After a considerable delay, the U.S. Securities and Exchange Commission (SEC) has finally arrived at the climate disclosure party – and it is going to have a significant impact on U.S. companies.
Its recently released proposals, which are under consultation until May, call for businesses to disclose how they identify and manage climate risks, and how those risks will affect the company; what they are doing in terms of scenario analysis; and how the board oversees climate risk.
The SEC also calls on companies to provide updates on their progress on meeting any climate pledges, as well as any use of carbon offsets or renewable energy certificates.
Perhaps most importantly, companies with revenues of more than $25 million will have to report on not just their Scope 1 and 2 emissions (those that derive from their own operations) but also Scope 3, which covers emissions from their supply chain and customers. And they are likely to have to do this from 2024, for their 2023 results.
Keith Fortson, global head of ESG at integrated risk management provider Riskonnect, agrees. “It feels like the writing is on the wall. There is a convergence of the political, economic and social environments that are all calling for this.”
States and even individual cities may introduce their own requirements, he added, and over time, disclosure is likely to encompass other issues such as water, waste, and diversity and inclusion.
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