Should Boards Still Care About the SEC’s Climate Disclosure Rules?

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Should Boards Still Care About the SEC’s Climate Disclosure Rules?

16 April 2024 / Essay

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Spoiler Alert: Yes, They Should

Based on recent headlines, board members might be under the impression that regulators are retreating from new sustainability regulations. In February, the EU scaled back the requirements of its draft sustainability compliance rule (the Corporate Sustainability Due Diligence Directive (CSDDD)); in March, the SEC abandoned key requirements in its final climate disclosure rules, such as the disclosure of scope 3 GHG emissions; and in early April, the SEC announced it would pause the final climate disclosure rules pending litigation challenges.

However, while the SEC’s final climate disclosure rules are less stringent than the proposed ones, there still is a lot of work to be done. This essay highlights eight areas that boards should keep in mind:

While we may not know the outcome of litigation challenging the SEC rules until year-end, companies should continue preparing for compliance. The SEC is facing litigation from both sides of the spectrum, with some arguing the rules are an overreach of the SEC’s statutory authority, too taxing for companies, and not material to a reasonable investor, and others arguing the rules don’t go far enough. The multiple lawsuits have now been consolidated into the US Court of Appeals for the Eighth Circuit, which will complete a judicial review of the consolidated petitions. In the meantime, the SEC has determined to exercise its discretion to pause the rules pending this review. Given how long it has taken other appellate courts to address similar challenges, we can expect a final ruling from the Eighth Circuit by year-end. Along with the US presidential election results, these two events should give companies a clear idea of the future of the rules. In t

Authors

Merel Spierings

Former Senior Researcher, Governance & Sustainabil…
The Conference Board

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Paul Washington

President and CEO
Society for Corporate Governance

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