5 Steps To Prepare For The Release Of The SEC Climate-Related Disclosure Rules

The need for sustainable business practices is becoming more apparent each day. Aside from risk mitigation, the benefits and opportunities that accompany sustainable business practices include improved operational efficiency, increased revenues from meeting consumer demand, gains in market share, positive reputational effects, talent attraction and retention, increased access to capital, and more. Successful sustainable business practices deeply integrate environmental, social and governance (ESG) factors into the core of a company’s policies, practices, and processes. Of the many aspects of ESG, climate is the top material issue for many companies.

Climate is top-of-mind for not only businesses, but for governments, NGOs and citizens alike. Governments have agreed to The Paris Agreement, a legally binding international treaty on climate change written to limit the increase in global average temperature to 1.5°C above pre-industrial levels. Fulfillment of The Paris Agreement requires climate action and accurate reporting from both the public and private sectors. Simultaneously, consumers are also increasingly demanding more sustainable products. A study from Deloitte showed 23% of consumers say they will switch to buying products from an organization that shares their values on environmental issues.

While many companies have voluntarily reported climate-related information for several years, various groups of stakeholders are seeking and advocating for a consistent, reliable, and comparable climate-related disclosure framework that ultimately allows for informed and timely decision-making.

The impact of SEC climate risk disclosure rules on your sustainable business strategy

In March 2022, the SEC issued its proposed climate risk disclosure rules. Under these rules, publicly listed US companies would be required to provide Scope 1 and 2 GHG emissions disclosures in their annual reports surrounding climate-related risks. Disclosures were proposed to follow the Task Force on Climate-Related Financial Disclosure (TCFD) recommendations, a widely accepted climate-related reporting framework. Disclosure of Scope 3 emissions would also be required if they are material to a company’s operations or if a company has set a Scope 3 emissions reduction target.

The SEC’s compliance schedule announced a Scope 1 and 2 GHG disclosure compliance date as early as the publish date of companies’ 2024 annual reports and a Scope 3 compliance date in the following year. Since the release of the proposed rule, the SEC has received an immense number of public comments – amounting to over 15,000. The final rules, which are expected to incorporate adjustments based on stakeholder feedback and an updated compliance schedule, are likely to be released in spring 2023.

A recent Climate Disclosure Project (CDP) analysis indicates that US publicly listed companies are behind in implementing sustainable business practices and preparing for climate-related disclosure regulations. In the UK, mandatory climate-related disclosures took effect in 2022, while the EU implemented the Corporate Sustainability Reporting Directive (CSRD) in January 2023.

5 steps to prepare for the release of the SEC climate-related disclosure rules

1. Review the SEC climate-related disclosure rules carefully to understand the full requirements and determine applicability for your company. Ensure that you stay up to date with the SEC’s release of the final rules, which are expected in spring 2023.
2. Familiarize yourself with the TCFD framework due to the close alignment between its recommendations and the requirements of the SEC proposed rules.
3. Align your climate-related disclosure reporting cycle with the time your company publishes its annual report. Communicating cross-functionally will establish a schedule and processes between your transportation, sustainability, and finance teams.
4. Establish your emissions baseline for Scopes 1, 2, and 3. If setting a science-based target through the Science Based Targets initiative (SBTi), you must include Scope 3 emissions if they represent more than 40% of your combined emissions.
5. Create a winning transportation sustainability strategy. Your transportation emissions reduction strategy can be a mosaic of stackable wins including changes in carrier choice, intermodal conversion, freight consolidation, and energy choice.

Start planning now to comply with climate-related disclosures

Collecting and organizing your total lifecycle greenhouse gas (GHG) emissions will be time intensive and require internal and external collaboration. With the final SEC climate risk disclosure rules expected to be released in spring 2023, it will be imperative to understand the proposed SEC rules as well as the TCFD recommendations.

In this process, consider the mandatory climate-related disclosures from the wider lens of your transportation sustainability strategy. By establishing your GHG emissions baseline and taking the necessary steps to plan and execute your strategy, you will be setting a solid foundation to satisfy the climate-related reporting requirements and meet your meaningful GHG emissions reduction goals.

If you're ready to embark on your emissions reduction journey, consider partnering with a transportation emissions management partner to help guide you through the process. Breakthrough’s solution, CleanMile, is accredited and conforms to the Global Logistics Emissions Council (GLEC) Framework. The GLEC Framework is aligned with the CDP disclosure system and the GHG Protocol corporate carbon accounting standard.

See what's possible, schedule a demo of CleanMile today.