SEC Carbon Disclosure Is Not Optional
Sunday, February 21st, 2010
As amazing as it may seem, many organizations are still not \”on board\” when it comes to the issue of corporate sustainability. Many see this as just another \”buzzword\” and have not taken the issue to heart. In truth, an organization that does not realize how important this matter is to its very survival is doomed to failure unless it acts and acts relatively quickly. This is not about the \”green\” movement any more, but a fact of corporate life.
The SEC carbon disclosure finding was issued in early February and caught many public companies off their guard. Opinion had been growing around the country however and pressure groups had already submitted several petitions to the Securities and Exchange Commission over the years. While the Commission was not seen to be very active during the previous administration, an important clarification has now been issued and corporate action is expected.
The SEC carbon disclosure finding means that companies have a clear responsibility to disclose anything related to climate matters as \”material.\” This is fundamental to the decision-making process of investors. In other words, now that carbon related issues have been classified in this way, companies may no longer be vague and it will not be acceptable for them to say that climate issues are \”unknown.\”
Many developments have occurred in the last year or so with regard to corporate level sustainability. we could certainly have been disappointed by the outcome of the Copenhagen Summit, but we must have noted that the American Clean Energy and Security Act was passed by the House of Representatives. The EPA made a landmark ruling that greenhouse gases were a hazard to public health and Pres. Obama took a direct Executive Order and mandated that major Government agencies become sustainable quickly.
While the ACES Act passed by the House of Representatives has yet to be discussed at the Senate level and it seems unclear whether it will ever be passed into law in its current form, few would doubt that some kind of significant legislation is in the corporate future. The SEC carbon disclosure finding should only emphasize to corporate chiefs that they must act immediately to put their house in order and review all operations from the point of view of sustainability.
The SEC carbon disclosure finding requires organizations that trade publicly to include material climate change related information within their annual reports. For example, should a company rely heavily on fossil fuel based energy for its operations, any pending emission regulations could be detrimental to its future. Major weather events, potentially linked to climate change could affect the company\’s portfolio of interests elsewhere.
Does the SEC carbon disclosure requirement have any teeth? If it is interpretive guidance and the company is not bound by its findings, you could nevertheless argue that the company that does not act proactively could be seen to be ducking the issue.
Each and every organization must be sustainable and this theme should run throughout the decision-making process. When greenhouse gases are emitted as a consequence of using energy, the user is responsible. Legislation is sure to await those who fail to see this and if a company does not look at the impact of emissions in both its supply chain and its direct operations, it could face reputational difficulties.
Daniel Stouffer has a lot of information about SEC carbon disclosure and how a visit to www.verisae.com will be of use to you.
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