One of the most significant developments over the past few years has been the increase in commitment and action by governments, businesses, and individuals to address the climate crisis. Though there's still a long way to go, the recent proposal by the US Securities and Exchange Commission (SEC) on its climate-related disclosures for enterprises is a big step toward meaningful change. But not all companies have the technology, processes, or governance structures they need to comply and report investor-grade information.
There's no doubt that the planet needs all organizations – public and private – to take giant leaps. And they have taken steps, but a report by Climate Action Tracker highlights that recent targets and pledges are not yet enough to keep the world's average temperature from rising beyond 1.5˚C1. Staying within that threshold would reduce the risks from the catastrophic impact the climate crisis will have on the world's environment and economy. For example, a World Economic Forum report says that more than 50% of the world's total GDP, amounting to $44 trillion, is moderately or highly dependent on nature.
In recent years, the scientific community, institutional investor forums, shareholder activists, governments, private-sector enterprises, and the global community have rallied together to redress the harm being inflicted on the planet.
Businesses play a critical role in protecting the environment and driving a net-positive impact. The new rules proposed by the SEC in March 2022, The Enhancement and Standardization of Climate-Related Disclosures for Investors, will require publicly listed companies to disclose the nature and extent of climate-related risks to their businesses. This includes the impact of material risks, greenhouse-gas (GHG) emissions, and related financial metrics as part of their annual 10-K reports.
The proposed rules require businesses to adapt to new guidelines and regulations. But they also offer an immense opportunity to accelerate action toward reducing climate impact and creating a new source of long-term competitive advantage.