che_april-2024 - 4

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JOY LEPREE (NEW JERSEY)
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Disclosing climate risks
L
ast month, the U.S. Securities and Exchange Commission
(SEC; www.sec.gov) finalized rules [1] that require registrants to
disclose information about climate-related risks in their annual
reports and registration statements. Recognizing that climaterelated
risks can affect a company's business and financial position, the
SEC rules are intended to give investors " more consistent, comparable
and reliable information about the financial effects of climate-related
risks on a registrant's operations and how it manages those risks. " The
new rules were first proposed two years ago, in March of 2022. Since
that time, the SEC has considered more than 24,000 comment letters
about the initial proposal before voting on, and passing a modified final
ruling on March 6, 2024. The final rules will become effective 60 days
after publication in the Federal Register, and compliance dates will be
phased in, depending on the registrant's filer status.
The final rules
The final rules require registrants to disclose information about climate-related
risks that materially impact business strategy, operations
or finances. Some disclosures related to severe weather events
and other natural conditions are also required. In its Fact Sheet about
the rules, the SEC states that the rules require the following, among
other things, to be disclosed: " material climate-related risks; activities
to mitigate or adapt to such risks; information about the registrant's
board of directors' oversight of climate-related risks and management's
role in managing material climate-related risks; and information
on any climate-related targets or goals that are material to the
registrant's business, results of operations, or financial condition. "
In addition, some registrants are required to disclose Scope 1 and
Scope 2 greenhouse gas (GHG) emissions. Scope 1 includes direct
GHG emissions from sources that are controlled or owned by an organization.
Examples are emissions from fuel combustion from boilers,
furnaces and vehicles. Scope 2 refers to indirect GHG emissions,
for example those that are associated with the purchase of electricity,
steam, heat and cooling. Scope 3 emissions result from an organization's
upstream and downstream activities [2].
The proposed rules included requirements to report Scope 3
emissions, but this requirement was dropped in the final rules. In
response to the final rules announcement, the American Chemistry
Council (ACC; www.americanchemistry.com) states " While it will take
some time to digest the lengthy rule package, we're pleased that the
Commission has removed the proposed requirement that companies
quantify and report on 'Scope 3' emissions. ACC members supply
critical chemistries used in the value chains of nearly every sector
of the economy. This requirement posed unique challenges for the
chemical sector while providing little value to investors. " The ACC
also points out that its members already track Scope 1 and 2 emissions
through its Responsible Care program, and it further states
" ACC and its members are committed to being partners and solution
providers in supporting a sensible path to a loweremissions
economy. We vigorously participated in
this rulemaking and look forward to engaging on
proposals with significant impacts for companies
and sustainability efforts. "
■
Dorothy Lozowski, Editorial Director
1. The Enhancement and Standardization of Climate-Related Disclosures:
Final Rules can be found at www.sec.gov
2. Source for the definition of emission scopes: U.S. Environmental Protection
Agency; www.epa.gov
CHEMICAL ENGINEERING WWW.CHEMENGONLINE.COM
APRIL 2024
http://www.sec.gov http://www.americanchemistry.com http://www.sec.gov http://www.accessintel.com http://www.epa.gov http://WWW.CHEMENGONLINE.COM
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