Readiness is a Journey
Updated:
May 28, 2024
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Overview
In this lesson, we'll cover critical aspects of SEC climate disclosure readiness. Recognize that each company's readiness will vary, and disclosing climate information will become a standard practice over time, much like past regulatory changes. Aligning ownership, defining internal terms, and setting up repeatable processes are crucial initial steps for Governance, Strategy, and Risk Management disclosures, while Metrics & Targets disclosures can benefit from carbon accounting software solutions like Persefoni to ensure accuracy and efficiency.
So far in this primer, we’ve covered several important aspects related to SEC climate disclosure, including:
- The broader benefits of climate risk disclosure beyond compliance
- The global regulatory landscape regarding climate disclosures
- The intent and context of the SEC rule
- The required components of SEC disclosure as proposed
Even so, you’re likely still asking yourself the big question: ‘Is my company ready for SEC climate disclosure?’
For most companies, the answer is likely ‘Not yet’.
Each company’s disclosure readiness will differ based on the unique facets of their organization’s structure, processes, value chain, exposure to climate risk, or simply based on where they are in their carbon journey.
What’s most important to remember is that every company lies somewhere on a readiness curve, and that your climate reporting process and fidelity will continue to evolve well beyond your first required disclosure.
Kristina likens the new SEC climate rules to the adoption of Sarbanes Oxley in the early 2000s:
“The parallels between the implementation of Sarbanes-Oxley and the climate rules are significant. I have every confidence that companies will soon come to report their greenhouse gas emissions as a normal part of doing business. Companies were apprehensive about the new internal controls provisions of the Sarbanes-Oxley rules. Yet, we saw that they were able to comply, given the right tools and systems.
The same is true for the forthcoming climate rules. We can calculate and report greenhouse gas emissions with the right tools. What’s more, as we saw with Sarbanes-Oxley, reporting will get easier over time. ”
In the near term, there are some important initial steps that you, as an executive, can begin to take to distill a disclosure mindset in your organization.
In the last module, you became familiar with the four pillars of SEC climate disclosure: Governance, Strategy, Risk Management, and Metrics & Targets – and we provided some immediate next steps for each.
For the Governance, Strategy, and Risk Management pillars, many of the immediate steps for disclosure readiness are centered around identifying owners, aligning on internal definitions, and setting up repeatable processes to meet these new requirements.
The Metrics & Targets disclosures, particularly your ‘carbon footprint’, will naturally be more quantitative and will require converting your business activities into carbon data. This can be quite an undertaking if done using traditional spreadsheets and other “manual” processes. These require significant effort around data management and complex calculations, with the right internal controls wrapped around the process to ensure accuracy.
Fortunately, carbon accounting software solutions like Persefoni exist to automate many of these activities, and in turn enable you to disclose your footprint with confidence and ensure you have the necessary supporting documentation to ‘show your work’. More on this solution in the next lesson.
