Per WSJ, California and the European Union (EU) are both poised to approve rules requiring companies that do business there to disclose their greenhouse gas (GHG) emissions (Note: the CA bill was signed into law on October 7). The rules would apply to private and public companies and require businesses to calculate and disclose emissions from their suppliers and customers, which goes beyond what was expected in Washington. The size of the two economies (if CA was a country, it would have the world’s sixth largest economy; the EU as a bloc ranks third) means that few large companies can avoid their rules.
The rules will be among the biggest changes in corporate disclosures in decades. They add climate information to financial data that companies need to produce, showing how companies compare to each other and whether they are cutting emissions in line with their commitments. This will help investors identify which companies are particularly vulnerable to, or prepared for, risks related to climate change. These could include threats from hurricanes and wildfires, also which companies could be left behind by society’s transition away from fossil fuels. For companies, particularly private firms that don’t currently disclose much information about their businesses, the rules imply a significant increase in data gathering, processing and reporting.
The big change for companies, and the shift that industry groups are fighting against, is disclosure of so-called Scope 3 emissions, which are produced by suppliers and customers. Scope 1 emissions are produced by a company’s own operations and Scope 2 emissions come from the energy a company uses. These emissions often constitute the vast majority of a company’s carbon footprint. For oil companies, for example, most of their emissions occur when consumers burn their fuel. For clothing makers, emissions occur in their supply chains.
The SEC floated its proposal 18 months ago, but has yet to finalize it. The CA and EU rules might make it easier for the SEC to finalize its climate rules. Companies, resigned to the fact they will have to disclose this information, now are seeking consistency among regulators to limit the cost of complying.
There is a lot of change in the world today. From climate change to supply chains, just-in-time to real-time, automation to innovation…businesses are struggling to quantify the impact of these changes and assess their risk exposures. MOSIMTEC helps companies explore every option by guiding them along the simulation modeling (SM) and Digital Twin (DT) continuum, so businesses aren’t just ready for change, they embrace it. MOSIMTEC industrial engineers and data scientists can help you incorporate key GHG and carbon disclosure measures into SM and DT to evaluate alternatives. We can help you future-proof your business.
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