As You Sow
The nation’s leading non-profit shareholder advocate, with a 30-year track record of changing corporations for good
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Dear John,

The SEC made a MAJOR announcement Monday – companies will be required to disclose audited greenhouse gas emissions in much the same way they’re required to disclose audited financials. This long-anticipated Climate Disclosure Rule is a momentous step toward a livable climate and a sane future, one that we’ve been working toward for years. Kudos to the SEC for getting this right! And gratitude to the thousands of investors, academics, and activists who submitted powerful comment letters demanding accurate and comparable disclosure.

There are details, of course.

Here’s the good stuff --
Required disclosures cover Scope 1, 2, and 3 emissions for all but the smaller reporting companies
Specific disclosure requirements will create comparability across companies
Scope 1 and 2 emissions must be “assured” – that is, audited by an expert 3rd-party, in the same way financials are audited. By definition, assured disclosures are subject to litigation

Here’s the not-as-good part --
Scope 3 emissions reporting is protected from litigation
Scope 3 auditing is phased in over two to three years

And here’s the big caveat –
This is a draft rule and it does not go into effect immediately. There’s a public comment period, and we expect a lot of pressure and litigation from the fossil fuel industry and other companies seeking to continue business-as-usual.

We’ll be out there, with our partners and allies, arguing strongly for the rule as announced. If you’d like to help, write the SEC and your congressional representatives in support.
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In the interim, we’ll continue pressing the issue through shareholder resolutions. We filed requests for audited net zero scenario analyses last year at Chevron and Exxon, earning incredibly strong 48% and 49% votes from shareholders. We’ve filed similar resolutions with both companies again this year, and with Valero and Marathon Petroleum as well. At Valero and Marathon we’ve been able to successfully withdraw!

What does it mean?
Scope 1 emissions are direct emissions from a company’s operations -- emissions from an oil company’s office building or, say, emissions created by operating an oil well. Scope 2 are the indirect emissions from the energy purchased by the company. Scope 3 is all other emissions associated with a company’s activities, across its supply chain all the way to product end use. For instance, Chevron’s Scope 3 emissions include the GHGs emitted when you drive a car powered by Chevron gasoline.

The impact of this new rule cannot be overstated. Accurately counting GHG emissions is an absolute requirement for heading off catastrophic climate change. Until now, company emissions and climate risk information has not been readily available to investors. The data, when provided, is fragmented and presented in a wide array of formats, and is without clarity on what is being measured, how it is being measured, or using what assumptions.

The new rule will standardize reporting across all companies
The audit requirement will help ensure the information is credible and trustworthy

When companies have to make the full scope of their greenhouse gas emissions public, analysts, investors, and advocates will be able to accurately compare companies’ climate risk, transition readiness, and emissions reduction success. With accurate data, companies can be held accountable on their climate pledges. For instance, we continue to engage many companies that have agreed to reduce their emissions by 5% per year. If their reporting is not accurate, the benchmarks are meaningless. This new SEC rule will help immensely to ensure emissions reporting is, in fact, accurate.

Take a look at our press release on the announcement.
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Yours for the clean energy transition,

Andrew Behar

As You Sow’s 30-year track record promoting environmental and social corporate responsibility and facilitating values-aligned investing spans many of the most important environmental and social issues facing us today, including climate change, ocean plastics, pesticides, racial justice, workplace diversity, and executive compensation. To donate to As You Sow, visit our website at www.asyousow.org/donate

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