As climate change progresses, the U.S. alone could lose more than $520 billion across 22 different sectors, and 80 million jobs would be at great risk worldwide. Though the prevalence of climate change has long been up for debate, countless studies have proved its danger.
As the planet’s well-being continues to decline and emissions continue to rise, the Securities and Exchange Commission (SEC) has proposed new regulations requiring U.S. companies to “disclose a range of climate-related risks and greenhouse gas emissions.”
The SEC felt pressure from both President Joe Biden and company investors to propose such requirements. When it comes to reporting the impact that companies have on climate change and the risks climate change poses to their futures, the U.S. lacks clear rules and regulations. Climate change progressions have begun to perturb investors as some feel unsure as to how climate change will affect the businesses they support.
The new regulations would require companies to track their greenhouse gas emissions in three different categories. The first, named Scope 1, requires companies to disclose their direct greenhouse gas emissions, while Scope 2 requires companies to disclose their indirect emissions. Indirect emissions pertain to mostly purchased energy, whether it be electricity or an alternative.
Scope 3 is where the complications may begin for businesses, especially those that are largely international. The SEC press release stated, “A registrant would be required to disclose GHG [greenhouse gas] emissions from upstream and downstream activities in its value chain.”
While emission tracking is a necessity today, some companies feel disproportionately targeted by the new regulations. U.S. companies that are not reliant on any international support or supply will have a simpler process when it comes to disclosing upstream and downstream emissions, making these companies less susceptible to mishaps or potentially unreliable information.
Local business owner Amy Nicholson does not think the regulations will have a big impact on her small business. “Most of our products and supply chains are from the U.S., so our emissions will theoretically be easy to track,” she stated. “This new rule doesn’t affect [her business] much, but hopefully larger corporations will take more responsibility when it comes to their emissions.”
Consultants, advisors and auditors are likely to benefit from such a rule. Their expertise will skyrocket in demand as companies are forced to face how they affect climate change.
International supply chains are predicted to have a messy impact on many companies as reliability can make emission tracking difficult. Domestic suppliers are typically easier to monitor, and domestically-transported supplies have lower carbon emissions. Companies may be forced to bring parts of their supply chain to domestic providers to avoid violations of the new rules.
“If emissions are difficult to track, companies could be polluting more than they think they are,” senior Catherine Moore said. “I think emission transparancy will help not just investors but also the company itself to see the impact they have on the planet.”
As companies may be forced to release critical data relating to their impact on climate change, a number of factors may force companies to see how their impact on climate change exceeds just direct emissions.
The realm of climate change expands endlessly beyond releasing greenhouse gas emissions; it encapsulates the future of investments, supply chains and what global business will look like. Perhaps new SEC regulations will not only make greenhouse gas emissions known, but may force companies into understanding the depth of their impact on the future.
Ryan S • Apr 15, 2022 at 11:31 pm
WOW! I had no idea what the SEC was and didn’t even know they were going through it. When I first saw the SEC, I thought about college football. This is a well-written article and very informative; I didn’t realize companies had to jump through so many hoops to meet climate change laws and regulations.