The US Securities and Exchange Commission (SEC) on Mar. 6 voted to require most publicly traded companies to disclose their levels of greenhouse gas emissions and ways climate change may present business risks.
In a 3-2 vote, the SEC moved forward with the far-reaching—and contentious—rule that weaves climate accountability into financial oversight to give investors more transparent and comparable data on which to make decisions.
Under the rule, businesses must reveal their climate-related goals, including efforts to transition away from fossil fuels. The disclosures are legally binding, meaning companies could be liable if they misstate their emissions.
The rule was the most anticipated in SEC history, generating nearly 25,000 comments from companies, trade groups, investors and climate activists.
The SEC stripped out some provisions included when it proposed the rule in 2022, most notably the requirement that some publicly traded companies disclose not only their direct emissions but those from supply chains and from use of their products. This would have required energy companies to report the carbon emitted when their products were used to fuel cars or generate electricity.
The commission also limited the rule to large and midsized companies, which are now required to report emissions for the fiscal years that start in 2026 and 2028, respectively.
Despite weaker provisions, the rule faces pushback from the business community and many Republicans. GOP attorneys general from 10 states immediately filed suit. Some Capitol Hill Republicans indicated they will try to use the Congressional Review Act to kill the rule.
California in October enacted a law requiring large companies doing business there, including private companies, to report on the carbon footprint of their supply chains. European rules mandate similar disclosures. Most major companies do business both in Europe and California, meaning they will be subject to those rules – if they survive legal challenges.
