SEC’s climate disclosure rule delayed with investor support for scope 3 reporting
In a “fireside chat” last week, the Securities and Exchange Commission (SEC) Chair, Gary Gensler, refrained from confirming the release date of the pending US climate disclosure rule, indicating further delays, possibly into 2024.
Since its launch in March 2022, the SEC’s rule making process for its Climate-Related Disclosure proposal has faced ongoing delays, primarily due to contentious issues regarding Scope 3 emissions and Regulation S-X.
The proposed rule establishes a three-tiered system for reporting greenhouse gas emissions, with Scope 1 focusing on direct emissions, Scope 2 on energy provider emissions, and Scope 3 encompassing supply chain emissions. Scope 3’s complexity arises from a perception that this might require public companies to obtain data from private firms outside SEC regulation {Ed – the proposals seemed clear to us: Scope 3 can be estimated and doesn’t require supply chain data}.
While there were initial speculations about the SEC eliminating Scope 3 altogether, Chair Gensler’s recent statements suggest investor demand is driving additional efforts to include Scope 3. One proposal is for the SEC to include Scope 3 by making it an optional disclosure, allowing companies to decide its materiality themselves. The rule’s final form and release date remain uncertain – watch this space for more updates as they are published!
The part of the discussion that we found the most interesting were the hints that the SEC has been talking to, or at least seeks to speak with its international counterparts about, “equivilence” or “substituted compliance”. These are technical terms for agreements to mutually recognise each other’s disclosure arrangements. Since at XBRL International we are so focussed on comparability in this space, this part of the interview was perhaps the most telling.
Find a recording of Chair Gensler’s discussion here for more details.
