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Preparing your organization for the dawn of a new eraThe US Securities and Exchange Commission’s (SEC) recent announcement of a climate disclosure mandate has caused ripples across industries. Companies are now under pressure to navigate the intricacies of sustainability reporting with potential enforcement anticipated as early as 2023. This article unpacks the SEC's proposed climate disclosure rule and offers insights into how organizations can gear up for the impending change.
Breaking Down the SEC's Climate-Emission Disclosure RuleIn March 2022, the SEC put forth a proposal that would obligate public companies to regularly disclose climate-related information. Drawing parallels with the EU's Corporate Sustainability Reporting Directive (CSRD), the SEC's proposed guidelines aim to standardize corporate sustainability reporting much like financial accounting.
This potential regulation, marking the most substantial shift in corporate disclosure policy since the 2008 financial crisis, caters to investors' rising demand for climate-related risk data. The SEC contends that existing climate disclosures lack consistency in terms of type and format, creating challenges for shareholders evaluating climate risk and greenhouse gas (GHG) exposure.
An Overview of Expectations for CompaniesUnder the proposed rule, SEC climate disclosures would feature in registration statements and routine reports. The rule mandates the inclusion of Scope 1, Scope 2, and Scope 3 information, requiring the disclosure of specified GHG emissions and climate-related financial statement metrics.
The SEC's focus initially will be on larger companies, namely those with a market cap exceeding $700 million. However, smaller registrants and companies falling under Section 12(g) of the Exchange Act will also fall under the SEC's proposed climate disclosure requirements.
The SEC's proposal aligns largely with the Task Force on Climate-Related Financial Disclosures (TFCD) framework, which assesses material climate-related risks and opportunities based on their projected short, medium, and long-term financial impacts on a registrant. As part of their reporting, companies would need to include:
Stepping Up for SEC Climate Disclosure ComplianceThe SEC's proposal brings an added layer of transparency and accountability, enabling companies and investors to evaluate their current risk scenarios, confirm emissions targets, establish clear and measurable goals, and provide visibility on the means employed to attain sustainability goals.
For companies that don't currently collect this data, compliance with the SEC's climate disclosure requirements will pose initial challenges. However, if equipped with the right resources, compliance can yield substantial benefits for these companies.
Our ContributionAs a key contributor to the SEC’s Emissions’s Climate Disclosure, nZero (referenced as Ledger8760) was instrumental in shaping the report. The SEC highly advocates the use of third-party companies like ours to aid organizations in tracking and managing emissions.
With experience spanning various industries, we specialize in providing detailed climate change and environmental data for corporate reports. Being well-versed in all major frameworks—CDP, GRI, GRESB, and TCFD—we offer a robust solution for tackling climate risk and for Scope 1, 2, and 3 emissions calculation and reporting. Our methodology focuses on automating data gathering and calculations, reducing your internal workload while ensuring accuracy and audit readiness.
As the SEC's climate disclosure plan undergoes further deliberation and development, we will remain vigilant, keeping you updated on all forthcoming announcements.
