Uncertainty has increased after the United States Securities and Exchange Commission (SEC) paused the implementation of its climate disclosure rule. Nevertheless, organizations are still being affected by the regulation, with companies actively preparing for compliance.
Some companies have already begun reporting under the Corporate Sustainability Reporting Directive (CSRD), which was finalized in December 2022 by the European Union. This directive is considered to be a broad environmental, social and governance (ESG) regulation, because it combines assurance, ESG data and financial data. Other countries, including New Zealand, the United Kingdom, Hong Kong, South Korea, Brazil, China and Japan, have all passed or proposed similar rules.
The significance of ESG reporting has grown, with an independent survey of global professionals finding that 81% of companies, even those unaffected by the rules, still intend to comply with the regulations. More and more companies are also acknowledging and placing more emphasis on accountability and transparency.
The ESG wave seems to have spread globally, with a separate set of ESG standards being launched by the International Sustainability Standards Board. These regulations combined with the EU’s CSRD mean that more than 50,000 companies based in Europe will now be required to report any risks related to the climate.
In the United States, the state of California recently approved a bill that directs all large companies in the state that earn more than $1 billion in a year to disclose their carbon footprints.
At the national level, it is expected that about 5,400 companies in America will be impacted by the SEC ruling. If approved, companies will need to disclose data on different aspects of ESG, including climate-related goals crucial to a business’ financial health or operational results, and any risks associated with the climate and their financial impacts, among others.
Many hope that the SEC’s regulation will standardize the release of data that rating agencies, investors, regulators in different continents, employees and customers need.
Despite all these strides, there are still gaps in international regulations on ESG reporting. For instance, the SEC rule doesn’t direct all publicly traded companies to report their scope 3 greenhouse-gas emissions. These are indirect emissions that occur in a company’s entire value chain.
Companies are advised to avoid adopting a wait-and-see-approach, with experts terming the move as unwise, seeing as ESG regulations are here to stay. Instead, experts advise that companies focus on leveraging technology for compliance with the regulatory requirements and collaboration across teams focused on collecting, analyzing and reporting sustainability data.
Some entities that have taken a proactive approach to this matter, such as Coyuchi Inc., could find themselves having a significant advantage over their peers that wait until regulations compel them to treat ESG matters seriously.
NOTE TO INVESTORS: The latest news and updates relating to Coyuchi Inc. are available in the company’s newsroom at https://ibn.fm/COYU
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