New Rule Coming Through: How to Keep Up with Changing Climate Regulations
December 2, 2022
In an effort to salvage our planet for generations to come, climate-protection measures are intensifying around the world. Most recently, the Security and Exchange Commission (SEC) has launched the process to update its climate disclosure requirements. Companies will have to find tools and strategies to swiftly adapt.
Let’s start at the beginning. Greenhouse gas (GHG) emissions are the leading contributors to climate change, and all hands are needed on deck to reduce them exponentially. One of the solutions being proposed is an enhancement of climate reporting efforts. Several frameworks already exist to provide guidelines for GHG inventories: the TCFD, the GRI, and the GHG Protocol, to name a few. They require companies to identify climate-related risks, describe management’s role in mitigating them, and disclose scope 1 and scope 2 emissions. This year, the climate reporting train is picking up steam in the form of the SEC’s proposed rule on The Enhancement and Standardization of Climate-Related Disclosures for Investors. And it’s headed across America, ushering in a new era for publicly-traded companies.
The rule has already been met with mixed reactions. On the one hand, experts believe it will improve capital-allocation decisions for investors, giving them information and leverage to make responsible choices for the planet. Managers hope it will improve the visibility they’ll have on pollution from their suppliers. Researchers eagerly welcome the rule, heralding it as the solution to the drought they’ve seen on climate data. Several skeptics, on the other hand, have doubts as to the rule’s legality. Some want more information on its statutory basis, and others are intimidated by the cost ramifications. The most recurring concern, however, is whether it is logistically possible to track all emissions across a company’s supply and distribution chain, from third-party suppliers to final customers.
So, how does one even address this concern? Well, several organizations have already forged ahead to solve the emissions tracking problem. Their solutions are all diverse one from the other, from satellites calculating the emissions levels of power plants, to the unveiling in 2019 of a “QuickBooks for carbon management”. As your company decides what technology to use to facilitate the journey to compliance and decarbonization, here are 9 things to consider looking for in Emissions Management Software (EMS):
- Data Aggregation: An efficient EMS should assemble disparate sources and types of data into one centralized database. The objective is to leave behind rudimentary reporting strategies and spreadsheets.
- Real Time Updates: Users should be able to share real-time dashboards with top management on company progress. The EMS should continuously measure carbon as a key performance indicator.
- Regulations-Friendly Format: Users should be able to smoothly report company performance to reporting frameworks such as the TCFD, the GRI, etc.
- Reporting Cadence: The EMS should facilitate the creation of reports in days instead of weeks or months. The goal is to migrate beyond the traditional annual reporting schedule.
- Supplier Input: Users should be able to obtain accurate, timely data from suppliers across all emissions categories, upstream and downstream.
- Assistance with Corporate Planning: Good EMS systems should help companies set targets, gain valuable insights into their processes, analyze different scenarios and trade-offs, and improve sustainability performance.
- Forecasting Tools: Smart EMS systems should be able to calculate and provide views of past and future carbon emissions.
- Technical Assistance and Training: Embedded guides and user flows should be included to structure and streamline the data collection process.
- Gap Analysis: Powerful EMS should use machine learning and artificial intelligence to model missing emissions data and pinpoint irregularities.
There are many other tools companies can use to comply with reporting standards and reach their decarbonization goals, for a livable planet. Do not hesitate to find out more in the sequel of this series. Make sure to explore Earth Day’s Invest in Our Planet campaign to learn more about climate action worldwide and how key players are coming together to make a change.