3 2026	Scope 3 mapping across value chainEngage suppliers on data requirements	Scope 3 inventory with data quality assessment
Q4 2026	Implement reporting systems and controlsConduct voluntary assurance pilot	Documented processes ready for mandatory assurance
Q1 2027	First assured disclosuresRefine based on auditor feedback	Published reports meeting regulatory standards
Ongoing	Monitor regulatory changesContinuous improvement of data quality	Maintained compliance and enhanced accuracy

Future view

The consolidation of GHG accounting standards under the ISO-GHG Protocol partnership, combined with expanding mandatory disclosure requirements, marks the end of voluntary, loosely-defined carbon reporting. Companies face a binary choice: invest in robust measurement and reporting systems now, or face compliance failures, financial penalties and eroded investor confidence.

The question is no longer whether companies must report emissions comprehensively, but whether they can do so accurately enough to avoid regulatory sanction and reputational damage. 2026 tests whether corporate measurement capabilities have kept pace with political commitments made at successive climate conferences.

For organisations still relying on spreadsheet-based calculations and annual data collection exercises, the transition will be disruptive. Those that begin now to build systematic, technology-enabled measurement infrastructure will navigate the change more successfully than those that wait for enforcement actions to force compliance.

The obsolescence of current reporting methods reflects a broader shift in how markets price climate risk. Vague commitments no longer satisfy investors, regulators or consumers. The decade ahead belongs to companies that can demonstrate measurable progress through verifiable data, not those that issue aspirational targets without credible tracking systems to support them.

References and Sources

Regulatory and Official Sources

·  United Nations Environment Programme (2024). Emissions Gap Report 2024. Available at: https://www.unep.org/interactives/emissions-gap-report/2024/

·  California Air Resources Board (2025). California Corporate Greenhouse Gas Reporting and Climate Related Financial Risk Disclosure Programs. Available at: https://ww2.arb.ca.gov/our-work/programs/california-corporate-greenhouse-gas-ghg-reporting-and-climate-related-financial

·  European Commission. Corporate Sustainability Reporting Directive (CSRD). Available at: https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en

·  International Sustainability Standards Board (ISSB). IFRS Sustainability Disclosure Standards. Available at: https://www.ifrs.org/groups/international-sustainability-standards-board/

Standards Bodies and Frameworks

·  International Organization for Standardization and GHG Protocol (9 September 2025). 'ISO and GHG Protocol announce strategic partnership to deliver unified global standards for greenhouse gas emissions accounting'. Available at: https://www.iso.org/news/2025/09/iso-and-ghgp-partnership

·  GHG Protocol (2025). 'ISO-GHG Protocol Partnership: Frequently Asked Questions'. Available at: https://ghgprotocol.org/blog/iso-ghg-protocol-partnership-frequently-asked-questions

·  GHG Protocol (27 October 2025). 'Announcement: ISO-GHG Protocol to Jointly Develop New Product-Level GHG Accounting Standard'. Available at: https://ghgprotocol.org/blog/announcement-iso-ghg-protocol-jointly-develop-new-product-level-ghg-accounting-standard-call

Legal and Professional Analysis

·  Baker Tilly (December 2025). 'California Climate Disclosure Regulations SB 253 and SB 261'. Available at: https://www.bakertilly.com/insights/california-climate-disclosure-regulations-sb-253-and-sb-261

·  K&L Gates (8 December 2025). 'California Climate Disclosure Regulations Update: CARB Provides Additional Clarifications on Implementation and Ninth Circuit Stay of SB 261 Enforcement'. Available at: https://www.klgates.com/California-Climate-Disclosure-Regulations-Update

·  White & Case LLP (December 2025). 'California climate disclosure laws: CARB issues draft regulations'. Available at: https://www.whitecase.com/insight-alert/california-climate-disclosure-laws-carb-issues-draft-regulations

·  PwC (January 2026). 'California climate reporting – SB 253 and SB 261 explained'. Available at: https://viewpoint.pwc.com/gx/en/pwc/in-depth/id202505.html

·  Crowell & Moring LLP (2025). 'California's Climate Disclosure Laws Continue to Roll Forward'. Available at: https://www.crowell.com/en/insights/client-alerts/californias-climate-disclosure-laws-continue-to-roll-forward

Industry and Research Sources

·  ESG Today (9 September 2025). 'ISO, GHG Protocol Unify Standards for Measuring and Reporting Emissions'. Available at: https://www.esgtoday.com/iso-ghg-protocol-unify-standards-for-measuring-and-reporting-emissions/

·  Corporate Disclosures (10 September 2025). 'Unifying carbon accounting: ISO and GHG Protocol to consolidate emissions measurement standards'. Available at: https://www.corporatedisclosures.org/content/top-stories/top-story-10-september-2025.html

·  Carbon Brief (22 November 2024). 'UNEP: New climate pledges need quantum leap in ambition to deliver Paris goals'. Available at: https://www.carbonbrief.org/unep-new-climate-pledges-need-quantum-leap-in-ambition-to-deliver-paris-goals/

·  PACT (2025). 'PACT welcomes Greenhouse Gas Protocol and ISO partnership: a milestone for global carbon accounting'. Available at: https://www.carbon-transparency.org/news/pact-welcomes-greenhouse-gas-ghg-protocol-and-iso-partnership

·  Persefoni (2025). 'California SB 253 and SB 261: What Businesses Need to Know'. Available at: https://www.persefoni.com/blog/california-sb253-sb261

Note: All web sources were verified as of February 2026. Regulatory frameworks are subject to ongoing legal challenges and administrative updates. Readers should consult official regulatory sources and legal counsel for current requirements.

[1] EU CSRD Omnibus Amendments (February-April 2025): The original CSRD timeline has been substantially revised. Wave 2 reporting (large undertakings) delayed from 2026 to 2028. Listed SMEs removed from mandatory reporting. New thresholds: 1,000+ employees (increased from 250+) and €450m+ net turnover (increased from €50m). Scope reduction of approximately 80%. Wave 1 companies (large public-interest entities under NFRD) proceed as scheduled. Companies should verify current applicability as member states transpose amendments into national law (expected completion March 2027).