April 24, 2022
The term reasonably likely is broad and up for interpretation. The discretion given to the SEC to determine what is reasonably likely would open the door for increased ambiguity in filing, auditing, and fines in relation to this proposed rule. More clarification is needed on the term, how it will apply to the reporting and auditing process, and how and if fines will apply to the proposed rule. Further, describing risks under subsection of 229.1502 would require extensive specialized analysis and calculations from experts in multiple fields. It is unclear if these costs are captured in the burden of costs stated in the proposed rule.
Subsection 229.1501 through 229.1503 of the proposed rule, require disclosure of non-risk business strategy information that could be adversely affect the companys competitive structure that brings value to its shareholders and investors. While the intent of the proposed rule is to allow investors to understand their risks, disclosure of such extensive non-risk business strategies would dilute the investors value and potential return. Subsection 229.1504 GHG Emissions Metrics is a clear overlap with the rules extensively enforced by the EPA and this requirement would contradict the Paperwork Reduction Act. The requested increase in cost of burden totaling over $6.3 million does not outweigh the benefit of the proposed rule.
It is noted that a benefit of the proposed rule provides for transparency on the indirect GHG emissions commissioned by respective companies according to Scope 3. There will be significant challenges in gathering this data as a large percentage of outsourced labor and manufacturing are not required to calculate or report GHG emissions. This is largely dependent on the type of company and country they are located. Transportation related GHG emissions will also be difficult to calculate do to their fragmented customer base. For example, one transport company may provide services for 30 different companies. How to calculate and divide the amount of CO2 contributions amongst those companies will also increase the burden and cost onto those parties. How does the SEC plan to address this increased burden of cost?