Participants at a recent symposium on environmental, social and governance (ESG) reporting, hosted by the AICPA and its subsidiary, CPA.com, discussed how mandatory reporting requirements for Scope 3 greenhouse emissions—set to go into effect in two jurisdictions in 2025—could create audit opportunities for firms of all sizes, the Journal of Accountancy reported.

While it would appear at first that pending regulations in California and in the European Union won't have a widespread effect on smaller CPA firms, in 2025, that situation will change. The reporting and attestation of Scope 3 greenhouse gas emissions will change from voluntary to mandatory, and that shift suggests that more companies will be affected, so that CPA firms of all sizes could see new opportunities.

"The market forces that are driving these compliance requests are accelerating," said Good.Lab co-founder and CEO Andries Verschelden during the symposium. "It's all moving in a single direction—upwards."

The Environmental Protection Agency (EPA) defines Scope 3 emissions as emissions that are "the result of activities from assets not owned or controlled by the reporting organization, but that the organization indirectly affects in its value chain." They account for roughly 70 percent of greenhouse gases produced by many businesses, according to The Wall Street Journal

The reporting requirements of California and the European Union stand in contrast to those of the U.S. Securities and Exchange Commission (SEC). In early March, the SEC voted to adopt rules to enhance and standardize climate-related disclosures by public companies and in public offerings. But the SEC scaled back its original 2022 proposal so as to exclude the requirement that public companies disclose Scope 3 emissions.

Later in March, a federal appeals court temporarily stayed the SEC’s climate-disclosure rules, and they remain in limbo.

But with the upcoming California and E.U. requirements, companies will likely look to CPA firms to perform auditing and attest services, the symposium speakers said.

"In order to perform these services, you really need to be upskilled and competent in this area," said Ami Beers, senior director­–Assurance & Advisory Innovation for AICPA & CIMA, s during the symposium.

"The profession has to seize this opportunity to be the key provider, do it well, and win the marketplace with clients or prospective clients," said AICPA President and CEO Barry Melancon, during the symposium.

In 2022, when 99 percent of the largest 100 U.S. companies were reporting some sustainability information, voluntarily, only  23 percent of them that obtained assurance turned to an audit firm, the Journal reported. But  in 2025, the start of mandatory regulations will likely change those percentages significantly. Among 300 U.S.-based executives at public companies with at least $500 million in annual revenue surveyed by Deloitte for its 2024 Sustainability Action Report, 92 percent said they plan to obtain assurance of their companies' sustainability disclosures for the next reporting cycle. And among those, 89 percent said they plan to turn to a CPA firm for assurance.

The Journal relied on CNBC reporting from last year to note that retail giants Amazon and Walmart and technology giants Apple and Microsoft are among the companies starting to require their suppliers to report data if they want to continue to operate as suppliers.

"When these large enterprise companies are subject to rules that say you have to measure and report on the emissions in your supply chain, that trickles down into requirements for middle-market organizations," Verschelden said during "Navigating Supplier Sustainability Information Requests," a webcast produced by Good.Lab and AICPA & CIMA that debuted Aug. 30. "We think in the next few years, there is going to be an even faster acceleration in requests to share in particular greenhouse gas data and also an increased pressure on the quality of data that is being shared."

The webcast, set for rebroadcast Sept. 24 (during Climate Week NYC) as well as Oct. 23 and Nov. 21, "introduces accounting and finance professionals to ways they can help clients respond to sustainability information requests and how they can work with clients to improve their sustainability profile in the eyes of potential business partners."