The SEC has adopted new rules to ‘enhance and standardise’ climate related disclosures for investors. In summary it will require publicly listed US companies to disclose Scope 1 and 2 emissions considered material to their business starting from 2026. The largest of these companies will then be required to have these disclosures assured from fiscal year 2029[i].
In a press release SEC Chair Gary Gensler said: “These final rules build on past requirements by mandating material climate risk disclosures by public companies and in public offerings. The rules will provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements.” [ii]
He added: “They will provide specificity on what companies must disclose, which will produce more useful information than what investors see today. They will also require that climate risk disclosures be included in a company’s SEC filings, such as annual reports and registration statements rather than on company websites, which will help make them more reliable.”[iii]
As we discussed in December last year, the SEC was initially proposing to mandate standardised emissions disclosures across Scopes 1-3, with Scope 3 being required for just the largest firms. However, lobbying by corporations meant that not only was the ruling delayed into 2024, but the scope 3 requirements were removed.
With the SEC finalising the climate disclosure rules on 6th March 2024, legal challenges from Liberty Energy and Nomad Proppant Services saw the Fifth Circuit Court grant request for administrative stay little more than a week later. With further legal challenges in process, it likely marks the start of a drawn-out legal battle between the SEC and its opponents. Given 2024 is an election year, many companies may be tempted to take a ‘wait and see’ approach.
As ZCA have suggested in the past, firms should plan their reporting processes now, and ensure they have the personnel to do so- whether this means hiring new talent with the necessary reporting skills, or training up current staff. Ultimately reporting demands are only set to increase- with investors, consumers, and regulators leading growing demand for climate related disclosures. A study by FERF and Persefoni last year, found that 53% of US corporations are already upskilling members of their finance teams to support climate reporting, with a further 25% saying they have plans to[iv].
In addition, whilst scope 3 reporting requirements have not been imposed by the SEC at this time, other regions already have, or are set to introduce similar rules. For example in California many large companies operating within the state will be required to disclose their scope 1,2 and 3 emissions data from 2026[v], and in the EU the CSRD will see 50,000 companies required to report more broadly on environmental matters, social responsibility, human rights, anti-corruption measures, and board diversity[vi]. In general, the reporting of Scope 3 emissions is already on the increase, with a recent study by Boston Consulting Group finding that 53% of companies reported some Scope 3 data, compared with just 34% in 2021[vii].
[ii] SEC.gov | SEC Adopts Rules to Enhance and Standardize Climate-Related Disclosures for Investors
[iii] Ibid
[v] California enacts major climate-related disclosure laws (harvard.edu)
[vii] The SEC Watered Down Its Climate Reporting Requirements. Here’s What That Means for Companies. - WSJ
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
