VIDEO: The SEC’s new climate disclosure rule passes

Updated: 
March 13, 2024
Article

The Week in Sustainability – March 4–March 8

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As predicted, the U.S. Securities and Exchange Commission approved the long-awaited climate disclosure rule this week. The impact? Now, thousands of public companies will be required to disclose material scope 1 and 2 emissions. The disclosure law marks a significant milestone in corporate climate reporting, driving the imperative for strategic alignment and comprehensive risk management.

In this episode of The Week in Sustainability, we welcome Christopher McClure a partner and ESG services leader for Crowe LLP, a leading public accounting, consulting, and technology firm.

The impact of the SEC’s Enhancement and Standardization of Climate-Related Disclosures on companies

Increased transparency

Companies must divulge more details about climate risks, severe weather costs, and greenhouse gas emissions.

Investor empowerment

This transparency empowers investors to make more informed decisions, driving companies towards sustainable practices.

Legal challenges expected

Despite its importance, the rule may face legal battles and attempts at overturning from various quarters.

Learn how Sustain.Life can help your company navigate these new compliance requirements.

The evolution of the SEC disclosure law

The SEC’s proposed rule on enhancing climate disclosure for publicly traded companies faced significant feedback and commentary from the market. After receiving over 24,000 comment letters, the final ruling was approved on March 6th, with notable differences from the initial proposal.

Key requirements of the final ruling

The final ruling focuses on climate-related governance, strategy, risks, and targets, aligning with frameworks like TCFD. It includes disclosures of scope 1 and 2 emissions, transition plans, and scenario analysis, but notably excludes scope 3 emissions, a contentious point for many stakeholders.

Materiality assessment and its importance

A crucial aspect of the SEC rule is the emphasis on materiality assessment. The determination of material topics hinges on various considerations beyond financial metrics, requiring a cross-functional team to ensure accuracy and credibility.

Phase-in timeline and assurance requirements

The phased timeline of the ruling grants larger companies more time for compliance, with a transition from limited to reasonable assurance for scope 1 and 2 emissions. Despite the extended timeline, companies must integrate these obligations into their compliance strategies amidst evolving regulatory landscapes.

Implications for companies and industry trends

While the exclusion of scope 3 emissions disappointed some, companies are already engaged in reporting due to existing regulatory requirements and stakeholder demands. Climate risk is increasingly recognized as financial risk, urging companies to prioritize transparency and accountability across operations.

Preparing for the future

We advise companies to adopt a proactive approach, establishing cross-functional teams to navigate evolving reporting obligations and stakeholder expectations. Consistency, alignment, and robust data support are essential for building trust and resilience in the face of regulatory and market pressures. As the sustainability reporting landscape evolves, companies must embrace transparency, accountability, and proactive engagement with regulatory requirements. 

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Editorial statement
At Sustain.Life, our goal is to provide the most up-to-date, objective, and research-based information to help readers make informed decisions. Written by practitioners and experts, articles are grounded in research and experience-based practices. All information has been fact-checked and reviewed by our team of sustainability professionals to ensure content is accurate and aligns with current industry standards. Articles contain trusted third-party sources that are either directly linked to the text or listed at the bottom to take readers directly to the source.
Author
Alyssa Rade
Alyssa Rade is the chief sustainability officer at Sustain.Life. She has over ten years of corporate sustainability experience and guides Sustain.Life’s platform features.
Reviewer
Mitch Voss
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