For the metals and energy industries, carbon data is a major compliance concern

In the metals and energy industries, carbon data has become a crucial compliance issue. While corporate sustainability action first began as a largely voluntary movement, in 2024, times have changed. Increasingly, external pressures—such as regulation, investors, financial institutions, and customers—are driving companies to provide detailed carbon disclosures. For many, this is a compliance-driven process, where the push for transparency is less about strategy and more about meeting regulatory demands.

As carbon reporting becomes mandatory, especially for industries with large footprints, failure to comply can lead to significant financial and operational risks. This article explores the main external forces shaping the demand for carbon data and how companies can navigate these pressures to meet compliance requirements while staying competitive.

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Key sustainability regulations are driving the quest for accurate carbon data

Many new regulations around the world require companies to measure and disclose the greenhouse gas impact of their operations and supply chains, with some also requiring that companies set and make progress towards decarbonization goals. For example, the European Union’s Corporate Sustainability Reporting Directive (CSRD) and the Securities and Exchange Commission (SEC)’s Climate Disclosure Rule will demand more carbon data than companies have ever been required to provide. One regulation that particularly affects the metals and energy industry is the EU’s Carbon Border Adjustment Mechanism (CBAM), a type of carbon pricing which requires companies to disclose data on certain products imported into the EU, including aluminum, steel and iron, fertilizers, electricity, cement, and hydrogen. CBAM will have significant effects on metals traders. 

Financial institutions are demanding sustainability action from the companies they finance

Increasingly, banks and other financial institutions are recognizing the impact of their financed emissions — the carbon footprints of the companies and activities they fund. Portfolio emissions disclosures and climate stress tests are becoming ‘the norm’ across key economies, with over 160 financial institutions committing to net zero.

Given the comparatively large footprints of those in metals and energy, these companies may find themselves under the microscope and may have begun to address their environmental impact in order to appease financial partners. On a more opportunistic note, many financial institutions are now offering sustainability-linked loans, which allow companies to earn lower interest rates over time by meeting decarbonization milestones.

Investors require comprehensive data on greenhouse gas emissions and climate risk management

Investors have been one of the biggest driving forces towards carbon transparency and decarbonization in the last decade. A recent EY survey suggested that 99% of investors have either already aligned their portfolio to net-zero goals or plan to do so over the next two years.

Many companies will already be familiar with the increasing demands from investors to provide detailed information on climate risk management, and getting the right carbon data is an essential first step here.

Customers want low-carbon and carbon-transparent products to fulfill their own sustainability commitments

As a price on carbon becomes a reality or future possibility for many companies around the world, the drive to decarbonize has become almost universal. Nearly 6000 companies have set science-based targets through SBTi, with 3400 of these being net-zero targets. With carbon now a key financial risk, many companies in the metals and energy sector are finding that the topic of carbon transparency is coming up more frequently in customer-facing functions such as sales and marketing. Requests for product carbon data are coming from existing clients and new prospects alike. Take, for example, Fusina,  who plans to source 100% low-carbon primary aluminum for its tailor-made industrial products.

“In each of these cases, risk manifests in two forms: regulatory risk, and market risk,” says Graham Stirling-Moffet, CarbonChain’s Head of Product. Direct regulatory risk is straightforward, as companies face mandates for disclosure, decarbonization, and/or carbon pricing, depending on their industry and location. Market risk, which involves regulatory impact on supply and demand dynamics, is, according to Stirling-Moffet, also just another manifestation of regulatory risk deeper in your supply chain. “It’s indirect — it’s affecting your customers, so eventually it will affect you.” To maintain contracts with existing clients or continue winning bids at previous rates, more companies will be required to provide product carbon data.

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From Compliant to Competitive: How Metals and Energy Companies are Turning Carbon Data Into a Market Advantage

‍How to source accurate carbon data for compliance purposes

The journey companies follow when gathering carbon data for compliance purposes is relatively universal.

Step 1: Measuring and disclosing

For most voluntary and mandatory compliance exercises, companies will need to complete a full corporate carbon footprint, calculating the emissions generated by your company in a particular 12-month period and including Scope 1, 2, and 3 emissions. For non-compliance purposes, your carbon data may be less holistic and more specific (for example, you may conduct a particular product carbon footprint (PCF) or request product data from particular suppliers), but most companies looking to produce sustainability reports will need a company-wide carbon footprint.

We’ve produced a number of helpful resources to help you gain an in-depth understanding of carbon accounting and guide you step-by-step through the process.

Read our free guide to calculating your corporate carbon footprint →

Step 2: Defining a reduction strategy over time

Every sustainability journey begins with an emissions profile from a baseline year (calculated in Step 1). Once a company understands their total annual emissions and has a clear idea of where the majority of these emissions is coming from, they can then set decarbonization goals, define a sensible strategy for moving towards them, and track their carbon emissions over time.

Once again, the right tools are critical. “Using a company’s historical emissions data, CarbonChain helps companies define a strategy to reduce emissions over time,” says Peter Campbell, CarbonChain’s Head of Customer Success. Because CarbonChain is built to serve commodity traders and manufacturers, our platform helps companies get a deep understanding of their supply chains thanks to highly accurate product-based carbon data.

Stage 3: Executing

A baseline and a strategy are one thing, but execution is a whole new challenge. Moving from theory to practice is where most companies come up short. Why? It’s usually because they don’t have the right tools to point them in the best direction for action.

“At this stage, most companies that try to reduce their emissions are basically winging it,” says Campbell. “They only have a vague sense of their carbon hotspots,” says Campbell. Though they may have historical emissions data, this is precisely the problem — the emissions data only becomes available retroactively, once the emissions from the product have already been produced. It is difficult to make real progress when data lags like this, not to mention that customers, financiers, and other stakeholders may need accurate emissions data either upfront or in almost-real-time. For this, companies need the right tools — ones that support a more commercially-driven approach to carbon data, even going as far as helping companies forecast or estimate their emissions ahead of time.

Accurate carbon data is a compliance exercise — but it’s also an opportunity

For metals and energy companies, carbon data is no longer a nice-to-have; it’s a critical compliance requirement driven by stringent regulations, investor expectations, financial institutions, and customer demands. As the landscape continues to evolve, businesses that fail to address their carbon footprint risk facing significant financial penalties and losing their competitive edge. However, those that embrace carbon transparency and leverage the right tools can not only meet compliance requirements but also unlock opportunities for growth, such as sustainability-linked loans and stronger customer relationships. Ultimately, navigating the complexities of carbon data compliance will require a proactive, strategic approach, ensuring both regulatory alignment and long-term success in a carbon-conscious market.

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‍FREE DOWNLOAD

This article is an extract from our free whitepaper:

From Compliant to Competitive: How Metals and Energy Companies are Turning Carbon Data Into a Market Advantage

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