"While the final decision will be welcome, it's not that unexpected and won't be seen as a burden, given the wholehearted support for the decision from business during the consultation process," said Alan McGill, a partner in PwC's sustainability and climate change practice. "Of the four options under consideration, business backed mandatory reporting.
"The biggest winners will be the companies that took the early steps to measure and report on carbon, and understand the risks better. Investors will also get more from the information about the risks and liabilities of the business, and its efficiencies. Regulations on emissions reporting will indirectly increase everyone's attention on the issue, which should lead to improved performance."
He also dismissed concerns that the new rules will impose an onerous burden on businesses. "For large companies, this won't be seen as a huge burden," he said. "Our analysis of the FTSE shows it has the highest levels of board oversight and engagement on climate change strategy, compared to other global business indices."
Matthew Spencer, chief executive of green business think-tank Green Alliance, said the decision would also significantly bolster the coalition's green credentials. "It is great to see the Coalition being bold on the low carbon agenda, and credit is due to the leadership that UK business groups have shown in championing greater transparency in corporate reporting," he said.
However, Martin Baxter, executive director of policy at the Institute of Environmental Management and Assessment,argued the benefits associated with mandatory carbon reporting would only be maximised if the rules are extended to cover all large businesses.
"Mandatory greenhouse gas reporting will deliver benefits for both the UK economy and the environment, and turn the environment into a mainstream business opportunity," he said. "However, we will not see the full benefits of mandatory reporting until it is introduced for all large businesses (around 24,000). Currently the majority of listed businesses already report on their GHG emissions, so until this legislation is broadened out it will not achieve its full potential for environment and business."
Will other countries follow suit?
The government will be hoping that the introduction of the world's first mandatory requirements for emissions reporting will trigger other countries to adopt similar rules.
One of the key areas of agreement at the Rio Summit is a commitment to encourage businesses to report on their sustainability performance, a recognition of the importance of the global "green economy," and proposals to develop a mechanism for measuring so-called GDP Plus that takes account of natural capital, all of which have made it into the draft negotiating text to be considered by world leaders later this week.
"Whilst there is still a lot of work to do, this agreement means we have made progress towards achieving what the Rio Earth Summit set out to do – to get the world on the right path to achieve cleaner and greener growth that ends the damage we have done to the environment and helps end poverty," Spelman said. "We now have a global commitment to the green economy as a way to reduce poverty, sustain economic growth and use our natural resources in a more responsible way to protect them for future generations."
However, green groups have been highly critical of the draft text, arguing that it makes few firm commitments and lacks the ambition necessary to tackle the world's environmental challenges.