If you are a SME (small to mid-sized enterprise), take note – The US SEC (Securities and Exchange Commission) has published its proposed rule changes that will require companies to include certain climate-related disclosures in their registration statements and reports.
These changes will be reviewed for 60 days before, either in current or modified form, they are implemented. Once in final form, these rule changes that impact publicly traded companies will impact their stakeholders, including their supply chain.
The proposed rule changes would require a company to disclose information about
- its governance of climate-related risks and relevant risk management processes;
- how any climate-related risks identified by the company have had or are likely to have a material impact on its business and consolidated financial statements, which may manifest over the short, medium or long term;
- how any identified climate-related risks have affected or are likely to affect the company’s strategy, business model, and outlook; and
- the impact of climate-related events(severe weather events and other natural conditions) and transition activities on the line items of a company’s consolidated financial statements, as well as on the financial estimates and assumptions used in the financial statements.
The proposed rules also would require a company to disclose information about its Scope 1 and 2 emissions — as well as Scope 3, if material or if the company has set a GHG emissions target that includes Scope 3 emissions. This Scope 3 component impacts supply chain.
Here is an article with four key takeaways:
- Disclosure mandates will make CEOs more accountable.
- Measuring and reporting ESG is hotly contested.
- Scope 3 emissions are the areas of biggest political divide.
- Companies and other interested parties are invited to comment on the proposed rules.