Beware of This Filing Requirement – You May Get Hit with It. The SEC is considering forcing publicly traded companies to estimate what their climate risk disclosures are – including their suppliers! So, whether you are publicly traded or not, you may be forced to measure your environmental impact risk and report that to a publicly traded client or business partner so that they can measure it and report it.
Supply Chain Dive reported this:
“Securities and Exchange Commission (SEC) Chair Gary Gensler has asked agency staff to submit a proposal for mandatory climate risk disclosures for consideration by the end of 2021. Such reports may be required in an expanded Form 10-K and describe a company’s direct and indirect carbon emissions, including those by suppliers and partners in its “value chain.”- Companies may be required to disclose both qualitative and quantitative details, including how they manage climate-related risks and opportunities in day-to-day operations and in broad strategy, Gensler said Wednesday. They may also need to report on metrics such as greenhouse gas emissions, financial impacts of climate change and progress towards climate-related goals.
- “Today, investors increasingly want to understand the climate risks of the companies whose stock they own or might buy,” Gensler said in remarks during a webinar. “Investors are looking for consistent, comparable, and decision-useful disclosures so they can put their money in companies that fit their needs.”
Looking around the world, the wildfires and drought impacts are providing an incredible backdrop for any regulatory activity that surrounds climate and climate change. But remember that it was just four years ago that companies were released from a lot of reporting and regulatory “burden” in the early days of the Trump Administration. Corporate profits soared and the stock market surged.
The actual impact of regulatory burdens and filing requirements is not well document (no consistent agreement on what the actual cost to the economy is). But again, companies are already understanding that their profits are being impacted by regulatory activity – and we really haven’t even gotten started yet with the majority of new regulations headed your way.
Just the requirements to add staff to handle this filing requirement will force a whole new wave of regulatory compliance hires. Again, even if you are a small business and don’t have a significant footprint, a larger, publicly traded customer of yours may need your input to help them meet regulatory requirements. And, once you disclose what your findings are, you may come under competitive pressures if someone has a more environmentally friendly footprint.
From an analyst’s perspective, regulatory change is coming at us so fast that we can’t even process how impactful the change will be on the operating environment. In fact, neither can Congress. The vast number of regulatory changes in the infrastructure bill are large but will pale in comparison to the $3.5 trillion spend bill right behind it.
