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Preparing for Future Climate Reporting: What Industrial Manufacturers Need to Know
4/18/24 | Jacquelyn Kingsley, Senior Director of ESG Programs
The Securities and Exchange Commission (SEC) recently adopted Climate Disclosure Rules requiring public companies to disclose their climate-related information in their annual reports and registration statements. However, the implementation of the Climate Disclosure Rules have now been voluntarily stayed by the SEC in response to court challenges. Notwithstanding this development, almost all industrial manufacturers now face increased scrutiny around the environmental impact of their operations, products, and services.
Note: As of April 4th, 2024, the SEC voluntarily stayed the ruling, pending court challenges.
What does this mean? While the SEC ruling is now stayed due to pending court challenges, it’s a good idea to prepare for future climate reporting requirements as they will undoubtedly be coming, both at the federal and state level. For example, California recently enacted a regulation that makes greenhouse gas emissions (GHG) reporting mandatory.
SEC Ruling: What Needs to be Disclosed?
Below are some of the items the SEC under the Climate Disclosure Rules intends to have large accelerated and accelerated public companies disclose in their annual reports and registration statements. This isn’t an all-encompassing list, and it’s worth noting that the SEC is taking a phased-in approach with the Climate Disclosure Rules, meaning different items would need to be reported over the next several years.
- Material Scope 1 and Scope 2 greenhouse (GHG) emissions
- Governance and oversight of material climate-related risks
- The material impact of climate risks on the company’s strategy, business model, and outlook
- Risk management processes for material climate-related risks
- Material climate targets and goals
- Companies will not have to provide Scope 3 GHG emission disclosures
In short, under the stayed SEC Climate Disclosure Rules, publicly traded U.S.-based companies would need to publish their Scope 1 and Scope 2 CO2 footprint and their goals to reduce them. It’s good to make note of these if the Climate Disclosure Rules are implemented for future reporting requirements so you can start building these metrics and goals.
What are Scope 1 and Scope 2 Emissions?
According to the United States Environmental Protection Agency (EPA):
- “Scope 1 emissions are direct greenhouse (GHG) emissions that occur from sources that are controlled or owned by an organization (e.g., emissions associated with fuel combustion in boilers, furnaces, vehicles).
- “Scope 2 emissions are indirect GHG emissions associated with the purchase of electricity, steam, heat, or cooling. Although scope 2 emissions physically occur at the facility where they are generated, they are accounted for in an organization’s GHG inventory because they are a result of the organization’s energy use.”
Why This Matters for Industrial Manufacturers (And How to Prepare)
The SEC Climate Disclosure Rules present challenges and opportunities for industrial manufacturers and their suppliers. Investors are increasingly demanding transparency on environmental, social, and governance (ESG) issues, and the Climate Disclosure Rules will put a spotlight on your company's sustainability efforts. It’s also an opportunity to demonstrate sustainability leadership and show your commitment to climate protection.
3 Places to Get Started
1. Prepare for Reporting & Goal Setting
If you don’t have the policies and procedures in place to start setting goals, tracking, and reporting on your Scope 1 and Scope 2 emissions, now is the time to get started. A modern and reliable SCADA system is a good place to start.
2. Identify Improvement Opportunities
If you’re not sure where improvements can be made, consider:
- Prioritizing predictive maintenance to focus on repairs and less on replacements (Scope 1 and Scope 2)
- Utilizing thermal imaging to identify hidden energy loss (Scope 1)
- Invest in process automation and advanced process control to improve quality, consistency, and efficiency. This can also reduce energy consumption and lower your carbon footprint. (Scope 1 and Scope 2)
- Installing electric vehicle (EV) chargers for your fleet and employee vehicles (Scope 1)
- Installing LED lighting and controls to reduce kWh consumption (Scope 2)
- Using/upgrading Variable Frequency Drives (VFDs) to reduce kWh consumption (Scope 2)
- Utilizing Solar and Energy Storage Solutions (ESS) to transition from brown utility and reduce kWh consumption (Scope 2)
3. Embrace Automation
Like process automation and advanced process control, there are several automation options that can play a major role in reducing your energy consumption and emissions. Data and analytics, robotics, and other solutions can help reduce your environmental impact, improve efficiency, save money, and address staff shortages.
Taking Action: Partnering for a Sustainable Future
Rexel has a deep knowledge of climate reporting and the tools and resources that can help you be more sustainable. We’ve been reporting our environmental footprint since 2010, received an A- rating by the CDP (formerly called the Climate Disclosure Project) and achieved a Gold rating by EcoVadis. Our environmental work has also been recognized by Dow Jones Sustainable Europe Index and the S&P Sustainability Yearbook.
We understand the unique challenges faced by industrial manufacturers and offer a wide range of solutions and products to support your sustainability goals. Contact us today to learn more.
Rexel’s Sustainable Selection
As a global distribution expert, we launched our Sustainable Selection in 2023 – an informed selection of responsible products and solutions to help meet your needs and anticipate regulatory changes. The Sustainable Selection offers the most responsible products with the least impact on the planet, respecting ethical values and contributing to energy transition.
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