The pressure is building for U.S. publicly traded companies to capture, measure, and disclose their emissions data. This past June, the U.S. Securities and Exchange Commission (SEC) announced that the new climate change disclosure rule is expected to be published in October 2023, with compliance phased in over the next few years starting in 2024.
The rule will require SEC-registered domestic and foreign companies to disclose greenhouse gas (GHG) emissions, climate-related business risks with material impact, and plans to mitigate such risks in their registration audited financial statements and annual financial reports. Currently, only 71% of S&P 500 companies voluntarily report on GHG emissions, yet there are discrepancies with how these emissions are calculated, making the reports unreliable, inconsistent, and incomparable. While the upcoming regulations cannot force companies to reduce their emissions, they bring standardization, transparency and data accuracy, and thus expose businesses making unsubstantiated greenwashing claims.
Disclosure of GHG emissions will also be used as a metric for investors to evaluate the climate-related financial risk of the company. By clarifying discrepancies between how the GHG footprint is reported, the data then becomes comparable and transparent for stakeholders, investors, and the public.
Some of the key proposed mandates that aim to enhance and standardize climate-related disclosure include:
- Greenhouse Gas Emissions, Scope 1, 2, and 3 (if part of the company’s climate goals)
- Climate-related risks and impacts on business, strategy, and outlook
- Details about governance practices on climate-related risks and relevant risk management processes
- Impact of climate-related events and transition plan, if any
- Climate-related financial statement metrics and related disclosures in a note to audited financial statements
- Systematic management of offsets and Renewable Energy Certificates (RECs)
- Financial-grade reporting that is based on the Task Force on Climate-related Financial Disclosures (TCFD)
The long delay in finalizing the SEC Climate Change Disclosure mandate has led to high uncertainty for U.S. public companies regarding the scope of rules and compliance timings. Many organizations have complained that the disclosure rules are too expensive, complicated, and far-reaching, with a particular emphasis on Scope 3 emissions (which is still to be determined as to whether it will be required). On the other hand, climate activists are concerned that without mandatory Scope 3 emissions (which make up 87% of emissions across all industries), companies could offload emissions from energy-intensive activities to suppliers or customers as a form of greenwashing. Furthermore, not including Scope 3 emissions runs the risk of double counting emissions and false reporting.
What does this mean for U.S. publicly traded companies?
Take advantage of the delay and prepare by compiling the necessary data for SEC compliance. This data will be essential for reporting climate metrics and driving strategic decision-making for climate goals and targets
The proposed disclosures for GHG emissions are similar to the already accepted disclosure frameworks, such as Greenhouse Gas (GHG) Protocol. The organizations will be required to disclose their direct GHG emissions (Scope 1), indirect GHG emissions from purchased electricity (Scope 2), and potentially their value chain GHG emissions from upstream and downstream activities (Scope 3). The first step will be calculating the carbon footprint across the company’s entire global value chain, including operations, supply chains, and downstream products in use.
Let us help you prepare for the pending SEC climate disclosure rule
GreenStruxure's Sustainability Service makes it easy to comply with the new SEC disclosure mandates. Our unified platform BeyondtheGrid® facilitates data collection, calculates Scope2 GHG emissions, and automatically creates audit-grade Scope 2 reporting. It can easily integrate with standard ESG reporting platforms for seamless reporting at a company-wide level. This service is available for all the sites our zero-carbon energy service serves.
Through GreenStruxure’ Sustainability Service, you can:1. Seamlessly track and monitor renewable energy certificates (RECs) for onsite generated solar energy.
2. Generate Scope 2 emissions reporting that is location and market-based, as per the GHG Protocol for the full site.
Starting early, you can strategize your decarbonization path and prepare appropriately without unnecessary rushing or urgency. GreenStruxure is here to help. Talk to one of our climate experts today and be one step ahead of your competitors with a clear plan and pathway for SEC Climate Change disclosure compliance coming this fall.