Recently, the Securities and Exchange Commission proposed a rule that would require publicly traded corporations to regularly disclose some key climate-related data. And while a few have decried the pending requirements as “burdensome” or “onerous” or “governmental overreach,” the change would provide some much-needed information to businesses, investors and all of us consumers living on the planet.
Specifically, the proposed rule would require about 4,000 companies listed on U.S-based exchanges to periodically publish information about the risks that climate change presents to their success and what they’re going to do to mitigate those risks. Additionally, it would require these businesses to share estimates of greenhouse gas emissions related to the production and, in some cases, the consumption of their products.
The SEC doesn’t propose a cap on emissions, goals or timelines for reductions. Nor does it tell businesses how to go about addressing their contributions to climate change. It simply requires businesses to share information needed to assess the total costs of their products, including environmental costs..
It’s akin to the “Nutrition Facts” label, which can be found on most prepared food packaging. When the Food and Drug Administration mandated labels in 1990, it didn’t specify what should or should not be in a product; it simply required companies to list ingredients and key nutrients. The information made it possible for people to know what they are putting into their bodies, so they could assess and make their own decisions. Consumers adjusted their appetites and buying on their own, and companies quickly evolved recipes to deliver healthier options.
Likewise, the SEC attempts to inform investors what they are putting into the atmosphere when they buy a stock. Disclosure would create essential awareness and benchmarks for companies by revealing and quantifying their downside risks in climate change.
This holistic view can establish more complete investment parameters and define ways to operate more efficiently in hyper-competitive markets. It also answers the complex needs of investors. We want more from life than just dividends, stock buybacks, and capital gains. We’re human beings with a vested interest in preserving the environment. Consumers, employees and citizens want to do things they believe will make life better. They’re already pushing for more information, and they won’t stop.
Recognizing this, a handful of companies already voluntarily disclose this type of information. They know that increased visibility on “costs” provides a competitive advantage in a world where, without information, people often assume the worst.
New reporting requirements will be challenging to put into place, but so was developing the logistics that empower “just in time” manufacturing and delivery. Businesses made these investments anyway, and now JIT is the baseline for manufacturing that enables our pace of life.
By looking at the big picture of environmental costs, the SEC can lead us to a better basis that syncs the long-term objectives of business and society. Smart companies will jump at the strategic operations opportunity. Enlightened consumers and investors are already there.