Open Letter: How Business Leaders Should Prepare On Heels of the SEC Climate Proposal
Persefoni CEO highlights the key takeaways & next steps from the SEC’s new climate proposal
Published March 21, 2022
Dear Executives and Board Members:
The time to measure your carbon footprint and build your climate strategy is now. The SEC has proposed new rules that, once adopted, will require your company to disclose its carbon footprint in reports filed with the SEC. This will compel accurate and reliable measurement of your greenhouse gas emissions, as well as disclosure of your strategic planning around climate-related risks and opportunities.
While this is a significant step, it is not time to panic. It is time to prepare. Together with our partners like Workiva, Bain & Co, and CGI, as well as counsel from our unrivaled Sustainability Advisory Board (SAB) of global industry experts, Persefoni provides an end-to-end solution that ensures organizations are in compliance with the growing expectations of international regulators and stakeholders. The platform enables rigorous, reliable, and real-time carbon accounting so that company leaders can develop business strategies to thrive in a low-carbon economy.
At a high level, the SEC proposal tracks many elements of the widely endorsed framework developed by the Task Force on Climate-Related Financial Disclosure (TCFD) and the Greenhouse Gas Protocol. This is very positive as it marks an important step toward much needed convergence and harmonization of climate reporting standards. The SEC’s proposal is also largely consistent with existing disclosure provisions around the world, including those proposed or adopted in the United Kingdom, European Union, Hong Kong, Singapore, and New Zealand. The proposal further outlines mandatory financial statement disclosures related to the financial impacts of climate change on the company. Some of the key provisions in the SEC proposal would require disclosure of:
A company’s governance and strategies for management of climate-related financial risks - starting with the board and executive management;
Climate-related financial risks over short, medium, and long term
Scopes 1 and 2 greenhouse gas emissions for all registrants;
Scope 3 greenhouse gas emissions (from the value chain) if those emissions are material, or if the registrant has set a GHG emissions target or goal that includes Scope 3 emissions (the proposal exempts smaller reporting companies from the Scope 3 disclosure requirement)
An attestation report from an independent attestation service provider covering at least Scopes 1 and 2 emissions disclosures for Accelerated Filers and Large Accelerated Filers
Any transition plan adopted by the registrant, along with metrics and targets used to identify and manage its climate-related risks
Any targets or goals the company has set as well as a description of the activities covered by the target(s), how the company plans to meet its target(s), and progress toward the goal(s)
A description of any scenario analysis used to evaluate the resilience of the registrant’s strategy
A description of climate-related and transition-related impacts on the registrant’s financial condition - reported in a note to the company’s financial statements, including the underlying assumptions that contribute to the disclosures
How to get started
The best place to start is to create an inventory of your company’s greenhouse gas emissions in accordance with the Greenhouse Gas Protocol. Understanding your emissions profile is the first step in evaluating your climate-related financial risks/opportunities and building strategies to mitigate risk and capitalize on opportunities.
Many companies currently issue annual ‘sustainability reports’ that contain some of this information. These reports are a good start, but won’t be sufficient for SEC financial reporting. If your company already issues greenhouse gas information, conducting a ‘gap analysis’ is the best course of action.
Every company is different - whether you are building on existing reporting or just beginning to measure your emissions, starting with tools that ensure reliable, transparent, verifiable greenhouse gas data is essential. This will enable Chief Financial Officers (CFOs), General Counsels, and other key executives to have confidence in the level of care applied to these filings.
Climate disclosures must be reliable. Information filed with the SEC demands added rigor to ensure accuracy. Disclosures should be traceable at a granular level to each transaction, emission factor, calculation, and accounting method. Persefoni’s solutions simplify this complexity.
The proposed rules, if adopted, would require that climate disclosures be included in your company's SEC reports. This means applying the same level of diligence that goes into the other information filed with the SEC should go into your climate disclosures. In addition, digital tagging of the disclosure will be required similar to your financial filings.
Your company’s climate risk assessment, strategies, and governance will be included in the SEC disclosure, requiring the attention of your company’s C-suite and board of directors.
Carbon Accounting is Complex
Robust, reliable reporting begins with good accounting. While financial accounting has 12 calculations and one data type (money), carbon accounting is significantly more complex, requiring more than two hundred calculations across thousands of data types. The Greenhouse Gas Protocol is the global accounting standard for carbon accounting and forms the basis of robust, verifiable carbon data across the enterprise value chain.
The Persefoni platform encodes the accounting rules of the Greenhouse Gas Protocol and incorporates more than 100,000 greenhouse gas emission factors from around the world. Once connected to client transaction information from the company’s existing ERP systems, the Persefoni platform automatically calculates the carbon inventory across Scopes 1-3. Each calculation is recorded in a transparent ledger for audit and assurance.
Good carbon accounting software is necessary, but it may not be sufficient for all clients. That’s why Persefoni has partnered with Workiva, the market-leading software platform for SEC financial filings, simplifying SEC forms with a single cloud solution. This partnership helps clients integrate their carbon and financial disclosures into a single SEC filing. In addition, our consulting partners – Bain & Company and CGI – can assist clients in developing an overall management strategy for climate risk.
Cutting-edge carbon accounting software is a critical part of an overall solution. In February 2022, Persefoni was named an industry leader in carbon accounting and management by Forrester, with the highest possible score for “Strategy.” Moreover, when the SEC itself was looking for counsel on this regulation, it relied on Persefoni. Not once, but three times. The Persefoni solution enables companies of all types to account for their carbon impacts with the same rigor and confidence they apply to their financial disclosures. With clarity on the direction of the SEC’s rulemaking, now is the time for companies to take the necessary steps to treat the calculation of their carbon footprint and climate strategies with the same rigor as their financial disclosures.
Persefoni is ready to help you simplify this complexity and measure your carbon footprint accurately and reliably so you can comply with the SEC rules, easily disclose to your diverse stakeholders, and stay ahead of additional changes in regulations and standards
Persefoni was purpose-built by Fortune 500 executives who lived this challenge first-hand. We developed software and market intelligence to help you quickly and easily understand and disclose your carbon footprint to many different stakeholders, seamlessly, so you can focus on the crucial work of building and implementing your climate strategy.
CEO and Co-Founder