The US Securities and Exchange Commission (SEC) is expected to pull back on some radical greenhouse gas (GHG) emissions disclosure requirements for listed companies in its upcoming climate-risk disclosure rule, as reported by Reuters on February 22. According to people familiar with the matter, the SEC has dropped a mandate for US-listed firms to disclose Scope 3 emissions, which was included in the original draft of the rules released in March 2022. The new rules, scheduled to be released in the coming weeks, are intended to provide new clarity and standardization to corporate climate disclosures. It remains uncertain whether the latest draft changed the disclosure requirements on Scope 1 and Scope 2 emissions.

The retreat represents a win for many corporations and their trade groups advocating for a relaxation of emission disclosure rules. Removing the Scope 3 disclosure requirement means public companies will not have to report emissions related to their suppliers and customers—an extremely tedious task, especially for large enterprises with huge value chains. However, the move may hinder the efforts to hold corporations accountable for both their direct and indirect emissions. Consulting firm Deloitte revealed that, for most businesses, Scope 3 emissions account for over 70% of their carbon footprints. In contrast, under the EU’s Corporate Sustainability Reporting Directive (CSRD) passed in 2023, large companies and all listed firms operating in the EU are obliged to report emissions across their value chains (Scope 1, 2, and 3) from 2025.

Sources:

https://www.reuters.com/sustainability/us-regulator-drops-some-emissions-disclosure-requirements-draft-climate-rules-2024-02-22/

https://www.politico.com/news/2024/02/23/sec-expected-to-scale-back-landmark-climate-disclosure-rule-00143046

https://finance.ec.europa.eu/capital-markets-union-and-financial-markets/company-reporting-and-auditing/company-reporting/corporate-sustainability-reporting_en#:~:text=The%20first%20companies%20will%20have,Sustainability%20Reporting%20Standards%20(ESRS).

https://einride.tech/insights/what-are-scope-3-emissions-and-why-should-you-report-them