As urgency to combat climate change increases, the actions of businesses are also being scrutinized. In March 2022, the US Securities and Exchange Commission (SEC) proposed a set of rules and guidelines that will require companies to disclose information and detailed reporting on climate-related risks. The proposal focuses on three key areas: material climate impacts, green-house gas emissions, and targets or transition plans. If passed, companies will have until 2023/2024 to disclose information, depending on the size of the organization.
While the proposal will have a direct impact on businesses, it is only part of the global shift towards sustainability which is affecting industries across the world. Businesses are now expected to align their operations with sustainable practices while offering transparency regarding their environmental impact.
This global shift was accelerated in 2015, when the UN Paris agreement was established to restrict global temperatures to 2°C above pre-industrial levels while trying to keep the increase below 1.5°C. World leaders, such as the UK, Japan, and the EU are now all taking steps towards sustainability amid increasing regulations, including the formation of the International Sustainability Standards Board (ISSB) and The Task Force on Climate-related Financial Disclosures (TCFD).
How will the regulations impact businesses?
The proposed SEC regulations will enforce the disclosure of climate-related information and data. Below are the proposed outlines:
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- Material risks and strategic implications: Companies are required to reveal physical climate-related hazards and share assets exposed. Regulatory, market, technological and reputational risks must also be disclosed, while filers would be expected to share strategic, operational, and financial impacts.
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- Greenhouse gas emissions: The reporting of Scope 1 and Scope 2 emissions generated from the company’s operations and purchased energy will be mandatory. The disclosure of Scope 3 upstream and downstream emissions across the company’s value chain will be more complex but is only required if they are material or if the filer has a target. Emissions reporting will involve the disclosure of greenhouse gases per dollar in sales and per unit of product.
- Target and transition plans: Companies will be required to share current targets on emission reductions, nature conservation, energy consumption, and revenues from low-carbon products. Disclosure of transitions plans to achieve targets on the use of renewable-energy credits or offsets will also be expected.
Complexities in tracking and accurately disclosing the large quantities of required data will potentially arise due to the lack of established universal standards regarding business sustainability, which could explain why 90% of executives1 think sustainability is important, but only 60% of companies have an operative sustainability strategy.
To combat this lack of guidance, the SEC regulations, alongside other international guidelines, aim to assist companies in developing sustainable strategies by providing a standardized method to monitor, disclose and track corporate impact.
How could the regulations benefit businesses?
The SEC metrics serve to encourage businesses to transparently establish ambitious environmental and societal goals, which go beyond greenwashing by taking more tangible and measurable actions which have a meaningful, positive environmental impact.
The focus on sustainability also gives businesses the opportunity to reevaluate their business structure and strategy with a new focus on decarbonization and responsible business practices. These innovative sustainability strategies help companies stand out amongst competitors while maintaining and increasing their client-base.
In addition to clients, businesses showing innovation and transparency will attract investors, who are willing to invest substantial amounts to support climate-related disclosures as they acknowledge that climate risks amid future regulations serve as a financial threat for companies. According to the Sustainability Global Study by the Boston Consulting Group, over 70% of surveyed investors2 believed sustainability was key to their investment decisions.
Launching your sustainable IT strategy
The proposed SEC regulations are one of the latest developments of the global trend towards combatting the environmental impact of business, that will see sustainability become a mandatory feature of corporate strategy. Companies are getting ahead now by developing strategies before new rules are enforced; aligning their businesses with investor demands and protecting themselves from future penalties.
As a major component of business, rethinking the management of IT and technology offers an important opportunity to minimize carbon emissions and consumption and facilitate a net-zero transition. This involves taking a holistic approach and evaluating how the lifecycle of IT infrastructure contributes towards consumption of energy and material resources, as well as the production of waste – taking the most appropriate actions to reduce them.
One of the easiest ways to achieve this is by partnering with sustainable IT services providers like Evernex. Our solutions can be adapted to your unique business needs to maximize the ROI of your IT and help you escape wasteful industry practices, like planned obsolescence.
Our services include Third-Party Maintenance, which helps to eliminate the need to buy new equipment by extending its useful life beyond predetermined manufacturer End of Life dates. We also have a unique Spare as a Service (SPaaS™) offering, which provides companies with thousands of high-quality, refurbished parts to repair their infrastructure and reduce consumption of raw materials and production of carbon emissions from frequent buying of new equipment.
Moreover, we offer hardware leasing and rental to help companies meet a short- or long-term need. This keeps equipment in circulation for as long as possible to prevent waste and overconsumption, while delaying or eliminating the need for significant CapEx investment.
Working with us, you can shape your sustainable IT strategy to help your business thrive despite emerging regulations and support the creation of a green digital world.
Book a free consultation to learn more about our catalogue of services.
Sources
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- Unruh, Gregory, David Kiron, Nina Kruschwitz, Martin Reeves, Holger Rubel & Alexander Meyer Zum Felde. 2016. ‘Investing for a sustainable future: Investors care more about sustainability than many executives believe.’ MIT Sloan Management Review. May 11, 2016. Investing For a Sustainable Future (mit.edu)
- Unruh, Gregory, David Kiron, Nina Kruschwitz, Martin Reeves, Holger Rubel & Alexander Meyer Zum Felde. 2016. ‘Investing for a sustainable future.’ MIT Sloan Management Review Research Report. May, 2016. MITSMR-BCG-Investing-for-a-Sustainable-Future-2016.pdf (truevaluemetrics.org)
- Corb, Laura, Kimberley Henderson, Tim Koller & Shally Venugopal. 2022. ‘Understanding the SEC’s proposed climate risk disclosure rule.’ McKinsey. June 3. 2022. Understanding the SEC’s proposed climate risk disclosure rule | McKinsey
- Colback, Lucy. 2020. ‘The role of business in climate change.’ The Financial Times. December 18, 2020. The role of business in climate change | Financial Times (ft.com)
- Rafi, Talal. 2021. ‘Why Corporate Strategies Should be Focused on Sustainability.’ Forbes. February 10, 2021. Why Corporate Strategies Should Be Focused On Sustainability (forbes.com)
- Jackson, Felicia. 2021. ‘Are Universal Sustainability Standards and ESG Reporting The Key to Net Zero?’ Forbes. October 5, 2021. Are Universal Sustainability Standards And ESG Reporting The Key To Net Zero? (forbes.com)
- Eccles, Robert G. & Mirchandani, Bhakti. 2022. ‘We Need Universal ESG Accounting Standards.’ Harvard Business Review. February 15, 2022. We Need Universal ESG Accounting Standards (hbr.org)
