Companies face a new world of climate disclosure

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New climate disclosure regimes are being put in place around the world, setting expectations for how companies will do business as climate change threatens everyone and everything on the planet.

disclosure regimes are being put in place around the world, setting expectations for how companies will do business as climate change threatens everyone and everything on the planet.A company's role in spewing more greenhouse gas emissions and its exposures to climate risks are becoming key metrics in the evaluations conducted by investors, customers, and the public.

It's likely to apply to emissions from a company's operations and the energy it consumes, but it's not yet clear what it will propose as far as emissions from a company's supply chain.The U.S. is quite behind on rolling out climate-related disclosure requirements. There are more than 175 policies worldwide focused on reporting and disclosures, and hundreds more on other aspects of green finance,For example, the U.K.

The European Union last spring adopted a package of new rules that will go in effect in 2023 and increase the number of Europe-based companies that have to comply to 49,000.: While the SEC is reportedly expected to require disclosures of Scope 1 and Scope 2 emissions, the Scope 3 category remains the wildcard.

Scope 1 emissions are generated from a company’s operations, while Scope 2 emissions relate to its energy consumption. Scope 3 emissions — those from a business’s supply chain, and whose methodologies for measuring have room for improvement — may end up only being required for certain companies for which they make up the bulk.As each country or region adopts its own approach, divergent disclosure requirements, standards, and scopes could create more reporting loopholes and opportunities for continued “greenwashing” from companies.

 

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