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Policy Voice

Why climate disclosure policy is critical to corporate sustainability

There are 3 primary reasons why disclosure rules can help accelerate climate policy progress.

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Source: Shutterstock/MMD Creative

There’s a lot of confusion and controversy swirling around the issue of climate disclosure: how much companies are mandated to tell the public about emissions they directly and indirectly generate. The controversy is now so thick that it has become a smokescreen, blocking a clear look at this issue. It’s important for sustainability professionals to know the facts and also understand how policy on disclosure can help drive the change we need to address our climate crisis.

In 2023, disclosure policy seemed to be on a fast track forward, with California’s enactment of the landmark bill SB 253 — the Climate Corporate Data Accountability Act, which mandated disclosure of Scope 3 emissions (related to a company’s value chains). Now, the brakes are on. The California law, along with a weaker federal rule announced this spring by the federal Securities and Exchange Commission, mandating a more limited scope of disclosure, are mired in state and federal lawsuits launched by the U.S. Chamber of Commerce.   

Let’s set aside the furor for a moment, and unpack why disclosure is such an important element of public policy on climate. There are three big reasons:

1. The hill is about to get steeper for sustainability tracking and reporting

Over the past decade, tech firms stepped into the lead on sustainability efforts in the corporate sector, and justly touted their emissions reductions. Companies such as Apple, Google, Facebook and Salesforce were willing to work hard to bend the curve on emissions in operations. Early (and laudable) gains in sustainability were relatively easier to achieve, such as cutting emissions at data centers. Now, as we move into Scope 3, the climb will get steeper and the accountability tougher.

Anyone working on corporate sustainability must eventually face this fact:  Pro-climate companies will struggle to reach their own ambitious sustainability goals without public policy, regulations and accountability measures to support them along the way. It’s been exciting to see so many companies make bold "net zero" pledges, but those in the field know that meeting these objectives is another matter. It’s tough to meet ambitious challenges, and do it fast, especially where there is no public policy guardrail in place. That explains why companies that care about climate change support disclosure rules as a necessary tool that moves us in the right direction.

2. Companies need robust information to plan for the future

As Salesforce said in March in response to the new federal disclosure rule from the SEC: "We have long been calling on regulators to increase the quality, comparability, and accessibility of corporate climate data. This information is critical to understanding business resilience to climate risks and helps advance meaningful ESG disclosures." The company noted it has been reporting climate data since 2011. "Scope 3 emissions make up the largest portion of most companies’ emissions. That’s why we advocated for the SEC to mandate disclosure of material Scope 3 emissions, as we believe that transparency, consistency and comparability are paramount to stakeholder trust," Salesforce added.

3. Our corporate sector will lag behind the world

If the U.S. corporate sector stalls out on policy action on disclosure, or it remains in legal (or budgetary) limbo, we’re in danger of falling behind the rest of the world. Surveys show not only that U.S. companies are ready to implement new reporting requirements, but many are already moving in that direction as policy progresses in the European Union. The slow pace of progress in U.S. policy on disclosure most helps Big Oil, effectively shielding it from revealing its full climate impact to the world — allowing it to tout modest reductions in Scope 1 and Scope 2 emissions while disclaiming responsibility for its biggest climate impact, which comes from burning fossil fuels. That may factor into why the U.S. Chamber of Commerce, which is better aligned with Big Oil than Big Tech on climate change, is suing to stop disclosure laws.

Pro-climate companies will struggle to reach their own ambitious sustainability goals without public policy, regulations and accountability measures to support them along the way.

Urgency should be the watchword of the moment. We have no time left for inaction on climate, as the record temperatures make clear. We must move faster to lower emissions, and companies have a key role to play. 2023 marked the first year that carbon emissions declined in the U.S. since the COVID era — but they are still rising globally.  

So what can companies and their growing cadre of sustainability professionals do? Here are some immediate steps:

  • Speak up publicly in favor of the new SEC disclosure rule. If your company hasn’t yet made a statement, urge company leaders to do so now. (Ceres has also published a number of resources on the rule here.)
  • If your company is a member of the U.S. Chamber of Commerce (or another group fighting these regulations), make clear to the public that the group doesn’t speak for the company. Ensure that the Chamber knows that you do not agree with the lawsuits to block climate disclosure rules.
  • If your company operates in California, reach out to legislators and the governor to convey strong support for fully funding implementation of the Climate Corporate Data Accountability Act (SB 253) and the Climate-Related Financial Risk Disclosure Act (SB 261).
  • Join with other companies to file amicus briefs in support of these disclosure rules as the lawsuits move forward. 

More broadly, if we are to speed decarbonization and achieve the transition from fossil fuels agreed to at last year’s COP28 meeting, companies need to be more vocal more often in support of climate policy. Sustainability professionals can also help encourage climate policy advocacy by joining more than 700 of their peers in signing the LEAD Statement in support of companies leveraging their power and influence to accelerate climate policy progress.

Deborah McNamara is executive director of ClimateVoice. Bill Weihl is the organization’s founder and chief strategic adviser.

[Continue the conversation on climate policy at Circularity 24 (May 22-24, Chicago), the leading conference for professionals building the circular economy.]

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