Investor Guidance on Climate Change

By Lara Greden, Environmental Product Strategist
March 4th, 2010

Consistency in Reporting to Investors Drives SECs Interpretive Guidance on Climate Change

With the SEC’s newly issued interpretive guidance on climate change, managers are reminded yet again of the pressing need to harmonize reporting across stakeholder groups: financial, environmental compliance, customers, and the public. As a law enforcement agency, the SEC’s Commissioner, Elisse Walter, stated that the interpretive guidance does not alter or add any new legal requirements.

Rather, it sets a standard framework for companies to disclose information in the interest of shareholders. The guidance outlines consideration in the areas of existing regulations, pending regulations, business risks or opportunities, and physical impacts of climate change. Previous examples of the SEC issuing interpretive guidance on disclosures include Y2K and preliminary merger negotiations. Disclosure of management’s analysis from a financial perspective is at the heart of the SECs guidance on climate change.

The SEC noted that one driver for issuing this guidance is the myriad of places that companies currently include reports to the public for their environmental and carbon impacts. Corporate sustainability reports, reporting to the EPA and state environmental agencies and voluntary initiatives such as the EPA Climate Leaders program and Climate Disclosure Project are several of the places that companies release information and statements. Companies include data on carbon footprints, analysis of carbon taxes, and positioning in carbon cap and trade schemes.

They also include success stories on projects that achieved notable reductions in greenhouse gas emissions, often focusing on replacing equipment with energy efficient models or implementing control and monitoring systems in buildings.

To the people working to analyze a company’s position, achieve reductions, and report on status, the multiplicity of reporting authorities makes consistency a real challenge for driving the bottom-line.

While there is not a one-size-fits-all approach for analysis of climate related impacts to a business, the common implication for all businesses is gathering the necessary inputs to support analysis. This includes information on the regulatory environment and trends in the marketplace. It also includes data from business operations, including electricity and natural gas consumption of buildings, other building energy use, fuel usage by vehicle fleets, fugitive emissions from refrigerants, and employee travel. Looking into their supply chains, companies such as Walmart are collecting data on sourcing of raw materials, manufacturing processes, transportation, and packaging.

Those inputs are assessed using carbon footprint calculation protocols such as the General Reporting Initiative which provide standard tables of emissions factors and guidance on allocation of emissions to jointly owned or operated ventures. Benchmarking against others in the industry or other facilities within an organization, such as looking at the top ten performers of distributed facilities, helps companies prioritize investments in recommissioning and retrofits. The analysis and data gathering functions cross departments: accounting, finance, energy, maintenance, procurement and EH&S compliance departments.

Energy companies such as PPL have been among the first to report on climate risks to the SEC. The message of significance within the SEC’s decision to issue guidance on disclosure is that climate change and carbon are to be analyzed with respect to the bottom line. Finding the projects with the highest ROI or the best market opportunities to exploit with respect to carbon reduction is the common element managers across departments will work towards as they cooperate in carbon analysis and reporting requirements.

About Verisae

Verisae helps measure, manage and reduce equipment and energy costs including the related business and environmental impacts of carbon emissions. The Sustainability Resource Planning (“SRP”) software platform improves operational efficiency, protects brand integrity and helps ensure regulatory compliance for distributed enterprises across many industries. Verisae delivers a broad range of sustainability solutions to dozens of clients globally with thousands of daily users including an extended network of third-party suppliers. Verisae’s integrated sustainability platform actively tracks millions of assets across thousands of sites worldwide.

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