SEC reviews Scope 3 emissions in upcoming climate disclosure rules


The U.S. SEC has received feedback against the inclusion of Scope 3 emissions in their proposed climate disclosure rule.

Scope 3 emissions encompass emissions originating in areas not directly controlled by companies, like supply chains.

SEC Chair Gary Gensler testified to the House Financial Services Committee that several concerns have been raised about the current unreliability and nascent state of Scope 3 reporting.

In response to the feedback, Gensler confirmed that the SEC would consider these issues when drafting the final rules.

Additionally, Gensler highlighted comments concerning the potential effects of the new rules on smaller businesses, especially farms and agricultural companies. These entities, although not directly under the purview of the new regulations, might face indirect pressure to provide emissions data to larger clients affected by the rules.

The SEC first proposed their climate disclosure rules in March 2022. The proposal would mandate U.S. companies to detail the climate risks their businesses face, strategies to combat these risks, and metrics that showcase the company’s operational climate footprint.

Despite possible changes to the SEC’s stance on supply chain emissions reporting, many companies might still need to report Scope 3 emissions due to other regulatory regimes. California Governor Gavin Newsom has recently expressed intentions to sign new climate disclosure legislation, while the EU’s Corporate Sustainability Reporting Directive (CSRD) has also set similar requirements.

SEC Chair Gary Gensler said, “We, the SEC, don’t regulate these companies, those non-public companies, so staff is looking very closely to ensure that we stay within our authorities. It’s about the public companies.”

Commenting on the new California climate disclosure rules, Gensler said, “If passed, they would effectively make the SEC’s rules less costly for companies, as many would already be required to provide this disclosure elsewhere, but it’s also crucial for the SEC to verify the accuracy of the reporting under these new rules.”

On the anticipated finalisation of the rule, Gensler commented, “we’re not doing this against the clock. When the staff is ready and when the Commission is ready.”

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