- Two out of five business leaders say that their companies are unprepared for the climate risk disclosure rule that the Securities and Exchange Commission plans to release before May, with 85% of executives reporting they lack the right technology, according to a survey by PwC and Workiva.
- “A final rule from the SEC may be published soon,” PwC and Workiva said in a description of the survey of 300 executives at U.S. companies with at least $500 million in annual revenue. “It is imperative that forward thinking organizations begin tackling their ESG data strategy now.”
- Six out of 10 executives estimate their company will spend at least $750,000 in complying with the rule during the first year — 17% more than the SEC’s $640,000 estimate, according to the survey. Seven out of 10 executives believe the SEC should grant companies at least two years to meet the filing requirements after enacting the rule.
Since releasing proposed rules for climate risk disclosure, global standard-setters have faced pushback from companies of all sizes.
The International Sustainability Standards Board said last month it will provide “reliefs” to small companies as they align with global guidelines for reporting on both climate risk and sustainability. The concessions include a longer phase-in period and simpler reporting requirements.
The board plans to release the standards in June and recommend that regulators set an enactment date of Jan. 1, 2024. The ISSB is backed by the Group of 20 advanced and developing countries and the sister organization to an accounting rulemaker recognized by 167 regulatory jurisdictions worldwide.
The SEC late last year postponed release of a final climate risk disclosure rule after receiving more than 14,000 comment letters from companies, trade associations, investors and other stakeholders.
Critics said that by pushing forward with the rule, the SEC would overstep its congressionally mandated authority, impose an excessive regulatory burden and require information that is immaterial to decision making by investors.
As described in its 490-page proposed rule, the SEC aims to mandate that companies describe on Form 10-K their strategy toward climate risk, including plans to achieve any targets they have set for reducing such risk.
Companies would need to disclose data on their greenhouse gas emissions, either from their facilities (so-called Scope 1 emissions) or through their energy purchases (Scope 2). They would also need to obtain independent attestation of their data.
The SEC has come under fire for planning to require companies to disclose so-called Scope 3 carbon emissions by suppliers and vendors across their supply chains. SEC Chair Gary Gensler implied on March 6 that the agency in the final rule will treat Scope 3 emissions differently than Scope 1 and Scope 2.
“There are far more companies that are already disclosing Scope 1 and Scope 2,” Gensler said during a webcast hosted by the Council of Institutional Investors.
“In our proposal we took a tiered approach, a different approach to Scope 1 and [Scope] 2 than we did to Scope 3,” Gensler said. “I don’t want to get ahead of the staff’s recommendation, but . . . when we made the proposal we took different approaches to the different levels of disclosure.”
Nearly one out of four executives (23%) said they would want at least three years for preparing their companies’ disclosures after the SEC announces the final rule, according to the PwC and Workiva survey. No more than a third of business leaders said they could meet the disclosure requirements within a year.