BDO Sustainability Insights – Q3

In this edition of BDO Sustainability Insights, we dive into the market momentum for battery storage, which businesses are increasingly considering as a strategy for controlling energy costs and enhancing power reliability. We also have a comparison of the EU’s different sets of sustainability reporting standards and outline how to establish an organizational boundary — the crucial first step and foundation for a GHG inventory.

• Why Battery Storage is Gaining Traction as a Business Energy Solution
• EU Sustainability Reporting Standards Compared: ESRS, ESRS-40a, Voluntary
• How To Set an Organizational Boundary for GHG Accounting

Why Battery Storage is Gaining Traction as a Business Energy Solution

As businesses look for ways to help control energy costs and enhance the reliability of their power supply, battery storage systems are becoming an increasingly attractive option. 

Over the past few years, deployment of these systems has grown dramatically — driven by a convergence of factors such as declining costs, federal tax credit availability, increasing system capacity, rising renewable energy deployment, and emissions reduction potential. Together, these market and technological trends are positioning battery storage to play a more prominent role in corporate energy strategies. 

Battery Storage System Use and Advantages

Battery storage in the power sector is divided into two categories: behind-the-meter storage and utility-scale (front-of-the-meter) storage.

Behind-the-meter battery storage systems are installed on the user’s side of the electric meter and are part of a facility’s internal electric system. Often used by commercial and industrial customers, behind-the-meter battery storage can help reduce a company’s electric costs — either by enabling increased use of on-site generation like solar, or by using grid power to charge at times when electricity costs are lower, then deploying that stored electricity at peak usage times when prices climb.

Behind-the-meter storage can provide organizations with a source of reliable back-up power during unexpected outages and help businesses integrate renewables, supporting greenhouse gas (GHG) emissions reduction. Systems can also help reduce strain on the power grid. In fact, the size of behind-the-meter solutions continues to grow as battery storage is now a primary strategy for hyperscale data centers, which are implementing systems as a solution for managing energy costs and reliability. 

In contrast, utility-scale storage connects directly to distribution or transmission networks and is utilized by utilities, grid operators, and power producers. Typically much larger than behind-the-meter storage, these utility-scale systems support grid stability and security by helping power providers integrate renewables, balance electricity supply and demand, reduce grid congestion, and enhance grid stability. 

Market Momentum

In 2025, new battery storage capacity reached 108 gigawatts (GW) globally, 40% higher than in 2024 and 18 times the capacity added in 2020, according to the International Energy Agency (IEA). Approximately 80% of 2025 capacity growth was utility scale, with the remaining 20% representing behind-the-meter storage. In the U.S., capacity additions reached 19 GW in 2025, up 58% versus 2024, with growth in utility-scale storage accounting for 86% of new capacity.

Dramatically falling costs are helping accelerate adoption. According to BloombergNEF, the cost of a battery system with four hours of capacity dropped to $78 per megawatt-hour (MWh) in 2025, a 27% decrease compared to 2024 and the lowest price since data collection began in 2009. Battery storage costs are forecast to continue falling, declining to $58 per MWh by 2035 due to innovation and market competition.

Incentives are also helping boost U.S. deployment. While the One Big Beautiful Bill Act rolled back certain federal tax incentives under the Inflation Reduction Act, credits for stand-alone commercial battery energy storage systems (BESS) remain available at their full value — provided projects begin construction before the end of 2033 and meet applicable eligibility requirements. Some states also offer business incentives for energy storage deployment to enhance grid reliability and reduce GHG emissions. 

Circularity and Waste Management

Despite their important role in grid reliability and enabling renewables deployment, batteries are resource-intensive and can create high-risk waste. Many jurisdictions regulate battery disposal under broader waste laws; however, some governments are beginning to put requirements in place that go beyond waste management to incorporate recycling and circularity.

In the U.S. at the federal level, many end-of-life batteries are managed under U.S. Environmental Protection Agency (EPA) hazardous waste and universal waste requirements, with the latter helping to facilitate recycling. While state extended producer responsibility (EPR) laws are largely limited to smaller batteries, Texas has notably adopted BESS-specific decommissioning and recycling requirements through House Bill 3809.

Legal requirements are among the most comprehensive for batteries placed on the market in the European Union, where the Batteries Regulation lays out content restrictions and requirements for labeling and documentation (including a Digital Product Passport beginning in early 2027), supply chain due diligence and reporting, and waste management.

Integrating Battery Storage Into Energy Strategy

With lower system costs, and strains on grid infrastructure continuing to pose a risk to operations, battery storage is poised to play a more significant role in business energy strategy — helping organizations lower electricity costs and emissions, enhance the reliability of their power supply, and contribute to broader energy security in their communities. Businesses considering battery storage should take a structured approach by assessing project economics, available incentives, permitting requirements, system integration needs, and end-of-life obligations to determine how storage can best support their broader energy strategy.

Contact BDO for help navigating tax credits and incentives for battery storage and other energy projects.

EU Sustainability Reporting Standards Compared: ESRS, ESRS-40a, Voluntary

The European Union is getting closer to completing its suite of sustainability reporting standards for companies in scope of the Corporate Sustainability Reporting Directive (CSRD), as well as smaller entities in their value chain.

Following the Omnibus’s call for clarifications and simplifications, the original set of European Sustainability Reporting Standards (ESRS) has been revised to reduce the number of mandatory data points and total data points by more than 60% and 70%, respectively. The European Commission adopted the revised ESRS on July 3, and the standards are now undergoing a two-month scrutiny period before becoming final, which could be extended by another two months at the European Council or Parliament’s discretion.

At the same time, the European Commission adopted a separate sustainability reporting standard for voluntary use (Voluntary Standard) that applies to companies with up to 1,000 employees. In addition to facilitating voluntary sustainability reporting, the Voluntary Standard creates a “value chain cap” that limits the information larger companies reporting against the ESRS can require from the smaller companies in their value chain for the purposes of CSRD reporting. The Voluntary Standard is similar to and supersedes an earlier voluntary sustainability reporting standard for small and medium-sized undertakings (VSME Standard). It is also currently subject to a two-month scrutiny period, with the possibility of an extension, before becoming final.

Another set of standards for non-EU groups directly in the CSRD’s scope is also under development. On July 23, the European Financial Reporting Advisory Group (EFRAG) released an exposure draft of the European Sustainability Reporting Standards for certain non-EU undertakings (ESRS-40a) and launched a 100-day public comment period. 

The proposed ESRS-40a, previously referred to as the Non-EU ESRS (N-ESRS), is similar to the ESRS; however, the standard limits reporting requirements to material impacts and offers companies the option of taking a global approach or mixed approach to reporting. Under the global approach, material impacts are reported at the global level for all topics. Under the mixed approach, climate impacts are reported at the global level but reporting on other topics can be limited to EU-related impacts. 

To learn how the standards compare, which companies they apply to, and their key requirements for topics such as materiality and value chain reporting, see the table below. 

1. During the previous fiscal year (for revenue and employees).
2. At the group level for each of the last two consecutive fiscal years.
3. ESRS topical standards cover: (Environmental) climate change, pollution, water, biodiversity and ecosystems, circular economy and resource use; (Social) own workforce, workers in the value chain, affected communities, consumers and end-users; (Governance) business conduct.

Contact BDO for help navigating CSRD-related reporting and assurance. 

How To Set an Organizational Boundary for GHG Accounting

Setting an organizational boundary is one of the most important — and often underestimated — steps in greenhouse gas (GHG) accounting. Learn how the process works.

What is an organizational boundary and why does it matter?

An organizational boundary defines the business entities, facilities, and mobile assets that make up a company and establishes which emissions are accounted for in an entity’s  emissions reporting boundary. Determining the list of items within the organizational boundary is the crucial first step and foundation for calculating GHG emissions: If a company’s organizational boundary is incomplete or inaccurate, then emissions totals will be too.

The current GHG Protocol outlines three different options for consolidating emissions. After selecting one, a company must consistently apply this approach across its business to determine which entities and assets should be included in its organizational boundary. 

The operational control approach is the most common method for consolidating emissions. A company using this approach accounts for 100% of the GHG emissions from entities and assets over which it or its subsidiaries have operational control, defined by the GHG Protocol as the full authority to introduce and implement operating policies. 

The financial control approach is another accepted method. Under this approach a company accounts for 100% of the emissions from entities and assets over which it has financial control, defined by the GHG Protocol as the ability to direct financial and operating policies with the potential for economic gain. 

A company may also choose the equity share approach for consolidating emissions, where it accounts for emissions based on its percentage of economic interest in an operation.

How does a company determine its organizational boundary?

To determine its organizational boundary, a company must first select which approach to use for consolidating its emissions. Companies predominantly select the control approach, choosing either operational control for the link it provides between management accountability and GHG emissions responsibility, or financial control for its closer alignment with financial accounting standards. The equity share approach may be determined most appropriate in cases where a company is made up of more complex organizational structures, such as joint ventures. 

After selecting a consolidation approach, the steps for determining a company’s organizational boundary for GHG accounting are as follows:

1. Identify the entities that form the business’s organizational structure, including subsidiaries, joint ventures, and partnerships. 
2. Develop an inventory of assets (e.g., facilities, vehicles) associated with each of the entities identified in Step 1.
3. Evaluate each entity and asset according to the selected consolidation approach to determine if and how it should be included in the organizational boundary for its emissions inventory. 
   
   This will require reviewing ownership structures, governance arrangements, lease agreements, joint venture agreements, and other contractual documentation as needed. 
4. Determine the portion of emissions to be included in the inventory: 
   1. Operational control approach: 100% of emissions from operations under operational control
   2. Financial control approach: 100% of emissions from operations under financial control, with the exception of emissions from joint ventures under joint financial control that are accounted for based on the equity share approach
   3. Equity share approach: A proportional share of emissions based on the company's economic interest in an operation (e.g., company accounts for 43% of emissions from a joint venture where it has 43% economic interest)
5. Calculate emissions from the entities and assets in the organizational boundary and classify them as Scope 1, 2, or 3, as applicable. Many organizations choose to prioritize Scope 1 and 2 and measure Scope 3 as a separate assessment; however, the organizational and operational boundaries must be consistent across all scopes. 

What are common pain points for setting an organizational boundary and how can they be navigated?

Each consolidation approach can pose a variety of challenges, from sourcing and analyzing relevant legal agreements, to gathering sufficient details, to building an audit trail. One example of these challenges can arise when companies using the operational control approach assess leased assets.

Under the operational control approach, it is generally straightforward to confirm that a company has operational control over its owned assets, but assessing operational control for leased assets often becomes much more nuanced and complex. 

Financial responsibility for emissions-generating activities (i.e., utility consumption, equipment maintenance) serves as strong supporting evidence of operational control, but it is rarely the sole deciding factor. As a result, determining whether a company has operational control over a leased asset often requires careful review of the lease agreement, a process often complicated by diverse lease terms and inconsistent or incomplete information. A lack of centralized lease management and tracking can also make gathering sufficient documentation and details about assets challenging, an issue that becomes even more important as companies move toward assurance and must provide necessary evidence to show that the list of entities and assets that make up their organizational boundary is complete and accurate. 

Mapping information owners and the storage systems and locations where contracts are kept can help build source documentation and streamline annual emissions updates. Clear information requests that specify key details needed about owned and operated facilities are also helpful. In addition to details on ownership status for each facility,  several other standardized fields of information are needed to complete emissions calculations associated with a facility — for example, ZIP code, square footage, and lease start and end dates are needed to estimate electricity consumption when utility bills are unavailable. 

Determining organizational boundaries can be complicated and is a critical first step in GHG accounting that defines the nature and scope of the GHG inventory process. Inaccurate organizational boundaries require substantial rework that can be avoided by getting it right the first time.    

Contact BDO for help calculating and preparing for assurance over your GHG inventory, including the setting of organizational boundaries. As the GHG Protocol undergoes revisions, we will provide additional guidance.