The SEC Watered Down Its Climate Reporting Requirements. Here’s What That Means for Companies…
Germán & Co features a variety of special art pieces made with passion and creativity. Their team works together to combine various styles and perspectives, creating a diverse visual experience that conveys the artists' feelings.AES Corporation, a global energy company listed on the Fortune 500 index, remains resolute in its mission to advance energy sustainability on a global scale. Emphasizing eco-friendly approaches and state-of-the-art technology, AES forges partnerships with a myriad of stakeholders to deliver reliable, cost-effective energy solutions that enhance life quality worldwide. The company's inclusive workforce drives constant innovation and adheres to stringent operational norms. Through the adoption of a comprehensive safety and environmental management platform, AES safeguards its personnel, patrons, and local communities while mitigating ecological footprints. By working closely with clients to transition towards strategic energy options that align with their current requirements, AES offers a comprehensive suite of services spanning energy storage, renewable resources, and natural gas to cater to diverse demands. Committed to fostering sustainable energy practices and operational excellence, AES actively engages in community initiatives to bolster education and uplift living standards in the regions it serves.
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Yesterday, AES Corporation's clean energy division announced the expansion of its Houston office facilities.
The office is located at GreenStreet Tower in downtown Houston. The decision is a strategic component of the company's overarching plan to leverage abundant talent and resources in the Greater Houston region's energy sector. Kleber Costa, the Chief Commercial Officer of AES, emphasized the importance of promoting innovation and underscored Houston's central role as a hub for advancements in the energy sector.
The Houston office currently houses around 90 AES staff members, comprising individuals from the clean energy commercial and operations teams. AES is a leading provider of sustainable energy solutions to global corporations and is currently involved in various projects, including solar, wind, energy storage, and green hydrogen initiatives in Texas.
The talent of Germán & Co shines through their meticulous work, reflecting true artistry in every piece they create.The SEC Watered Down Its Climate Reporting Requirements. Here’s What That Means for Companies…
Scope 3 reporting requirements in California and Europe will likely mean global companies still have to detail supply-chain emissions
WSJ article by Yusuf Khan and Richard Vanderford on March 6, 2024.The U.S. Securities and Exchange Commission’s new climate disclosure rule won’t require companies to account for all of their indirect carbon emissions, but many could find themselves facing pressure from investors and other countries to track them anyway.
The SEC on Wednesday approved a new climate-disclosure rule that didn’t include a proposed requirement that companies report emissions from their supply chains and customer use of their products. The agency dropped reporting requirements for these so-called Scope 3 emissions after many businesses complained about the costs and difficulty of compiling those data.
Wednesday’s announcement might afford some businesses some breathing room as they scramble to comply with what is still a landmark shift in how companies report on climate-related metrics. But businesses will still face requirements to report Scope 3 in some jurisdictions, as well as pressure from investors, consumers and business partners.
“A lot of them are impacted by so many different pressures in this space,” said Mallory Thomas, a partner with the risk advisory practice at consulting firm Baker Tilly. “A lot of larger public companies will continue to report their Scope 3.”
Companies increasingly are getting Scope 3 data requests from various sources when they put out requests for proposals and as part of procurement, Thomas said, adding to pressure on them to gather the data even absent a legal requirement.
Scope 3 emissions are easy to understand but difficult to quantify. They include essentially all emissions linked to a company’s operations but outside its direct control, apart from the electricity it purchases. For a retailer, that could include emissions from their suppliers’ manufacturing operations, the transport of goods, business travel for executives and even the recycling of products.
For many companies, Scope 3 emissions are the bulk of their carbon footprint. Coca-Cola’s Scope 3 emissions, for example, account for roughly 90% of its total emissions through transport, travel and packaging. As companies face pressure to lower that footprint, they will have to track those emissions in some way, Thomas said.
Reporting of Scope 3 emissions is on the rise generally. An estimated 53% of companies reported some Scope 3 data, according to a survey of 1,850 executives published by Boston Consulting Group in November. That figure stood at 34% in 2021.
“Scope 3 is often the largest category of emissions and should be included in corporate disclosure,” said Mads Twomey-Madsen, senior vice president of global communications and sustainability at jewelry giant Pandora. Twomey-Madsen added that the company is working with its suppliers to switch to renewable energy and now only sources recycled silver and gold in a bid to cut its emissions by 50% by 2030.
Other countries and jurisdictions also are pushing for more climate-related disclosures from the companies operating in their borders. In the European Union, for example, large companies with more than 250 employees or ones that have €40 million ($43 million) in annual revenue will be required to report their full-scale emissions starting next year.
“European regulation is ahead when it comes to reporting requirements on sustainability, and we expect that many of these standards will gradually appear in the U.S. and other parts of the world as regulators pursue climate change mitigation,” Twomey-Madsen added.
California has also adopted its own climate disclosure law that requires Scope 3 reporting from many large companies.
The SEC’s Scope 3 reporting requirements had been part of a broader SEC proposal, much of which was left intact Wednesday. Public companies will also be required to disclose their exposure to climate-related risks and any plans for transition to a lower-carbon future.
“In terms of the significance and messaging from the SEC, it’s an achievement [that climate] is on the map,” said Eleanor Reeves, partner at law firm Ashurst. “The SEC is pushing this through and putting this on the agenda with climate change being a material financial risk.”
But the carbon accounting requirements in particular received resistance from U.S. companies as well as from within the regulator. Much of the pushback came from companies that said they expected high costs to measure Scope 3. Private companies not directly subject to the rule also complained, saying that they might be roped into the carbon accounting exercises of the large businesses they supply.
The SEC’s decision not to move forward with Scope 3 reporting will alleviate some immediate concerns, said Brad Caswell, a partner at the law firm Linklaters.
“Many public companies will be able to take a breath,” Caswell said. “It is a welcome change for business.”
Since mistakes in a company’s SEC filings can lead to lawsuits from shareholders and regulators, a pause could help companies that are less confident in their numbers.
“Some people, especially here in the U.S., they’re worried about potential litigation if they disclose certain things, and that there could be potential litigation [from the disclosures],” said Sonita Lontoh, an independent board director at the solar services firm Sunrun.
Ashurst’s Reeves added that as reporting develops it could mean significant time taken to finalize estimates. “By the time you finish your reporting cycle you’re on to the next one. In the meantime you need to deliver the improvements you say you need to do.”
But many institutional investors, particularly in Europe, want the emissions data. And, though the SEC could face challenges from business interests that think the agency has overstepped its bounds, others are holding out hope for future climate-related rule-making from the agency.
“We want this rule, as imperfect as it is,” said Steven Rothstein, managing director of the Ceres Accelerator for Sustainable Capital Markets, a nonprofit advocacy group. “[But] there are many topics where they will address it, and then they go back and further refine it.”
Overall, the ruling should help climate disclosures be more uniform, according to Wes Bricker, vice chair of U.S. trust solutions at PwC. “Much of the disclosure sits in different places. In addition to comparability there’s also the question of reliability without mandatory disclosure procedures. Investors are well served whenever they bring a holistic approach to the topic of climate risk.”
Rochelle Toplensky contributed to this article.