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Last week the SEC announced wide-reaching proposed rules intended to enhance and standardise the way that US public companies report climate-related disclosures. If approved, these will require companies to disclose information on direct emissions and emissions derived from energy in their annual reports.

These could bring climate-related disclosures for US-listed business in line with efforts already underway in Europe on sustainability disclosures.

This is big news for climate action. The American market, with a market capitalization of $53trn, includes some of the biggest companies in the world, from investment giant Berkshire Hathaway, to energy behemoth ExxonMobil.

As SEC Chariman Gary Gensler noted in his statement, investors in this market recognize the climate risks, and they need reliable data on this to make informed investment decisions. Disclosure will be paramount, much as it is now in Europe. 

Here are some areas for people in communications to be thinking about as the rules get finalised:

  1. Talking about big changes takes practice

Ensure that your spokespeople are up to speed on the changes and how these would likely impact your business, both operationally and just from a disclosure standpoint. What are the curveball questions they could get asked, and do they have the correct response to reply with? Reporters are already asking for people to comment on the rules, the impact they could create, and whether or not these go far enough. For companies that are looking to engage positively with the climate agenda, this is an important moment in your communications calendar, and it will take practice.

  1. Clear messaging a must

The SEC ruling sets up a potential battle between companies and investors who have long asked for clear and transparent information on environmental risks. There is an opportunity here to win the hearts and minds of important stakeholder groups by clear and decisive messaging about the actions you are taking as a business.

The most critical part of this is on your firm’s scope 1, 2, 3 emissions. Companies will definitely have to disclose Scope 1 and 2 emissions (ie from your own operations, and energy that you buy in respectively). But firms will only need to disclose Scope 3 (from indirect upstream or downstream activities, such as across your supply chain) if deemed ‘material’.

Make sure that your messaging is clear, authentic and unambiguous on these points, and that your internal and external communications channels are put to work and well-oiled around these messages. 

  1. Does the corporate comms structure support what you need to do?

Consider if there is the right structure in place to adequately handle the new rules. Who has the ultimate responsibility to track and report climate-risks and communicating about these in a timely way? And do you have the right data and resources as a business to accurately generate the required kinds of ESG disclosures? It is important to start looking at the structure now that will support this kind of disclosure, and work out where Marcomms fits in.

  1. Do your communications assets do the job?

Is it clear to an external visitor to your website how your corporate governance on climate-related risks actually works? Do you talk about the required disclosures on your website, landing pages and other materials? Ensure that you are looking at all the right assets so you get these updated in good time should these rules become permanent.

  1. The stakes will be high if you get this wrong

It is illegal under American law to lie to investors. Since this SEC ruling is an extension of existing financial disclosures about profits, dividends and other forms of corporate activity, making a material statement on net-zero in an annual report is legally binding. Expect plenty of legal scrutiny on disclosures. 

The SEC is starting to make waves in climate disclosure. This is an important opportunity to not be washed away by this important regulatory ruling and make sure that your company’s communications structure and approach is fit for purpose. If you have specific questions or would like to speak to a member of Cognito’s sustainability practice about the communication implications of these proposed rules then please get in touch.