SEC climate disclosure explained – TravelPerk

Yesterday, in a defining moment, the US Securities and Exchange Commission (SEC) announced that it is considering passing legislation requiring all companies to assess and disclose their climate-related risk. They stated that:

  • The scientific implications of climate change are ‘clear and alarming’;
  • Climate change poses a ‘pressing and urgent risk’ for ‘businesses, investors, capital markets and the economy’;
  • Companies in the US need to start assessing and disclosing their climate-related risk.

Following the recent IPCC Report that reiterated “Any further delay in concerted global action will miss a short and fast closing window to secure a livable future.” it appears that the SEC is making a major decision to act now and implement climate disclosure regulations using the Climate-Related Financial Disclosures Task Force as a model framework.

The number of corporate climate disclosures has roughly doubled year over year for more than a decade, and a large number of US corporations already voluntarily publish climate disclosures using the TCFD framework. This proposed rule would ensure greater visibility into climate-related risks and greater transparency into corporate strategies and policies.

Reuters “Corporate climate disclosures surge in 2021 as board pressure mounts”

What does this all mean?

The proposed policy change would mean all publicly traded companies must incorporate a climate disclosure into their annual financial reports, in a standardized way, to the SEC detailing how climate-related risks would likely impact their business and strategy.

Companies are expected to disclose their Scope 1 and 2 greenhouse gas emissions. Scope 3 greenhouse gas emissions are also expected to be included if they are considered ‘material’, that is, if the absence of their Inclusion in the disclosure has the potential to affect those who use the disclosure to make decisions.

In practical terms, this means companies should now start accounting for their impact and assessing climate-related risk. That includes emissions within their supply chains, as well as those related to products sold. They are likely to start implementing emission reduction strategies, while investors and shareholders make financial decisions based on the relative rankings of companies in specific sectors. This is likely to have a significant impact on any business, from global strategies to marketing and fundraising plans.

Scope 1: direct emissions from owned or controlled sources, such as fuel combustion, company vehicles, or fugitive emissions.

Scope 2: indirect emissions from purchased electricity, steam, cooling and heat.

Scope 3: all other indirect emissions within a company’s value chain, such as business travel, purchased goods or services, waste disposal, employee commuting, and more.

According to the CDP, only 1,500 companies out of the approximately 10.75 million businesses currently operating in the US voluntarily disclose their Scope 3 emissions. In general, it is considered good practice to begin accounting for Scope 3 emissions, both for transparency and effective internal analysis, and to prepare for potential future policy changes.

views of planet earth

What could this mean for investors?

Shareholders of public companies are increasingly demanding more information about climate-related risks, so they can better understand the risks that climate change could pose to their investments. Investment firm Kinnevik has a long-standing commitment to investing in sustainable business models and has for some time factored climate-related risk into investment decisions. Mathew Joseph, Kinnevik’s Chief Sustainability Officer, welcomed the SEC’s announcement, stating:

“Kinnevik believes that companies that operate responsibly and sustainably will be able to continue to be the preferred choice of consumers, as well as hire the best employees, thereby outperforming their competitors in the long run. Understanding the potential effects of climate change on their El business, strategy and financial planning under different potential future climate scenarios are critical to building a long-term sustainable business.

The SEC’s proposed rule that would require corporate disclosure of greenhouse gas emissions for its registrants is an important step in helping companies build stronger, more resilient businesses and transition to a low-carbon economy.”

Mathew Joseph, Director of Sustainability at Kinnevik

How can TravelPerk help?

TravelPerk is committed to sustainability and has developed GreenPerk and the GreenPerk API that can help companies understand, account for and disclose their Scope 3 greenhouse gas emissions from business travel.

TravelPerk’s team of experts uses global reporting methodologies, in line with the TCFD framework, to enable companies to track their corporate travel emissions across all travel verticals (air, rail, hotel and car rental) . This can really ease the pain for companies that will need to start incorporating climate disclosures into their normal business practices.

To help companies achieve their net-zero emissions goals for business travel, TravelPerk has developed a suite of sustainability solutions:

GreenPerk: where TravelPerk users and customers can understand their business travel footprint. They can offset carbon emissions from their business trips by investing in projects related to biogas capture, forestry and renewable energy. All projects are VERRA accredited and meet the highest standards of the United Nations Sustainable Development Goals.

Green Perk API: an open source external API that companies can integrate into their own platforms. This API enables users to use actionable insights to create net zero strategies, develop sustainable travel policies, and understand which elements of their business travel are leaving the biggest carbon footprint.

Some final thoughts

Shareholders of public companies are increasingly demanding more information about climate-related risks, so they can better understand the risks that climate change could pose to their investments. The SEC’s proposed rule that would require corporate disclosure of greenhouse gas emissions for its registrants is an important step in helping companies build stronger, more resilient businesses and transition to a low-carbon economy.

wind power

Understanding the potential effects of climate change on your business, strategy and financial planning under different potential future climate scenarios is critical to building a long-term sustainable business. That’s why at TravelPerk we help our customers by providing information that will help them understand their carbon footprint when it comes to business-related travel. Clients can offset carbon emissions from their business trips by investing in projects related to biogas capture, forestry and renewable energy. All projects are VERRA accredited and meet the highest standards of the United Nations Sustainable Development Goals.

TravelPerk this month also launched GreenPerk API, an open travel API-based service for its customers and all businesses, giving them the tools to use actionable insights to create net-zero strategies, develop sustainable travel policies, and understand what elements of their travel businesses are leaving the largest carbon footprint.

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