Sustainability disclosure requirements are multiplying. We hear the same questions from companies at every stage of readiness. Here are the ones we’re hearing the most from clients today.
Carbon and Climate Risk Reporting
What do CA SB 253 and SB 261 require — and does it apply to us?
California's SB 253 requires public and private companies with over $1 billion in annual revenue doing business in California to disclose their greenhouse gas emissions annually across Scope 1, 2 and 3. It applies to US-headquartered companies, not just California-based ones.
- Scope 1 & 2: (direct emissions and purchased energy): reporting begins August 2026, with third-party limited assurance required from the outset.
- Scope 3: (value chain emissions): reporting timelines and assurance requirements are still being finalized by CARB.
If you are above the threshold and sell into or operate in California, you are very likely in scope. The August 2026 deadline for Scope 1 & 2 is close enough that companies without an emissions inventory already underway should move quickly — building a defensible, audit-ready inventory takes longer than most teams expect.
On SB 261: California’s climate-related financial risk disclosure law (SB 261 – for companies over $500MM in annual revenue doing business in CA) is currently subject to a legal stay and enforcement is on pause. We are monitoring developments closely and can help companies assess readiness if and when enforcement resumes.
We’re a US company. Why does the EU’s CSRD matter to us?
CSRD is an EU regulation but its reach extends well beyond Europe. Non-EU companies — including US firms — with net turnover above €150 million in the EU and at least one large EU subsidiary or EU-listed security fall under direct CSRD obligations.
But companies outside the direct scope may still feel CSRD’s effects. Large EU customers and partners subject to CSRD are required to collect sustainability data from their supply chains. If you sell to European enterprises, expect formal data requests and increasing commercial pressure, regardless of whether any law directly mandates it for you.
CSRD reporting is structured around the European Sustainability Reporting Standards (ESRS) and requires a double materiality assessment — evaluating both how sustainability issues affect your business financially, and how your business affects people and the environment. It also requires third-party assurance.
What is double materiality and why does it change how we approach reporting?
Traditional materiality — familiar from financial reporting — asks what information is material to investors. Double materiality asks two questions simultaneously:
- Financial materiality: How do sustainability risks and opportunities affect the company’s financial performance, position, and prospects?
- Impact materiality: How does the company’s business affect people, communities, and the environment — positively and negatively?
Under CSRD, both lenses are required. A topic is reportable if it is material from either direction. This represents a meaningful shift from most US disclosure frameworks, which focus primarily on investor-facing financial risk.
Double materiality also broadens the scope of stakeholder engagement required to support the assessment — employees, communities, suppliers, and civil society become part of the process alongside investors and analysts.
A well-executed double materiality assessment does more than satisfy a CSRD requirement. It surfaces the sustainability topics most connected to long-term business strategy and provides a principled basis for prioritizing where to invest resources.
What does third-party verification involve and when do we need it?
Third-party assurance is the process by which an independent auditor reviews and attests to the accuracy of sustainability data and disclosures. It is moving from best practice to legal requirement across multiple frameworks.
- CA SB 253: requires limited assurance for Scope 1 & 2 data beginning with the first reporting cycle.
- CSRD: requires limited assurance from the outset, with reasonable assurance required in subsequent years.
Assurance readiness requires building audit-ready data trails: documented methodologies, data sources, calculation assumptions, and internal review processes. Organizations that treat assurance as a subsequent consideration consistently encounter material gaps at the point of filing. It should be designed into reporting infrastructure from the outset.
Supply Chain Reporting & Supplier Questionnaires
What are EPR laws and how do they affect our reporting obligations?
Extended Producer Responsibility (EPR) laws hold manufacturers, brand owners, importers, and sellers financially and operationally responsible for the end-of-life management of their packaging. Companies placing packaged products into markets in California, Oregon, Colorado, Maine, and a growing number of other states face registration, annual reporting, and fee obligations.
EPR has evolved from a downstream waste issue into a front-end business obligation requiring data systems capable of tracking packaging materials by type and volume across multiple state programs, each with distinct timelines and requirements.
Core obligations typically include:
- Registering with a state-recognized Producer Responsibility Organization (PRO)
- Annual reporting on packaging materials placed into the market
- Fee contributions based on material type and volume
- Progress toward recyclability and recycled content targets over time
Companies operating nationally face an expanding patchwork of state programs. A unified data architecture that serves multiple state requirements — rather than managing each program independently — is substantially more efficient and reduces compliance risk.
Our customers keep sending us sustainability questionnaires. How should we handle them?
Supplier questionnaires — through CDP Supply Chain, EcoVadis, Sedex, or proprietary customer portals — are voluntary in format but commercially mandatory in practice. They are increasingly a condition of maintaining and growing relationships with large enterprise and public company customers, particularly those subject to CSRD or similar regulations.
The most effective approach treats these as a centralized data management challenge, not a series of one-off compliance tasks. Companies that build structured internal systems for emissions, energy, water, waste, and governance data are able to respond to multiple questionnaires efficiently, consistently, and with confidence in the accuracy of their disclosures.
Worth noting: CDP scores and EcoVadis ratings are actively used by procurement teams to evaluate and tier suppliers. A strong rating is an increasingly visible competitive advantage in enterprise sales processes. A weak or absent one can quietly affect contract outcomes.
What is SBTi and is setting a science-based target something we need to do?
The Science Based Targets initiative (SBTi) validates corporate emissions reduction targets aligned with limiting global warming to 1.5°C. No regulation currently mandates SBTi commitment — but pressure to adopt targets is intensifying from multiple directions simultaneously.
- Institutional investors increasingly treat SBTi commitment as an indicator of climate governance quality when assessing long-term risk
- Large customers subject to CSRD are required to manage Scope 3 emissions — which translates directly into target-setting expectations passed to suppliers
- SB 253 Scope 3 reporting will make emissions trajectories publicly visible; a validated reduction target provides important context for that data
A complete emissions inventory is a prerequisite for SBTi submission. A robust Scope 1, 2, and 3 baseline is the necessary starting point.
Efficiency, Business Value & Competitive Advantage
We face multiple overlapping requirements. How do we manage the complexity without duplicating effort?
The most significant driver of unnecessary cost and complexity in sustainability compliance is treating each regulation as a discrete, independent workstream. Most sustainability disclosure frameworks draw from the same underlying data — GHG emissions, energy consumption, supply chain spend and risk, packaging materials, governance structures. A well-designed data architecture serves multiple frameworks simultaneously and scales as requirements evolve.
A structured approach begins with three priorities:
- Regulatory scoping: A clear map of which obligations apply to your business, on what timeline, and what data each requires — eliminating redundant collection and surfacing genuine gaps
- Lead-time management: Scope 3 emissions data and supply chain information represent the longest collection cycles. Organizations with near-term deadlines under SB 253 need to initiate this work immediately
- Shared infrastructure: Data collection, documentation, and governance processes designed from the outset to serve regulatory filings, investor disclosures, and customer questionnaires through a single, consistent dataset
How does Third Economy support companies through regulation readiness?
We work with companies across the full arc of regulation readiness — from initial scoping through ongoing disclosure. Our work spans:
- Regulatory scoping and gap analysis: Mapping applicable obligations, timelines, and data and governance gaps
- GHG inventory and emissions accounting: Building Scope 1, 2, and 3 inventories to the methodological standards required by SB 253, CSRD, SBTi, and institutional investor frameworks
- Double materiality assessments: Structured processes to identify and prioritize the sustainability topics most relevant to your business and stakeholders
- Disclosure design: Structuring disclosures — in annual reports, standalone sustainability reports, or regulatory filings — to satisfy compliance requirements while clearly communicating performance and strategic context
- Supply chain data programs: Designing supplier engagement and data collection to meet Scope 3 and due diligence requirements at scale
- EPR program management: Packaging data collection, PRO registration, and multi-state compliance coordination
- Assurance readiness: Building the data documentation and internal controls required to support third-party verification
Our position advising both companies and institutional investors means we design compliance programs with direct insight into how investors evaluate disclosure quality.
What tangible business value does sustainability reporting generate beyond compliance?
Sustainability reporting generates material business value when structured as a management tool rather than a compliance output. The data collected to satisfy disclosure requirements — when properly organized and analyzed — consistently surfaces operational and strategic insights that extend well beyond the reporting itself.
- Operational efficiency: A rigorous Scope 1 & 2 inventory identifies energy waste and process inefficiencies. The cost reductions identified frequently offset the cost of the inventory itself.
- Supply chain intelligence: Scope 3 and due diligence programs map concentration risk, regulatory exposure, and potential disruption across the value chain — strategic information with significant value independent of any disclosure requirement.
- Capital market access: Institutional investors apply sustainability data to assess governance quality and long-term risk management capability. High-quality disclosure can reduce cost of capital and broaden investor access, particularly as more capital is managed under frameworks that require this data.
- Commercial relationships: As large customers cascade sustainability requirements to their suppliers, demonstrated performance and reporting capability becomes a factor in preferred supplier status, contract renewal, and new business development.
The organizations that extract the most value are those that align their reporting infrastructure with business strategy — ensuring that data collected for compliance informs operational decisions, capital allocation, and stakeholder communications, rather than serving only as a disclosure output.
How can sustainability reporting function as a competitive differentiator?
As disclosure standards rise and the gap between organizations that have invested in reporting infrastructure and those that have not becomes externally visible, strong sustainability reporting is increasingly a measurable competitive asset.
- Investor confidence: Companies with audit-ready data, robust governance structures, and credible reduction targets communicate long-term risk management more effectively than those assembling their first emissions inventory under deadline pressure. This distinction is visible to institutional investors who analyze disclosure quality as a proxy for management capability.
- Enterprise procurement: In competitive sales processes, CDP scores and EcoVadis ratings are applied as formal evaluation criteria by large enterprise and public company buyers managing their own supply chain obligations. Performance on these ratings directly affects commercial outcomes.
- Regulatory agility: Organizations that invest early in reporting infrastructure are positioned to respond to new requirements efficiently — without the cost and operational disruption of building foundational systems under compressed timelines.
- Stakeholder communications: Companies that treat sustainability disclosure as a strategic communications function — clearly connecting performance data to long-term business value — consistently differentiate themselves from those producing compliance-only documents with limited narrative coherence.