What you need to know about changing GHG reporting in 2025

Starting in 2025, companies must prepare for stricter, climate disclosures for both legal mandates and voluntary efforts. California’s SB 253 and SB 261, pending Illinois legislation, and updates to the GHG Protocol are pushing firms to upgrade reporting systems, especially for Scope 2 emissions backed by RECs.

Voluntary frameworks are also evolving, making clear, data-backed disclosures the new baseline. It puts a spotlight on the tools companies use to report and mitigate emissions, especially in Scope 2.

Innovo is the strategic support accelerating this transition. Our solutions empower organizations to achieve audit-ready, transparent emissions records, simplifying regulatory reporting with reliable data and operational efficiency demanded by today’s rapidly evolving compliance landscape.

What’s changing with compliance reporting? 

California has passed two laws: SB 253 and SB 261. SB 253 requires companies with $1 billion or more in annual revenue that do business in California to:

• Report Scope 1 and 2 emissions starting in 2026

• Report Scope 3 emissions starting in 2027

Reports must follow the GHG Protocol and be publicly disclosed. Third-party assurance is required but will phase in gradually as defined by CARB (California Air Resources Board). This is the most sweeping emissions disclosure law currently enacted in the U.S.

SB 261 applies to companies with $500 million or more in revenue. It requires climate risk disclosures every two years starting in 2026.

Illinois has introduced HB 3673, which mirrors California’s SB 253. If passed, it would require large companies to report Scope 1, 2, and 3 emissions starting in 2027, with verification required and public disclosure through a state registry.

Other states are considering similar bills. These rules are no longer one-offs, they’re a trend. It’s likely more states will follow, especially where there’s pressure to align with national or investor expectations.

Are other states considering GHG reporting mandates?

Yes, multiple states are drafting or debating bills that echo California’s framework. While timelines and thresholds vary, the trend is unmistakable: mandatory reporting around energy use, renewable procurement, and carbon offsetting is spreading. States are reacting to investor pressure and the increasing alignment of financial and sustainability disclosures.

What’s changing with voluntary reporting? 

It’s not just state laws driving change. Voluntary frameworks are also tightening. CDP, ISSB, and SBTi are asking for more detail, stronger data, and better evidence.

The line between “voluntary” and “expected” is getting blurry. Investors and customers often treat these disclosures as mandatory, even if regulators don’t.

There’s more pressure now to report Scope 2 emissions correctly. That means companies must show how they buy clean power and prove it with renewable energy certificates (RECs).

CDP, ISSB, and SBTi are setting tougher expectations. 

Why is Scope 2 reporting under new scrutiny?

Scope 2 emissions rely heavily on renewable energy certificates (RECs) for market-based accounting. Under both new regulatory mandates and evolving voluntary frameworks, companies can no longer rely on generic claims or aggregate data to demonstrate progress. There is now an explicit requirement to document and verify the full lifecycle of every REC, including precise disclosure of where each certificate was generated, the timing of its creation, the renewable resource it represents, and how it is chronologically matched to an organization’s electricity consumption. 

Auditors and stakeholders expect evidence that RECs are not only purchased, but uniquely allocated and properly retired in accordance with consumption data. Claims of clean energy use that lack a defensible, traceable audit trail are increasingly flagged as insufficient or even non-compliant.

As scrutiny intensifies, organizations must establish robust systems to connect each REC with metered energy use in a transparent, verifiable fashion, enabling instantaneous validation and ensuring that all market-based accounting accurately reflects real environmental impact.

What’s going on with the GHG Protocol?

The GHG Protocol is the standard that most laws and voluntary programs rely on. It’s currently being updated. Two major revisions are under review:

1. Scope 2 guidance update: Revisiting how RECs and energy attribute certificates are used in market-based accounting.

2. Scope 3 guidance update: Aiming to tighten rules around supplier data, estimation, and disclosure categories.

Final updates are expected by early 2026 and will influence both compliance and voluntary reports.

How will changes impact reporting tools?

To meet evolving regulatory and voluntary standards, organizations must significantly enhance their emissions tracking and auditability. Upgrading digital infrastructure will be essential for capturing granular emissions data, enabling automated data quality checks, and producing audit-ready documentation on demand.

New approaches to REC management are likely to alter Scope 2 calculation methods, requiring real-time tracking of REC provenance, matching, and retirement. Companies will need to ensure that REC inventories are verifiable and aligned seamlessly with energy consumption data to support market-based reporting.

For Scope 3, the landscape is shifting toward deeper supplier engagement and higher-fidelity data. Effective compliance will require building robust supplier data pipelines, standardized information exchanges, and tools for validating supplier disclosures or estimates. Transparent processes for collecting, managing, and defending supplier-related Scope 3 data will be vital to withstand both regulatory inspections and investor scrutiny.

Who should pay attention to all this?

Any company that uses renewable energy certificates (RECs), procures clean energy, makes or verifies net-zero commitments, or includes Scope 3 supply chain emissions in its disclosures, must track these regulatory and protocol developments with precision.

The imminent changes will affect not only the mechanics of reporting but also the strategic frameworks that underpin climate targets and sustainability roadmaps. Rigorous, high-frequency data collection and transparent documentation will increasingly be required for compliance, assurance, and to meet evolving expectations from investors, regulators, and customers.

What else in the world of voluntary disclosure?

Groups like EnergyTag are working to push more granular REC tracking, including hourly matching. CDP continues to push for Scope 3 transparency. The ISSB has released standards that closely align with the Task Force on Climate-Related Financial Disclosures (TCFD), and they’re gaining adoption worldwide.

Even if these programs aren’t required by law, they shape market expectations. They’re also being referenced more often in corporate procurement RFPs, investor due diligence, and ratings.

What does this mean for sustainability teams?

Carbon accounting is no longer just about emissions totals, it’s about traceability, integrity, and resilience in the face of growing public and regulatory visibility. Sustainability leads must now collaborate closely with finance, procurement, and legal to ensure that every facet of greenhouse gas reporting can withstand rigorous third-party review.

This means documenting and substantiating every element of the reporting process, including the origin and age of each REC, the procedures used for supplier data collection, and the rationale behind any estimation or accounting assumptions. 

Companies can no longer rely on opaque spreadsheets or vague summaries to satisfy stakeholders; transparency is now an expectation, not a differentiator. Public registries, investor demands, and tightening legal mandates will bring any deficiencies to light, organizations that underinvest in credible, future-proofed systems risk reputational and financial exposure as a result.

What does more reporting means for companies?

More rules mean more attention to the numbers. Companies are being asked not just to share emissions totals, but to back them up. You’ll need to explain where your data comes from, how RECs are tracked, how supplier estimates are built, and what methods were used. There’s less room for vague claims or generic reporting.

For corporate sustainability teams, this means stronger systems, better documentation, and closer collaboration with finance, procurement, and legal. Good reporting is becoming the baseline.

Companies like Innovo are prepared for when environmental performance reporting becomes a formal part of regulatory audits, supply chain evaluations, and investor due diligence. We're building robust, auditable infrastructures today, integrating blockchain for records, automating real-time validation, and standardizing supplier engagement, preparing to support this next phase.