SEC May Drop Scope 3 Reporting Requirement Amid Industry Backlash
The Securities and Exchange Commission (SEC) is considering a significant shift in its proposed climate change reporting rules. Reuters reports that the SEC may drop the Scope 3 reporting requirement due to potential legal challenges. This move comes after a wave of opposition from corporations, with over 15,000 letters challenging the introduction of Scope 3 reporting standards.
Scope 3 emissions, which account for more than 70% of the overall carbon footprint for many firms and up to 90% for the oil and gas industry, are at the heart of the debate. These emissions result from a company's value chain, including those from its suppliers and customers. Accurate Scope 3 reporting could enhance the reliability of climate indices for investors.
California has already implemented Scope 1, 2, and 3 emissions reporting rules, exceeding the potential SEC requirements. However, the US Supreme Court's limitation of the EPA's powers to restrict greenhouse gas emissions in 2022 has cast a shadow over the SEC's plans. Major corporations like ExxonMobil, Chevron, and financial giants such as BlackRock and Vanguard are among those opposing the SEC's Scope 3 disclosure rules. The new rules, if implemented, would align US standards with the EU's mandatory Scope 3 reporting for listed companies.
Investors will be watching the SEC's vote on Wednesday regarding new climate risk disclosure rules for US-listed companies. The potential removal of the Scope 3 reporting requirement could significantly impact the transparency of companies' carbon footprints and investors' ability to make informed decisions.
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