How to Prepare for SEC Greenhouse Gas Reporting Requirements

The latest Securities and Exchange Commission (SEC) ruling mandates that companies report their greenhouse gas (GHG) emissions. To ensure compliance, businesses need a proactive and systematic approach. Here’s a step-by-step guide on how your company can prepare for this new reporting requirement.

Key Takeaways

• Get Legal Help: Thoroughly study the SEC ruling and consult legal experts to understand the specific requirements.
• Inventory Emissions Accurately: Conduct a baseline assessment and clearly identify Scope 1, 2, and 3 emissions.
• Collect and Monitor Data Regularly: Implement data collection tools and train staff to ensure consistent and accurate monitoring.
• Don’t Skimp on Reporting: Develop a reporting framework using integrated reporting software and ESG tools, such as SupplierGateway’s Sustainability Assessments and Reporting.
• Verify Via Third-Party: Ensure third-party verification of emissions data to meet regulatory standards.
• Develop Reduction Strategies: Create and implement strategies to reduce GHG emissions, with clear targets aligned with international standards.
• Communicate Regularly: Maintain open communication with internal and external stakeholders about GHG reporting activities.
• Continuous Improvement: Stay updated on regulatory changes and refine reporting processes based on feedback.

1. Understand the Requirements

Study the SEC Ruling

Start by thoroughly understanding the specifics of the SEC’s requirements for GHG reporting. This includes identifying which types of emissions need to be reported: Scope 1, Scope 2, and Scope 3.

Consult Legal and Compliance Experts

Engage with legal and compliance professionals to interpret how the rules apply specifically to your company, including any sector-specific implications.

2. Inventory Current Emissions

Baseline Assessment

Conduct a comprehensive inventory of your current GHG emissions. Use established protocols like the Greenhouse Gas Protocol to measure emissions accurately from all relevant sources.

Scope Identification

Scope 1: Direct Emissions

Direct emissions from owned or controlled sources, such as company vehicles and onsite fuel combustion. Measure these using fuel consumption records, direct measurement tools, or emission factors.

Scope 2: Indirect Emissions

Indirect emissions from the generation of purchased electricity, steam, heating, and cooling. Calculate these based on utility bills and emission factors from energy providers.

Scope 3: Other Indirect Emissions

All other indirect emissions in a company’s value chain, such as those from purchased goods and services, business travel, and waste disposal. Measure these using data from suppliers, employee travel records, and waste management reports.

3. Implement Monitoring Systems

Data Collection Tools

Establish or upgrade systems and tools for ongoing data collection of GHG emissions. This might involve using software for tracking energy usage and emissions or installing sensors and meters on equipment.

Training and Processes

Train relevant staff on using these tools and implementing standardized processes to ensure consistent and accurate data collection.

4. Set Up Reporting Mechanisms

Reporting Framework

Develop a reporting framework that aligns with SEC guidelines and integrates with your existing financial reporting processes. Examples include:

• Integrated Reporting Software: Utilize platforms that combine financial and non-financial reporting, such as SAP’s Sustainability Performance Management, Microsoft Dynamics, and SupplierGateway’s Supplier Information Management.
• ESG Reporting Tools: Implement tools specifically designed for environmental, social, and governance (ESG) reporting, like Enablon or SupplierGateway’s Sustainability Assessments and Reporting, which ensure compliance and facilitate data collection and analysis.
• Data Management Systems: Use systems like IBM Envizi, Schneider Electric’s EcoStruxure, and SupplierGateway’s Sustainability Assessments and Reporting to manage and report GHG emissions data accurately.

Internal Reporting

Set up internal reporting processes to compile, review, and analyze emissions data before it is disclosed publicly. This includes:

• Regular Internal Audits: Conduct periodic internal audits to verify data accuracy and completeness.
• Review Committees: Establish review committees that include cross-functional teams to oversee and validate GHG data and reports.

Dashboards and Reporting Tools: Use dashboards and visualization tools to track emissions data in real-time and generate comprehensive reports.

5. Engage External Auditors

Third-Party Verification

Engage external auditors to validate your emissions reporting, as the SEC might require verified emissions reports. This step ensures the data meets regulatory standards and enhances credibility with stakeholders.

Continuous Audit Readiness

Maintain documentation and evidence of emissions and control activities in an audit-ready format to streamline the verification process.

6. Develop Mitigation and Reduction Strategies

Emissions Reduction Plan

Develop strategies for reducing GHG emissions, such as energy efficiency improvements, transitioning to renewable energy sources, and optimizing supply chain operations.

Set Targets

Establish clear, measurable goals for emissions reductions and align these with international standards like the Paris Agreement or Science-Based Targets.

7. Communicate with Stakeholders

Internal Communication

Keep employees and management informed about the company’s GHG reporting activities, emphasizing the importance of everyone’s role in achieving compliance and sustainability goals.

External Communication

Prepare to communicate with external stakeholders, including investors, customers, and the public, about your GHG emissions and reduction efforts. Transparency in these communications can enhance trust and corporate reputation.

8. Review and Adapt

Regulatory Updates

Stay updated on any changes to SEC regulations or relevant environmental laws that might affect future reporting cycles.

Feedback Loop

Create mechanisms to receive feedback on the GHG reporting process and use this feedback to improve accuracy and efficiency over time.

Conclusion

Preparing for the SEC’s GHG reporting requirement is not just about regulatory compliance but also about enhancing your company’s sustainability practices. This preparation can help your business better manage its environmental impacts and position itself favorably in a market that increasingly values transparency and sustainability. By transforming your ESG and SEC reporting processes now and building simplified, repeatable procedures using SupplierGateway’s Sustainability Assessments and Reporting, your company will be well-prepared to adapt to whatever comes next as stakeholders’ expectations evolve.