In the past month there have been a stream of announcements that will shape how businesses report emissions for the next decade. While the pace has been a bit breathless, the announcements now weave into a coherent whole. Emissions reporting is no longer a silo of data and customized processes, it is now integrated into financial reporting.

In 2021 it was okay to type emissions data into spreadsheets and create summary reports by hand. In 2023, that approach won’t fly. Companies reporting in 2024 will find that emissions data must be audited and will be held to the same rigorous data quality, preparation protocols, internal controls and board-level oversight as financial data. The announcements of 2022 shaped this new future.

As many have noticed, the arrival of game-changing new standards creates a large market. The SEC itself estimates that the average company complying with climate disclosure rules will need to dedicate 1 – 3 FTEs and pay $580,000 per year to external service providers. Across all filing companies the SEC estimates a new $10B external services market.

But this estimate of the market is too low. First, we’re seeing a lot of pressure from pension funds for their investees to report out sustainability data in the same manner as required by the SEC. So the market size is multiples of the public companies who must file.

Second, in October 2022, IFRS – the global financial reporting standards body – announced that supply chain emissions (Scope 3) must also be reported, and in an integrated financial-sustainability framework. COSO – another global accounting standards body – is expected to release an updated internal controls framework for integrated financial-sustainability reporting later this year. These new standards go much deeper into everyday processes than what the SEC envisioned.

To make our point, consider the market for Sarbanes-Oxley (SOX) compliance. SOX was passed in 2002 and much of the compliance began in 2004. SOX implementation led to 13 tests of financial accounting processes. A complying company had to dig deep into everyday workflows, there was no easy fix. The new integrated financial-sustainability standards are similar.

SOX created an instant $5B market that grew at about 10% per year for the next 10 years. Because of the global nature of the climate disclosure requirements, and how they impact non-public supply chain companies, it is reasonable to expect a minimal increase to a CAGR of 15%. And when one recognizes that the new financial and accounting standards will go as deep into the organizational fabric as SOX changes have done, the market size increases again. Finally, note that these market sizes are for US filing companies only. One could reasonably assume a 3X global market.

In sum, we’re at the starting gate of a significant wave of enterprise transformation. There is big money to be made as this new market emerges. But despite the big numbers, this is one of the cheapest ways to accelerate climate solutions. With accurate, credible and comparable sustainability data, the global economic system will respond with vigor. Another win for business and for the planet.


Comparison of the Size and Growth
of SOX and Climate Disclosure Compliance Markets

SOX (US Only) 2002 $5B $6B $8B 10%
SEC-Climate (US Only with supply chains) 2023 $10B $14B $19B 15%
IFRS-COSO-Climate – US (adds higher costs from deeper controls) 2023 $20B $28B $38B 15%
IFRS-COSO – Global – Private (adds expanded global and private company footprint) 2023 $40B $60B $120B 15%

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