Today, the U.S. Securities and Exchange Commission (SEC) approved a final rule requiring publicly listed companies to disclose their Scope 1 and 2 greenhouse gas emissions in their annual filings.
Energy Peace Partners (EPP) supports this final rule because it will foster wider global adoption of climate-related disclosure regulations and frameworks, promote greater corporate transparency on greenhouse gas emissions among investors, and create stronger incentives for companies to take actions to reduce the greenhouse gas emissions they report to the SEC.
As publicly listed companies assess available options to reduce their Scope 2 emissions globally, EPP encourages these companies to consider Peace Renewable Energy Credits (P-RECs) as part of their strategy. The P-REC serves as an option for companies to decarbonize their Scope 2 emissions in countries at risk of conflict and climate impacts and with low levels of electrification. In addition, because P-RECs provide financing for renewable energy mini-grids as well as community projects that deliver tangible social benefits to communities, they provide an option for companies to make progress on the “E” and “S” in their ESG goals.
While the SEC decided to drop Scope 3 emissions reporting requirements from its final rule, largely due to the practical challenges and complexities of securing quality data from suppliers and customers, EPP expects that the rule will still have a meaningful impact on corporate sustainability by motivating more companies to pursue options to reduce their Scope 1 and 2 emissions. The exclusion of Scope 3 emissions in the SEC’s final rule means it does not go as far as the European Union’s Corporate Sustainability Reporting Directive (CSRD) and California’s Climate Corporate Data Accountability Act (Senate Bill 253), both of which include Scope 3 reporting requirements. In other words, Scope 3 accounting and action will remain a priority for companies, despite the SEC excluding it from the final rule.
As the SEC now pivots toward clarifying the implementation of climate-related disclosure requirements, EPP encourages the SEC to follow prior calls about offering companies the ability to report the differentiated impact of their respective clean energy procurement strategy to reduce their Scope 2 emissions. For example, companies may be more inclined to prioritize next-generation procurement options like P-RECs that deliver additional community benefits if they can report these additional benefits alongside their Scope 2 emissions reduction claims. By allowing for such differentiated reporting, this will help encourage companies to pursue the most impactful clean energy procurement strategy possible and report the results in their disclosures.