US SEC Reporting

Be Prepared for the Proposed US SEC GHG Reporting Requirements

The United States Securities and Exchange Commissions’ (US SEC) proposed rules would see significant changes for publicly listed companies. Should the proposal be finalized, affected companies will be expected to disclose Scope 1, Scope 2 and Scope 3 greenhouse gas (GHG) emissions.

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Reporting rules are likely to change with US SEC Regulation

What will the US SEC's proposed climate disclosure rules mean for publicly listed businesses?

If the proposed rules are brought into force, the reporting landscape will change dramatically. Currently, many businesses engage in voluntary sustainability reporting – the proposed changes would shift this to mandatory climate reporting for thousands of listed companies.

Gathering US SEC GHG data is to be come mandatory

New US SEC GHG reporting requirements could be on the horizon

The proposed US SEC GHG reporting rules are designed to standardize disclosure in order to provide investors with consistent and comparable climate-related financial information.

These disclosures would have to be reported in a consistent manner as part of standard SEC reports.

Gathering the data alone is a time-consuming, difficult job. With so much uncertainty, how can you make the process easier for your business early on?

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The SEC released a proposed rule on climate disclosure in March 2022 affecting listed companies in the United States. The rule would bring in new requirements for greenhouse gas emissions tracking and climate risk reporting. It sets out to make reporting practices consistent and comparable to meet investor demand for decision-useful information.

The proposed rule is built around the Task Force for Climate-Related Financial Disclosures (TCFD) recommendations across the themes of Governance, Strategy, Risk Management, Metrics and Targets, as well as the Greenhouse Gas (GHG) Protocol for emissions reporting.

Listed companies in the U.S. would need to report their physical climate risks under various scenarios as well as scope 1 and scope 2 emissions, with scope 3 being phased-in for material sources.

The proposed rule sets out that SEC registrants would be mandated to include the climate-related disclosures in a separate section of Form 10-K annual reports. Finally, the requirements would apply to registration statements such as initial public offerings.

As of December 2023, finalization of the proposal has been delayed until Spring 2024.

Task Force for Climate-Related Financial Disclosures. The TCFD has developed a framework to enable companies to effectively disclose climate-related risks and opportunities through their existing reporting processes.

In GHG reporting and accounting, a year chosen as a basis against which future emissions are compared.

There are three emissions scopes, based of the Green House Gas Protocols (GHG) Corporate Standard. Scope 3 are indirect emissions which result from all other activities and sources that occur in the value chain of the reporting company not covered in scope 2. This includes business travel, commuting, waste, and 3rd party deliveries.

Reporting of all scope 3 emissions is typically not mandatory, unless the organisation is subject to a regulation such as the CSRD in the EU. This may become mandatory under the proposed SEC climate ready and sec greenhouse gas emissions disclosure rules.