The High Cost of Inaction: Why Energy Suppliers Can’t Afford to Ignore Increasing Customer Requests for Reporting

- Posted by in Carbon Accounting, ESG-Sustainability

As sustainability and decarbonization demands intensify in the race to net-zero, energy suppliers, such as utilities and retailers, are at a crossroads. Ignoring these demands is not just about sidestepping regulatory penalties or walking back on goals; it could mean losing the trust of customers, investors, and other stakeholders or missing out on prospective customers. Reputational risk now outweighs the financial risk of regulatory fines, with public and private expectations for transparency and traceability in carbon emissions data, as well as greenwashing lawsuits, on the rise. Even if regulatory standards ease in the United States before they tighten, the expectations for accurate voluntary disclosures and a trend towards increased regulations globally are here to stay—and proactive action is crucial.

The Regulatory Landscape: A Complex Web of Demands

The landscape of climate-related regulations is expanding rapidly, bringing both challenges and urgency for energy suppliers – which will put pressure to act if it has not already. At the federal, state, and global levels, regulations mandate a level of transparency, emissions tracking, and assurance that requires a proactive approach. Here are a few key regulations that have an impact today.

    1. EU Corporate Sustainability Reporting Directive (CSRD)
    • Overview: The CSRD represents a stringent set of requirements for climate disclosures and broader ESG requirements such as double materiality assessments. It impacts both EU and non-EU companies.  It demands detailed, annual reporting on climate-related and broader ESG data, including Scope 1, 2, and 3 emissions.
    • Applicability: EU and non-EU companies operating in the EU with revenue exceeding €40 million, assets over €20 million, or over 250 employees.
    • Timeline: Phased reporting deadlines began in January 2024, with new layers of requirements rolling out through 2028.
  2. California Assembly Bill (AB) 1305
    • Overview: AB 1305, adopted in October 2023, requires businesses that purchase, sell, use, or market carbon offsets in California—and those making net-zero or related claims in the state—to disclose carbon projects and establish accountability measures.
    • Applicability: Targets companies involved in carbon offset markets or making environmental claims within California.
    • Timeline: Implemented in 2024, with annual disclosures required.
  3. California Senate Bill (SB) 253
    • Overview: Recently adopted in October 2023, SB 253 mandates phased disclosure of Scope 1, 2, and 3 emissions for companies doing business in California with over $1 billion in revenue. 
    • Applicability: This rule impacts large corporate entities and will trickle down to energy suppliers expected to deliver emissions data for comprehensive corporate reporting.
    • Timeline: Initial requirements for Scope 1 and 2 emissions will be published by July 2025, followed by Scope 3 emissions in subsequent phases.

In addition to the above select regulations that companies should already be aware of, and preparing for, there are a number of other proposed and emerging regulations to keep on the radar such as the US Securities and Exchange Commission (SEC) Disclosure rule which was initially released in March 2024 and would impact publicly traded companies, though implementation was subsequently paused, New York’s proposed S897A which has similar language to California’s SB 253 and would impact public and private companies with at least $1 billion in revenue, and Illinois House Bill (HB) 4269 which is also a proposed state level climate disclosure rule that would impact public and private companies. 

Compliance Considerations

Regulatory requirements create overlapping and often competing demands for energy suppliers operating across jurisdictions with offtakers that have global operating footprints. Many entities will not just be subject to a single regulation but rather will be working to comply with multiple regulatory drivers in tandem with voluntary commitments. Navigating different compliance timelines, disclosure formats, and assurance standards can be complex and resource-intensive. Energy suppliers not only need to comply with their own direct regulations but also ensure their data transparency can support customer compliance across these various jurisdictions.

Corporate entities are putting pressure on their value chain to disclose and provide accurate data to support their own compliance. For instance, a Michigan-based automotive manufacturer subject to CSRD may require emissions data from suppliers, such as battery and paint manufacturers, to meet its own compliance obligations. Similarly, major tech companies often request CDP reporting for Scope 1 and 2 emissions from suppliers across their value chain to align with their sustainability goals, accurately disclose their own emissions, and track decarbonization progress, with non-compliant suppliers at risk of being replaced by more transparent partners.

Assurance Standards and Scope Complexity
Many of these regulations, such as the SB 253 and the CSRD, require that reported emissions data undergo assurance processes to confirm its accuracy, adding another layer of operational demand. Moreover, Scope 3 emissions—the emissions from a company’s supply chain—are particularly challenging to track accurately, placing added pressure on energy suppliers to capture and share traceable, verifiable data.

The Risks of Inaction

For energy suppliers, inaction on transparency and emissions management could lead to financial, reputational, and operational risks. Let’s break down each one:

  1. Financial Risks: The fines associated with non-compliance, while significant, may pale in comparison to the reputational and strategic costs. Fines are a known risk, but they do not account for the cascading impacts of eroded trust and lost business.
  2. Reputational Risks: In today’s digital age, accusations of greenwashing can spread faster than companies can mitigate them. Increasingly, companies are facing lawsuits, with plaintiffs targeting inaccurate sustainability claims. Large corporations like Tyson Foods have faced greenwashing lawsuits, as has  NW Natural, the first gas utility in the US to be sued for lying about climate change, showing how quickly credibility can crumble and the diverse stakeholders scrutinizing and monitoring green claims. For energy suppliers, greenwashing risks and lawsuits which get picked up by the media could lead to public relations nightmares, the loss of major contracts and revenue as customers seek more trustworthy partners.
  3. Operational and Strategic Risks: As corporate customers ramp up their decarbonization efforts, energy suppliers need robust data reporting infrastructure to support those goals and to accurately track and account for green claims associated with green products. This will be a significant operational task, requiring coordination across finance, sustainability, trading, and origination functions. Companies already struggling to capture real-time data could find themselves losing business as clients prioritize more advanced, transparent suppliers to support initiatives such as 24/7 carbon free energy (CFE), marginal carbon avoidance in alignment with Emissions First Partnership, and other advanced energy procurement strategies and initiatives to decarbonize.

Why the Time to Act is Now

A proactive approach to data transparency is essential. Waiting for regulatory softening or exceptions is risky, especially as voluntary decarbonization goals from major corporations are rapidly approaching. For instance, the EU’s CSRD is in force and will not reverse course, and major corporations continue setting ambitious renewable and net-zero targets for 2030 and beyond.

Moreover, large commercial and industrial (C&I) customers increasingly demand audit-ready data to back their green claims, requiring energy suppliers to implement robust data collection and assurance processes. Preparing for the “tidal wave” of data requests associated with mandatory and voluntary climate action will set proactive energy suppliers apart and build resilience against future regulatory shifts.

Steps Energy Suppliers Can Take

To navigate this landscape, energy suppliers can take a few strategic steps to reduce risks and enhance competitiveness:

    1. Enhance Data Transparency and Traceability: Invest in systems that capture near real-time data on carbon impacts, environmental attributes, and generation data, creating a foundation for accurate, auditable sustainability claims.
    2. Improve Sustainability Reporting: Align reporting practices with current and upcoming regulations, ensuring all disclosures are transparent, comprehensive, and ready for verification.
    3. Customer Engagement and Education: Engage directly with customers to help them meet their own voluntary goals and compliance requirements. Survey them. This includes supporting their sustainability goals with relevant data and educating them on the evolving regulatory environment and being a partner in decarbonization strategy.
    4. Collaboration for Improved Data Infrastructure: The path forward includes collaborative solutions like LF Energy’s open data standard, which can help align data-sharing practices across the utility sector and bring in diverse perspectives to solving the immense data challenges in the space. For energy suppliers, partnering with customers and stakeholders in data-sharing initiatives creates a mutually beneficial ecosystem.
  • Talk to and take the pulse of customer facing teams. Many energy suppliers are challenged by inherent silos, so customer-facing teams may be subject to increasing volumes of customer requests but because the process for responding to these requests is not scalable, the “pain” in the organization may not be as widely spread. It would be good to make note of the increasing volume of customer requests over time, too, to help build the business case for action. 

Closing Thoughts

Inaction is no longer an option. The demands on energy suppliers, from regulatory, customer, and investor fronts, make proactive data transparency and climate action a business imperative, starting today. By investing in green programs, transparency, and robust data capabilities, energy suppliers can future-proof their operations, maintain competitiveness, and safeguard their reputation.

Call to Action
Energy Suppliers: Engage with your customers early to understand their needs and timelines.

Corporate Offtakers: Support your energy suppliers by setting clear expectations for data and compliance standards. 

Together, energy suppliers and offtakers can make strides toward a decarbonized, transparent energy grid.

        
Nicole Sullivan

Nicole Sullivan is the VP of Sustainability for Cleartrace. Her expertise is at the intersection of carbon accounting, decarbonization strategy, and energy management. She is an environmental engineer by trade and has spent her career in environmental and sustainability consulting across industry sectors, including energy, manufacturing, and consumer packaged goods (CPG). When she's not supporting Cleartrace customers and the Cleartrace product team, you can catch her outside - her favorite pastimes include gardening and fly fishing.