Case study: Corporate climate disclosures — A startup-to-enterprise scale story

Climate disclosure requirements have expanded dramatically over the past five years, with the EU's Corporate Sustainability Reporting Directive (CSRD) now covering approximately 50,000 companies—a 4.3x expansion from the previous 11,700 under the Non-Financial Reporting Directive. For companies scaling from startup to enterprise, this regulatory evolution presents both a challenge and an opportunity: those who build robust disclosure practices early gain competitive advantages, while those who wait face mounting compliance costs and potential exclusion from key value chains.

Why It Matters

The business case for climate disclosure has shifted from voluntary reputation management to mandatory compliance. In the EU, the first wave of 11,000-12,000 large public-interest entities began reporting under CSRD in 2025, with requirements extending to large companies with 250+ employees in subsequent years. Meanwhile, 92% of large enterprises' emissions originate in their supply chains, meaning startups and SMEs increasingly face disclosure requests from enterprise customers even before formal regulatory requirements apply.

The costs are real but manageable. According to an ERM/Persefoni/Ceres survey, companies spend an average of $533,000 annually on climate-related disclosure activities, including $237,000 for GHG analysis, $154,000 for scenario analysis, and $148,000 for internal controls. For smaller companies, these fixed costs represent a disproportionate burden—yet the cost of non-compliance increasingly exceeds compliance costs, as companies risk losing access to major customers who demand supply chain transparency.

Early disclosure adoption also correlates with better access to capital. Institutional investors representing trillions in assets under management now routinely screen for climate data, while green bond issuers face mandatory disclosure requirements. Companies without established reporting systems find themselves excluded from sustainable finance opportunities precisely when scaling requires capital.

Key Concepts

TCFD Framework: The Task Force on Climate-related Financial Disclosures, established by the Financial Stability Board, provides the foundational structure for climate disclosure. Its four pillars—governance, strategy, risk management, and metrics/targets—have been incorporated into CSRD, SEC rules, and most national disclosure frameworks. TCFD-aligned reporting requires companies to disclose board oversight of climate risks, the actual and potential impacts of climate on strategy, processes for identifying and managing risks, and specific metrics including greenhouse gas emissions.

CSRD (Corporate Sustainability Reporting Directive): The EU's comprehensive sustainability reporting law requires detailed disclosures under the European Sustainability Reporting Standards (ESRS). Key features include "double materiality" assessment (reporting both financial impact on the company and company impact on society/environment), mandatory Scope 1, 2, and 3 emissions disclosure, third-party assurance requirements, and machine-readable digital format. CSRD applies to EU companies with 250+ employees and €40M+ turnover, plus non-EU companies with €150M+ EU revenue.

SEC Climate Rules: Adopted in March 2024 but currently stayed pending litigation, the SEC rules require publicly traded companies to disclose material climate risks, governance processes, Scope 1 and 2 emissions (if material), and financial impacts from severe weather events. While enforcement remains uncertain, companies preparing for CSRD compliance will largely satisfy SEC requirements should they take effect.

Materiality Assessment: The process of determining which climate-related issues require disclosure. Single materiality (financial impact on company) underpins SEC rules, while double materiality (adding company impact on environment/society) drives CSRD. Effective materiality assessment requires engagement across business functions and stakeholder groups, forming the foundation for disclosure scope decisions.

What's Working and What Isn't

What's Working

Early Adoption Creates Competitive Advantage: Companies like Allbirds, which implemented product-level carbon labeling in 2020—years before requirements—have built disclosure capabilities that now serve as differentiators. Their open-source carbon footprint methodology, published in 2021, allowed them to reduce per-product emissions from 10.98 kg CO2e to 5.54 kg CO2e by 2023, a 50% reduction achieved through transparent measurement driving continuous improvement.

Technology Platforms Reduce Compliance Costs: Carbon accounting software has dramatically lowered the barriers to sophisticated disclosure. Platforms like Carbonfact, Persefoni, and Watershed enable startups to implement enterprise-grade measurement systems without building internal expertise. The key is starting with a scalable platform rather than spreadsheets that require costly migration later.

Phased Implementation Aligned to Growth: Successful scaling companies match disclosure sophistication to business stage. Seed-stage companies focus on product-level carbon footprints; Series A/B companies implement Scope 1 and 2 inventories; growth-stage companies build Scope 3 measurement; and enterprise-scale companies add scenario analysis, third-party assurance, and regulatory filings. This progression allows capabilities to develop alongside resources.

Supply Chain Pressure as Catalyst: Rather than viewing large customer disclosure requests as burden, forward-thinking companies use them as roadmaps. When 41% of CDP-reporting companies engage suppliers on emissions, those suppliers gain de facto guidance on what to measure and report. Meeting customer requirements often prepares companies for eventual regulatory compliance.

What Isn't Working

Delayed Action Until Regulatory Trigger: Companies that wait for mandatory requirements face compressed timelines and premium consulting costs. First-wave CSRD filers had years to prepare; companies caught in later waves may have 12-18 months from final rule clarity to first filing. Retroactive data collection—especially for Scope 3—proves exponentially more difficult than prospective measurement.

Overreliance on Offsets Instead of Reduction: The credibility of carbon offset programs has deteriorated, with investigative reporting revealing that many offset projects overstate climate benefits. Companies built disclosure strategies around offset purchasing rather than emissions reduction face reputational risk and potential regulatory scrutiny as disclosure requirements increasingly distinguish between actual reductions and offset purchases.

Incomplete Scope 3 Measurement: While Scope 1 (direct) and Scope 2 (purchased energy) emissions measurement has become routine, Scope 3 (value chain) emissions—typically 80-95% of total footprint—remain challenging. Companies that treat Scope 3 as optional find themselves unable to satisfy enterprise customers who need supplier data for their own reporting. Partial Scope 3 measurement provides incomplete picture and false confidence.

Siloed Sustainability Teams: Climate disclosure requires integration across finance, operations, procurement, and legal functions. Companies that treat sustainability as a standalone function struggle to collect necessary data, embed climate considerations in business decisions, and present integrated reports that satisfy investors and regulators alike.

Examples

1. Unilever's Disclosure Journey: Unilever pioneered TCFD implementation, publishing their first aligned disclosure in 2017—the same year the framework launched. Their CFO served as Vice Chair of the TCFD, positioning the company to shape standards while building internal capabilities. By 2021, shareholders approved their Climate Transition Action Plan with 99.59% support, demonstrating how disclosure maturity builds stakeholder confidence. Their evolution from basic footprint reporting in the 1990s to comprehensive scenario analysis and independently verified targets shows the multi-decade journey enterprises undertake. Today, Unilever's climate disclosures span annual reports, CDP responses, standalone climate plans, and digital sustainability hubs—a level of transparency that took 25+ years to develop.

2. Microsoft's Climate Reporting Evolution: Microsoft's sustainability journey illustrates both ambition and honest disclosure of challenges. Their 2020 commitment to become carbon negative by 2030 came with a $1 billion Climate Innovation Fund and expansion of their internal carbon fee to cover Scope 3 emissions. Their 2025 Environmental Sustainability Report acknowledged that total emissions increased 23.4% since 2020—driven by AI and cloud expansion—while Scope 1 and 2 emissions decreased 30%. This transparent acknowledgment of setbacks, combined with disclosure of corrective investments (22 million metric tons of carbon removal contracted), demonstrates how mature disclosure includes honest assessment of progress and challenges. Microsoft stopped claiming "carbon neutral" via renewable energy certificates in 2025, refocusing on higher-integrity solutions—a disclosure evolution reflecting learned lessons.

3. Allbirds as Startup Example: Allbirds demonstrates how startups can build disclosure-first cultures that scale. As the first fashion brand to label every product with its carbon footprint (2020), they embedded measurement into product development from inception. Their open-source methodology—published for industry-wide use—created transparency that builds both customer trust and supplier engagement. With SBTi-validated targets and annual "Flight Status" reports that detail both successes and failures, Allbirds shows how early-stage transparency creates the foundation for enterprise-grade disclosure. Their partnership with Carbonfact for automated LCA provides a template for scaling without proportional cost increases. Their B Corp certification (score of 96.5) and third-party verified GHG inventory demonstrate how startups can achieve credibility typically associated with large enterprises.

Action Checklist

• Conduct materiality assessment: Identify which climate risks and impacts are material to your business using both financial and impact perspectives. This assessment forms the foundation for disclosure scope and should involve cross-functional stakeholders.

• Establish Scope 1 and 2 baseline: Measure direct emissions and purchased energy emissions using GHG Protocol methodology. Start with operational boundaries you control before expanding to more complex Scope 3 categories.

• Implement carbon accounting software: Select a platform that can scale with your business and export data in formats required by regulatory frameworks. Avoid spreadsheet-based approaches that require costly migration as requirements increase.

• Map Scope 3 categories: Identify which of the 15 Scope 3 categories apply to your business and prioritize measurement of material categories. For most companies, purchased goods/services, upstream transportation, and use of sold products represent the largest categories.

• Develop disclosure governance: Assign board-level oversight of climate risks and ensure management accountability for disclosure accuracy. Document processes for data collection, verification, and approval.

• Prepare for assurance requirements: CSRD and emerging regulations require third-party verification. Begin with limited assurance readiness, building toward reasonable assurance as your disclosure matures.

• Monitor regulatory developments: Track CSRD implementation, SEC rule status, and California requirements (SB 253, SB 261). Join industry associations that provide compliance guidance relevant to your sector.

FAQ

Q: When should a startup begin climate disclosure? A: Ideally, from founding. Product-level carbon footprints and basic emissions tracking establish the data infrastructure that scales with your business. At minimum, begin formal disclosure preparation when you reach Series A or start serving enterprise customers who may request sustainability data. The cost of early implementation is far lower than retroactive measurement and rushed compliance.

Q: How do disclosure requirements differ between the US and EU? A: The EU's CSRD is more comprehensive, requiring double materiality assessment, mandatory Scope 1, 2, and 3 emissions disclosure, and third-party assurance. SEC rules (currently stayed) focus on financially material climate risks and require Scope 1 and 2 disclosure only if material, with no Scope 3 requirement. California's climate laws (SB 253) may require Scope 3 disclosure for large companies doing business in the state. Companies operating across jurisdictions should prepare for the most stringent requirements, as CSRD compliance generally satisfies other frameworks.

Q: What's the typical cost to implement enterprise-grade climate disclosure? A: According to surveys, companies spend an average of $533,000 annually on climate-related disclosure, including emissions analysis, scenario modeling, and internal controls. However, costs vary significantly by company size, complexity, and existing capabilities. Startups using modern carbon accounting platforms can achieve sophisticated measurement for $10,000-50,000 annually, scaling to enterprise costs as requirements increase. The key cost driver is Scope 3 measurement, which requires supplier engagement and often third-party data sources.

Q: How do we handle Scope 3 data gaps when suppliers don't measure emissions? A: Start with spend-based estimates using industry emission factors, then progressively upgrade to supplier-specific data as engagement matures. Prioritize high-impact categories—typically your largest suppliers by spend correspond to largest emissions contributors. Communicate your disclosure requirements to suppliers early, providing guidance and timelines. Many suppliers appreciate advance notice and will develop measurement capabilities in response to customer expectations.

Sources

• European Commission. (2024). Corporate Sustainability Reporting Directive (CSRD). https://finance.ec.europa.eu/sustainable-finance/corporate-sustainability-reporting_en

• Task Force on Climate-related Financial Disclosures. (2023). TCFD Recommendations and Guidance. https://www.fsb-tcfd.org/

• Securities and Exchange Commission. (2024). The Enhancement and Standardization of Climate-Related Disclosures for Investors. https://www.sec.gov/rules-regulations/2024/03/s7-10-22

• ERM, Persefoni, and Ceres. (2022). Costs and Benefits of Climate-Related Disclosure Activities by Corporate Issuers and Institutional Investors. https://www.erm.com/insights/costs-and-benefits-of-climate-related-disclosure-activities/

• Unilever. (2024). Climate Transition Action Plan. https://www.unilever.com/sustainability/climate-action/

• Microsoft. (2025). Environmental Sustainability Report. https://www.microsoft.com/en-us/corporate-responsibility/sustainability/report/

• Allbirds. (2024). Product Carbon Footprint Methodology. https://cdn.allbirds.com/image/upload/v1628280054/marketing-pages/Allbirds_Product_Carbon_Footprint_Methodology.pdf

• Science Based Targets initiative. (2024). SME Target Setting Resources. https://sciencebasedtargets.org/resources/