ServiceNow: How the SEC’s proposed climate disclosure rules will affect your business

Edua Dickerson, vice president of ESG and financial strategy at ServiceNow, co-authored this blog.

Environmental, social, and governance (ESG) concerns are rapidly rising to the top of the company’s agenda. ESG is not only a corporate responsibility, but it is also a win-win for businesses.

By embracing sustainability, ethical labor practices, and effective processes and controls, organizations are laying the foundation for increasing value creation, according to McKinsey. In other words, ESG is an opportunity to thrive by doing the right thing.

Investors are also interested in ESG. In fact, we see ESG becoming a critical factor in the investment decision -making process, for both institutional and individual investors.

Climate risk reporting law

Confirming this major change in investment priorities, the U.S. Securities and Exchange Commission (SEC) issued a statement on March 21, 2022, proposing rules to standardize climate-related disclosures — including climate-related risk disclosures — as part of certain SEC-specific offerings, such as number 10-Ks. The SEC’s action follows a wave of similar regulatory requirements in geographies around the world, including the EU, UK, and New Zealand.

If adopted, these new SEC requirements could take effect in early Q4 2022. That is, large companies (those with a public float of $ 700 million or more) with a Dec. 31 fiscal year end will need to start phasing in climate disclosures for their 2023 fiscal year report filed in 2024, with smaller companies following up a year or two later.

Increased emphasis on management and risk

Many large companies are already disclosing much of this climate -related information in voluntary reports. However, the need to include such information in a periodic report would require additional rigor, increase the need for auditability, and increase review at the executive and board-level.

The SEC’s proposed disclosures share common elements with existing ESG reporting frameworks, including:

• How the organization identifies and addresses the impact of climate -related risks in the short, medium, and long term

• How the organization aims to meet climate -related goals and targets

• How it progresses against these goals and targets

In essence, there is an increased emphasis on strategy, management, and risk management associated with the SEC’s climate.

Building ESG in the organization

Given the increased scope and mission criticality of these SEC disclosures, businesses will need effective tools and processes to gather, analyze, and report on climate-related strategy and performance. They will also need to create, manage, and measure programs to align the company’s activities with stated climate -related goals.

This visibility and control needs to permeate the entire business. What is needed is more than just running an ESG department. It’s about building ESG in every aspect of what an organization does.

Unfortunately, many organizations — including those adhering to standardized reporting frameworks such as the Task Force on Climate-related Financial Disclosures (TCFD) — still rely on error-prone manual processes such as spreadsheets and emails for ESG reporting. This approach does not apply to efficiently provide the climate -related information that investors need and the SEC’s proposed rules have helped in responding.

Instead, IT teams need to work with ESG/sustainability and risk management professionals within the business to implement sophisticated software solutions that enable effective implementation, monitoring, management, and disclosure of initiatives and concerns. associated with climate throughout the business.

These tools should capture ESG strategy and targets, tie ESG program implementation to these goals, provide capabilities to identify and mitigate ESG risks, and automatically gather ESG metrics on through internal processes — and by gathering information from third-party ESG data providers (e.g., to gather emissions data for an organization’s supply chain).

Enable ESG management

As part of the ServiceNow community, you can use your investment in the Now Platform® to empower your business with our ESG management tools. ServiceNow combines the capabilities of ServiceNow® ESG Management, Integrated Risk Management, and Strategic Portfolio Management into one unified solution that helps your business:

• Document climate strategy, including areas of focus, targets, and quantified goals

• Assess and monitor climate risks, including creating controls and implementing plans to address these risks

• Identify and prioritize climate initiatives based on their value, cost, and alignment with the ESG strategy

• Manage the development of these climate initiatives, keeping ESG programs on track

• Gather climate metrics and evidence from internal data owners with audible workflows

• Automatically collect climate and other ESG metrics from third-party providers

• Synthesize information, including strategy, targets, risks, projects, metrics, and other data into audible and trackable disclosures

Learn more about ServiceNow ESG solutions.

Learn more about ServiceNow’s ESG progress in our Global Impact Report.

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