Issue link: https://resources.tangoanalytics.com/i/1529482
Governments and regulatory bodies worldwide are increasingly focusing on comprehensive GHG emissions reporting, which includes Scope 3 emissions. Companies that proactively manage and report these emissions are better positioned to comply with current and future regulations. The ESRSs, ISSB, and California law all include Scope 3; they recognize that a carbon footprint without Scope 3 is not only incomplete, it can also be misleading. Investors also know that Scope 3 is, for many companies, the vast majority of their overall emissions, and as more and more global companies are required to disclose Scope 3, others will be expected to follow. COMPLIANCE WITH REGULATIONS SEC Climate Disclosure Rule While the SEC has officially voted and approved the enactment of a revised version of the climate rule, which notably drops any requirements for Scope 3, large firms for which this would have applied will still have to contend with Scope 3 for the California rules and EU requirements. Although Scope 3 is not mandatory, the rule highlights the importance of reporting Scope 1 and 2 emissions, currently under judicial review California SB 253 State-level climate disclosure rules in California were approved in October 2023 with reporting starting in 2026 (Scope 3 to start in 2027). EU CSRD Companies reporting under the EU's Corporate Sustainability Directive (CSRD) will be mandated to disclose Scope 3 emissions if they are material, and both EU and large US companies operating in the EU will fall under this jurisdiction. ISSB In 2023, the International Financial Reporting Standards (IFRS) issued IFRS S2 Climate-related Disclosures, which require companies to disclose absolute gross GHG emissions generated during the reporting period, measured following the GHG Protocol, including Scope 1, 2, and 3 GHG emissions. It is up to individual jurisdictions worldwide to adopt and/or adapt the standards issued by the ISSB, however, G20 countries have signaled their support for the new IFRS standards. Copyright 2024 Tango. All rights reserved.