SEC Carbon Disclosure Is Unequivocal
Amazingly, some organizations still consider corporate sustainability to be a buzzword and are just not “with it” when it comes to far-reaching implications. There is potential trouble ahead for these organizations and they could well be doomed to failure unless they realize that they need to educate themselves quickly and take action right now. This is far from being just an issue for “green” activists and is a matter of corporate life or death.
When the SEC carbon disclosure finding was revealed in early February, it took many public companies by surprise. Certainly, many pressure groups have been petitioning the securities and exchange commission for several years, yet under the previous administration the commission had been somewhat recalcitrant. However, the fact that the SEC has issued this clarification goes a long way to emphasize the need for corporate action.
If a company is not sure why it should be concerned by the SEC carbon disclosure finding, it must realize that the SEC has a clear responsibility to make sure that companies disclose anything that could be classified as “material” to potential investors. Now that the body has emphasized that carbon related issues must be referred to, companies may no longer be vague and must come forward. In other words, they will no longer be able to refer to potential climate risks as “unknown.”
Many developments have occurred in the last year or so with regard to corporate level sustainability. we could certainly have been disappointed by the outcome of the Copenhagen Summit, but we must have noted that the American Clean Energy and Security Act was passed by the House of Representatives. The EPA made a landmark ruling that greenhouse gases were a hazard to public health and Pres. Obama took a direct Executive Order and mandated that major Government agencies become sustainable quickly.
While the ACES Act passed by the House of Representatives has yet to be discussed at the Senate level and it seems unclear whether it will ever be passed into law in its current form, few would doubt that some kind of significant legislation is in the corporate future. The SEC carbon disclosure finding should only emphasize to corporate chiefs that they must act immediately to put their house in order and review all operations from the point of view of sustainability.
The SEC carbon disclosure finding requires organizations that trade publicly to include material climate change related information within their annual reports. For example, should a company rely heavily on fossil fuel based energy for its operations, any pending emission regulations could be detrimental to its future. Major weather events, potentially linked to climate change could affect the company’s portfolio of interests elsewhere.
Does the SEC carbon disclosure requirement have any teeth? If it is interpretive guidance and the company is not bound by its findings, you could nevertheless argue that the company that does not act proactively could be seen to be ducking the issue.
Every organization must aim to be sustainable and incorporate this element within decision-making processes. Wherever energy is used, greenhouse gases are emitted and the user is responsible. If less action is taken, the risk of regulation increases and the company that does not take steps to reduce the impact of emissions in its direct operations and within the supply chain could also be harmed reputationally.
Daniel Stouffer has a lot of information about SEC carbon disclosure and how a visit to www.verisae.com can be of use to you.
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