Growing concerns about climate change have led to tighter rules around environmental accountability, particularly in carbon emissions reporting. For businesses in the United States, this represents a significant and complex challenge.
Once optional under corporate social responsibility, sustainability reporting is quickly becoming a legal requirement. Companies now face increased pressure to measure, report, and reduce emissions, driven by investors demanding transparency and cities striving for net-zero goals.
Beyond environmental impact, this shift is intrinsically tied to financial performance. Energy-efficiency measures and carbon accounting impact both profitability and long-term viability. Whether you own a portfolio of commercial buildings or manage complex value chains, understanding and complying with carbon reporting requirements is essential to avoid penalties and unlock cost savings.
In this comprehensive guide, we discuss the fundamentals of greenhouse gas accounting and five key reporting mandates shaping the US market.
Understanding the basics of greenhouse gas accounting
Most emissions mandates are built on the Greenhouse Gas Protocol (GHG Protocol), the global greenhouse gas accounting standard for categorizing and reporting total emissions. It divides emissions data into three scopes:
- Scope 1: Direct emissions from burning fuel in owned or controlled sources, including emissions resulting from stationary combustion (e.g., furnaces or boilers) and industrial processes within the organization’s operations
- Scope 2: Indirect emissions generated from the production of purchased energy such as electricity, steam, heating, and cooling, consumed by the reporting company
- Scope 3: All other indirect emissions across the company’s value chain, including upstream activities (e.g., purchased goods from suppliers) and downstream activities (e.g., the use of sold products)
Historically, businesses focused on Scope 1 and Scope 2 emissions. However, as emissions calculations become more sophisticated, many new frameworks are shifting focus to include Scope 3 emissions, which represent a company’s full carbon footprint. Measuring Scope 3 emissions is particularly challenging, as they encompass activities across supply chains and external operations that fall beyond the organization’s direct control.
5 carbon emissions reporting mandates shaping the future of carbon accounting
While regulations vary by location and industry, a few landmark mandates are forcing building owners and businesses to get their reported data in order.
New York City: Local Law 97
Local Law 97 is one of the world’s most ambitious mandates for carbon emissions reporting, forming a key pillar of New York City’s strategy to cut greenhouse gas emissions by 40% by 2030 and 80% by 2050.
Who it affects: The law applies to commercial buildings and multifamily properties larger than 25,000 square feet, as well as properties with multiple buildings that exceed 50,000 square feet combined.
Requirements: As of 2024, building owners are required to report their annual GHG emissions and adhere to strict limits on carbon emissions per square foot. These limits are calculated using specific emissions factors applied to energy use, providing a measure of carbon intensity for building operations.
Penalties and compliance: Noncompliance comes with significant penalties for exceeding emissions limits, failing to report, or submitting false data. Fines are calculated based on the difference between reported emissions and the allowable limit, multiplied by a predetermined cost per metric ton of CO2.
Driving change: Local Law 97 compels building owners to move beyond basic energy-efficiency measures and consider deep retrofits to reduce emissions. While the law itself doesn’t include direct financial incentives, owners are encouraged to leverage federal and state programs to help offset the costs of implementing sustainable solutions to reducing carbon emissions.
California: The CEC Energy Code and climate laws
California has long been a leader in environmental sustainability, and its 2022 Building Energy Efficiency Standards (Energy Code) continue that trend. While the Energy Code is a building standard, its stringent requirements effectively mandate energy-efficient measures for all new construction.
The focus: The California Energy Commission (CEC) aims to transition new buildings away from fossil fuels. A key part of this strategy is promoting electric heat pumps for space and water heating, as these systems can cut greenhouse gas emissions by up to 75% compared to traditional gas furnaces.
Broader implications: Beyond construction, California is also making waves with new corporate disclosure laws (e.g., SB-253 Climate Corporate Data Accountability Act). These laws target companies with large global market capitalization doing business in the state and will eventually require reporting progress on Scope 1, Scope 2, and Scope 3 emissions.
For building owners, the Energy Code sends a clear message: gas is being phased out. By opting for high-efficiency electric systems, owners can avoid expensive compliance updates. Conversely, those relying on burning fuel for heat must implement costly efficiency measures such as superior insulation to meet the new standards. The Energy Code uses cost avoidance as a financial incentive to drive emissions reductions.
Washington State: Clean Buildings Performance Standard
Washington State’s Clean Building Performance Standards program is designed to lower fossil fuel consumption in existing buildings. Introduced in 2019 and expanded in 2022, this program is a prime example of how states are using emissions data to drive environmental progress.
Who it affects: Compliance is mandatory for Tier 1 buildings (over 50,000 square feet) and Tier 2 buildings (20,000–50,000 square feet), which includes large multifamily residential complexes.
Process: Building owners must benchmark their energy use and integrate that data into the ENERGY STAR Portfolio Manager. Reporting requirements are phased in, with Tier 1 buildings beginning in 2026 and Tier 2 in 2027.
Incentives and penalties: Washington State uses a carrot-and-stick model. Early adopters who improve their energy efficiency ahead of schedule can receive significant financial rewards of up to $0.85 per square foot. In contrast, noncompliance results in steep penalties, including a fine of up to $5,000 plus a substantial annual fee based on the building’s square footage. This mandate ensures that sustainability is not just a goal but a requirement for operating in the state.
Washington, DC: Building Energy Performance Standard (BEPS)
To achieve its goal of carbon neutrality by 2050, the nation’s capital has implemented the Building Energy Performance Standard (BEPS). The program mandates that buildings meet rigorous energy-efficiency standards to help the city reach net-zero emissions.
Requirements: BEPS mandates that buildings of specific sizes meet rigorous energy-efficiency standards. As of 2023, privately owned buildings of at least 25,000 square feet must comply. This threshold drops to 10,000 square feet by 2026.
Compliance pathways: Building owners have two options: they can follow a performance pathway, which requires a 20% reduction in energy use intensity, or a prescriptive pathway, which involves implementing specific energy-saving measures.
Why it matters: Noncompliance can lead to significant fines and civil actions. However, the city provides exemptions for buildings undergoing major renovations or facing financial hardship. BEPS highlights how governments are moving beyond voluntary greenhouse gas GHG emissions tracking to enforceable performance standards.
Colorado: House Bill 21-1286
Colorado is stepping up its fight against climate change with House Bill 21-1286, a bold move to increase transparency and reduce GHG emissions in the building sector by 7% by 2026 and 20% by 2030 compared to 2021 levels.
Requirements: Owners of large buildings, those exceeding 50,000 square feet, must annually report energy usage data to the Colorado Energy Office. This includes industrial processes and manufacturing facilities only if such operations occupy less than half of the building. Facilities where these operations dominate remain exempt.
Transparency for consumers: A unique aspect of this mandate is the requirement for transparency during real estate transactions. Building owners must share the previous year’s energy benchmarking data with prospective buyers or tenants when a property is sold or leased. This way, consumers and investors have access to critical emissions data before making financial decisions, embedding carbon footprint considerations directly into the property’s market value.
With House Bill 21-1286, Colorado is reshaping how the real estate market values sustainability, holding the sector accountable for its environmental impact.
Achieve your net-zero goals with Greenwich Energy Solutions
These five mandates are essential for businesses aiming to comply with evolving environmental sustainability standards and critical carbon reporting requirements, and Greenwich Energy Solutions can help you stay ahead.
Whether you need a comprehensive energy audit, assistance with emissions calculations, or a strategic roadmap to reduce emissions and energy use, our expert team is ready to guide you. Let us simplify your reporting process, enhance your building’s performance, and position your business for a sustainable, financially secure future. Contact us today to start your journey toward net zero.
