May. 24, 2022
May 24, 2022 Rule S7-10-22 is a necessity to bring comparability and accuracy to climate-related disclosures, which many other developed countries have already chosen to do and many more investors want this information to make informed decisions. This new rule will allow people to have consistent and reliable data that can help make informed decisions about the sustainability and long-term prospects of public companies. As an auditor, a main concern is consistency between companies to make financial disclosures that are comparable, and this can help achieve that goal because the disparate disclosures surrounding climate shown today are completely up to the company, and this allows firms with large climate-related issues to disclose less. Accuracy is also an important point, which is currently completely void in the voluntary reporting structure in place today and would force companies to follow strict guidelines on how to report emissions and exposures. The Task Force on Climate-Related Financial Disclosures presents a broad framework that will hopefully be correctly utilized to guide companies in their new disclosure requirements to provide clear and comparable information across companies and industries. An important issue regarding the rule, and I suspect will be a large flashpoint in this debate, is the inclusion of Scope 3 emissions. They are necessary for inclusion in these disclosures to show the true scope of the emissions produced by a company. Without the Scope 3 supply chain disclosures, companies can simply shift their polluting activities to other parts of the supply chain that do not get audited, and their products will contribute to environmental degradation while their disclosures will highlight huge emission reductions. This will certainly be more difficult to implement, so an added phase-in period as described in the law may be necessary. It is imperative though that the Scope 3 emissions be included in the rule to fully encompass all activities of the corporation. I strongly support the passage of this rule because it can create consistency and reliability to environmental disclosures, which can deliver reliable information to investors.