Public companies and their stakeholders often struggle with effective environmental, social and governance programs in the absence of clear and common standards and regulations.  But the landscape is rapidly changing in a way that will likely impose new risks and costs on companies.

The Securities and Exchange Commission Wades Into Climate Change

In a dramatic expansion of previous obligations, the U.S. Securities and Exchange Commission ("SEC") released a nearly 500-page proposal on March 21, 2022, requiring that publicly traded companies disclose their greenhouse gas emissions and business risks imposed by the changing climate. The draft rule requires public disclosure of the companies Scope 1 and 2 emissions – emissions from owned or controlled sources and from the generation of purchased electricity, steam, heating and cooling.  In contrast, Scope 3 emissions – indirect emissions from their supply chain – need to be disclosed if deemed "material," or if there is a substantial likelihood that a reasonable investor would consider them important when making an investment or voting decision.