Today, the Securities and Exchange Commission (SEC) voted 3-2 to approve a final rule that requires registrants to disclose certain climate-related information in an effort to gauge climate impact and emissions throughout companies’ supply chains. While the final rule is narrower than the SEC’s 2022 draft, it represents a significant shift in the U.S. regulatory landscape for climate disclosure and environmental social governance (ESG).
Key takeaways
- Large public companies will be required to report Scopes 1 and 2 greenhouse gas (GHG) emissions starting in 2026.
- The final disclosure requirement removes a Scope 3 disclosure requirement from the 2022 draft, which would have impacted private companies in a public company’s supply chain.
- All public companies will be required to report on material climate-related risks and their management of those risks.
What does this mean for ISRI members?
- If a member is a publicly traded company, its annual reports and registration statements will need to include new climate-related risk information.
- Large companies will also need to disclose material Scope 1 and Scope 2 emissions starting in 2026.
- There will be more visibility into GHG emissions from large public companies, which, in ISRI’s opinion, has the potential to drive demand for recycled feedstock to reduce those emissions.
- Although the SEC pulled back requirements that would have impacted a larger swath of recycled materials companies, it is likely that many companies will still request data from their supply chains for voluntary reporting or regulatory requirements from other jurisdictions.
- California and EU requirements remain in place that will both 1) require Scope 3 disclosure and 2) impact privately held and smaller firms, either through Scope 3 disclosures or by directly requiring private firms to make climate-related disclosures.
See the complete details on the requirements and the phased-in compliance schedule on the SEC’s Fact Sheet: https://www.sec.gov/files/33-11275-fact-sheet.pdf
If you have any questions, please contact ISRI staff, Natalie Betts at nbetts@isri.org.
