This article is adapted from Climate Tech Weekly, a free newsletter dedicated to climate technologies.
In a move that really surprised anyone, the U.S. Securities and Exchange Commission on Monday published its proposed rule for requiring public companies to disclose how their operations affect the climate-or the risks they may face. face a climate changing world.
The plan will be subject to comment for the next 60 days, and yes, there will be a lot of grumbling and threats of legal action from those who think requiring companies to report about these things is represents excessive government reach. It will take time to play, but it will be a catalyst for big changes, however.
what’s up? Although most large companies have not yet gained oversight on how to communicate publicly about Scope 3 emissions-let alone calculate them accurately or specifically-the proposal would require them to disclose the greenhouse gas emissions from their value chain if material in its business or if the company has a Range 3 commitment in place. “Our main bargain since the 1930s has been that investors will be able to decide which risks to take, as long as public companies provide full and fair disclosure and are honest with these disclosures,” the SEC Chair said. Gary Gensler on issuing rule changes.
The potential reporting requirement in Scope 3 is no small matter, and you can expect exceptions and phase-ins, as they take effect. “For businesses that don’t already, they should look at using the services to collect reliable, audible Scope 3 data from their entire supply chain and use specific emission factors to translate the available information. at a reportable data leak point, ”Joe Schloesser, senior director of tech company ISN, said in a statement. “Not only does the technological aspect of measuring emissions need to be more accurate, but purchasing organizations also need to interact with their supply chain now more than ever before to reach their ESG goals.”
Is there software?
It remains to be seen what remains after the public comment period, but I think the proposal represents a tipping point for how corporations use information technology – especially what I like to refer to as carbon. software – to manage their maintenance and ESG agendas. Get ready for the 2.0 wave of enterprise resource planning software.
Reality: Spreadsheets will no longer cut it when it comes to collecting, analyzing, calculating, forecasting and reporting climate-related data. So it should also surprise anyone that the rich range of ESG software application providers – including those dedicated to climate intelligence, carbon accounting and supply chain traceability – are incredibly excited about the SEC’s progress. Before the development officially hit my news alerts, my inbox was flooded with comments from enterprise software startups, à la the above and this one from Adrian Fleming, senior commercial director with governance software company and Diligent:
The first step for leaders should be to have oversight of their ESG performance, identify which areas to report on and set significant targets for improvement. It is very important that these companies treat non-financial data like their financial data, with similar rigor and rhythm, and do not treat it as a once-a-year reporting exercise. They will need to monitor and organize data regularly, and that requires an ESG platform with in-depth climate reporting capabilities and appropriate strategy.
Research firm Verdantix released a statement on Monday predicting that companies will spend beaucoup bucks to gather this data, verify it and report it over the next three years-$ 6.7 billion across 2023, 2024 and 2025. That money will go both to financial data service providers like MSCI and S&P Global that rate companies on climate risk and other ESG factors but a portion will also go to some software firms, including those Verdantix calls by name as “excellent position” to cooperate with the SEC mandate: Cervest; Envizi; Persefoni; Planetly; Watershed; and Workiva.
I personally think the estimate is a small amount. If you consider the need for climate risk analytics services, such as those provided by Jupiter Intelligence or Gro Intelligence, or broader sustainable business management platforms, such as those sold by everyone from Salesforce to Microsoft to ServiceNow, there is a lot of potential for software providers. Oh, and don’t forget SAP, dancing around the supply chain traceability movement for some time. On Monday, the company announced a project with Unilever, which will use SAP’s blockchain software to verify and report its palm oil sources-with a particular focus on ensuring it is free of deforestation.
It’s time to ask: Does your company’s IT budget include line items for ESG management, climate intelligence and supply chain traceability applications? How does your organization fund investments in these digital capabilities? Let me know.