The SEC recently announced its desire to require companies to disclose their greenhouse gas emissions information. The new proposal would cause a major shift in how U.S. companies report and deal with climate change.
This proposal puts supply chains under a microscope, as they are a significant contributing factor to a company's total pollution. To take it one step further, some large companies would have to report emissions that they don't create themselves but come from other firms in their supply chain.
"Over the generations, the SEC has stepped in when there's significant need for the disclosure of information relevant to investors' decisions," SEC Chair Gary Gensler said in a statement. "Today's proposal would help issuers more efficiently and effectively disclose these risks."
Such risks might include the potential for physical damage to companies' operations from floods, wildfires, or extreme weather events and potential new regulations designed to curb global warming.
Investors Want to See Green
While details of the requirements are still being ironed out amongst the SEC, pressures from stakeholders are already forcing companies to look at and disclose information on their sustainable impact and environmental harm.
Investors' attitudes toward climate change are changing alongside the rise in demand for carbon reporting. Stakeholders and regulators are increasingly interested in a company's sustainable activity for brand value and environmental, social, and corporate governance (ESG) goals.
According to the Wall Street Journal, "More than 1,800 companies listed on the Tokyo Stock Exchange will soon be required to either disclose climate information or explain why they aren't doing so. Investors are also demanding climate data so they can judge whether companies are living up to their promises to cut emissions."
Calculating these figures is difficult, but not impossible. With data certainty in greater demand than arbitrary numbers, tracking activity throughout the entire supply chain will be crucial for gathering reliable data.
After the impact of a company's operations is measured, supply chain leaders can begin to identify targets to cut emissions.