In March 2022, the SEC proposed new rules for climate change disclosures. While they are not yet final and are open for public comments, the SEC has proposed to advance rules that require disclosure of:
The proposal would also require:
The proposed disclosures are broadly aligned with frameworks such as the Task Force on Climate-Related Financial Disclosures (TCFD). All public companies must now quickly transition to investor-grade reporting. That means accelerating climate change reporting processes while transitioning to an effective controls environment. All businesses are at different points in their ESG journey, but here are five things every company should consider:
The time is now and our teams are here to help. Let’s move to action, together.
What will you report? How does it relate to your company narrative? How will you resource it?
For a reproduction of the SEC’s proposed climate disclosure rule, with the ability to review the proposal at a citation level, click here.
What’s the current guidance? How will you disclose?
Align on standard(s) and framework(s) to use in reporting and what that includes - e.g., TCFD recommends a broad analysis encompassing both physical and transition risks of climate change
Identify the climate measures that are most relevant for your organization
Link your strategy, metrics and stakeholder communications across multiple channels (e.g. 10-K, ESG report, Carbon Disclosure Project response)
Conduct a gap assessment on current disclosures and whether processes are SEC-ready to identify focus areas
How will you collect the data? How will you optimize processes?
How will you handle risk assessments, controls and data quality? What information governance will you put in place?
Consider the overall control environment, including, designing and implementing appropriate controls to to support timely and reliable reporting
Identify key controls for data quality and disclosure
Create and document program-level information governance standards
Set formal policies and procedures to enable consistency
How will you tech-enable reporting to streamline and get insights faster? How will you use a digital platform?
Understand that accelerated ESG reporting timelines will require automation to improve process efficiency
Select tools and technology for non-financial data with the same rigor as for your financial reporting
Consider how to collect and report data using a trusted, controlled technology platform
Engage finance and finance technology in ESG reporting planning
How will you confirm your reporting is 10-K ready?
Make company narrative and metrics readily available for investors
Integrate ESG reporting through the enterprise reporting system architecture and process
Consider/obtain independent third-party assurance to provide investors with additional confidence in the quality of climate information and enhance its credibility
Provide real-time reporting of public disclosures to help inform decision-making and consumer choices