4 Ways to Prepare for the New SEC Climate Disclosure Rules

by Laura Paddock

Earlier this year, the U.S. Securities and Exchange Commission (SEC) announced proposed rule changes that would, for the first time in the United States, require companies to disclose certain climate-related information. After an initial comment period that was extended, the SEC is reviewing comments before the release of their final decision on rules.                 

Though the finalized SEC climate disclosure rules aren’t expected to release until Fall 2022, the time to prepare is now to ensure your Environmental, Social and Governance (ESG) goals are in line with your business strategy. Based on what experts are saying, let’s review some ways companies can prepare for the incoming shift in federal climate disclosure regulations.

Identifying Climate Goals

Based on the SEC’s proposed rules, companies are likely going to need to disclose more information on how climate-related risks will impact business strategy. That means identifying the environmental goals in your ESG strategy will be more important than ever. 

Climate risk strategy, like all ESG strategies, is all about measuring and managing risk. Strategizing your business around measurable goals is the first step towards developing a comprehensive plan around climate risk. 

Take care not to overlook the incorporation of climate goals into the overall strategy of your business. Sustainability strategy isn’t something that can be tacked on to the end of your report. It should show meaningful consideration of how it impacts every dimension of your business

Working sustainability into the core of your business will work wonders for the efficacy of your reporting. It will help you identify risks and opportunities related to climate change early in the reporting process, allowing you to properly measure and manage the factors that impact your business. Companies that have this strategy established from the outset will be well equipped for the new SEC proposed disclosures.

Establishing Governance Structures

Once you’ve defined your sustainability strategy, it’s time to determine who will oversee those goals. This hits on the “G” of ESG strategy: building the governance structures around your strategies to measure and manage climate risk. With the incoming SEC changes, having established teams dedicated to climate-related disclosures will be paramount to successful reporting.

Building proper governance structures for ESG reporting will require you to answer questions such as: 

  • Which team bears oversight responsibility for climate-related risks?
  • When and how does finance, the audit committee or the board of directors get involved?
  • What policies are in place to govern climate strategy?

If responsibilities aren’t clearly laid out in your governance structure, your company may have to scramble to satisfy the SEC’s upcoming climate disclosure rules. Prepare early by establishing the necessary frameworks to hit the ground running. 

Enhancing Data Collection

Though the exact scope of the required data has yet to be determined, the SEC has indicated that the rules will be generally consistent with existing frameworks and standards, such as GRI and TCFD.

Therefore, companies familiar with these frameworks will have a head start on data collection and will be better equipped to implement the SEC’s new requirements. While the exact needs might be different for each company (for example, not all companies directly produce greenhouse gas (GHG) emissions), industry standard frameworks will provide a starting point for the data being collected and reported.

Identifying gaps in the data will prove equally crucial in preparation for the new SEC standards. Do you have all of the systems in place to measure the data you need? Which teams will manage the establishment of these systems?

Much of the necessary information to answer these questions will be unknown until the SEC releases its final rules. But according to an analysis by the National Law Review, a majority of the comments given in response to the SEC’s proposed rules are in favor of the new standards. Some experts are even calling for more expansive requirements on the types of data to be collected.

Given the tone of the responses, it’s likely that many companies will need to collect more data than they have previously. More and more investors are likely to start expecting data on Scope 3 emissions, encompassing emissions that are indirectly related to a company’s value chain.

Implementing a comprehensive sustainability strategy may require further investment in data collection, so to be prepared for the SEC’s upcoming rule changes, companies should begin evaluating their existing processes.

Upgrading Your Report

Countless companies are already reporting their ESG data via the traditional PDF report. But online reports offer many benefits to visibility and functionality that print or PDF reports just can’t replicate.

Creating an ESG website can allow your report to be searched and shared quickly and easily. Search engines can find ESG web reports much more easily, allowing you to reach a broader audience. They’re also much more accessible than having to distribute a massive PDF file or a physical copy. 

ESG websites also offer extremely powerful customization tools, especially through the use of reporting platforms like Artisan. With Artisan, companies can easily edit and add content and data to their report, such as year over year trends. They can even customize its design to match brand standards.

With the increased efficiency and low material cost of an ESG website, companies can report their data while saving time and money compared to traditional reporting methods. Digital reports are also more environmentally-friendly than print, further driving home the message of your sustainability goals. 

Beyond meeting federal standards, ESG websites are a way to ensure that your report reaches more people and makes a bigger impact. Your report should communicate the future projected success of your company, and ESG sites allow you to do just that.

Talk to an ESG Strategist Today

ESG Reporting Partners enables your company to communicate a sustainable future of your company and leverage ESG websites that are time and cost effective. To learn how we can help you develop and launch your next ESG report, contact a strategist today.