A pared-down proposal approved by the U.S. Securities and Exchange Commission (SEC) has drawn ire from critics who believe the weakened rules will make it more difficult to hold corporations accountable for the pollution generated by their operations.
What happened?
In 2022, the SEC suggested rule changes that would require companies to disclose the amount of pollution created by direct operations, as well as indirect pollution created by other actions in their value chain, including dealings with suppliers or electrical providers.
As reported by the New York Times, the final version of the proposal, adopted in early March, mandates that companies report only pollution they directly create. However, the language allows wiggle room for that reporting to be obscured, as companies will only need to take something into account if they consider it of "significant importance to their bottom lines."
Small publicly traded businesses also won't have to report the pollution they directly produce, and the proposal removed the requirement for companies to reveal the climate expertise of their board of directors.
Why is this concerning?
SEC chair Gary Gensler argued that the proposal would "enhance the consistency, comparability, and reliability of disclosures" with feedback from investors and the companies, per the Times.
Others pointed out that important data would be slipping through the cracks that could help policymakers monitor the severity of pollution issues.
"Thanks to corporate lobbying, disclosure of the very real financial risks from climate change has fallen victim to the culture wars," said Allison Herren Lee, the former acting chair and commissioner at the SEC.
Rising global temperatures — primarily driven by polluting dirty fuels — have been linked to several things that negatively impact our health and welfare. Among them are increases in extreme weather events, which have led to displacement, the resurgence of certain diseases, and decreased crop yields.
What is being done about this?
The SEC's ruling is already receiving pushback, with some arguing that the rules go too far and others saying they don't go far enough.
On March 14, Spectrum News reported oil and gas groups, multiple states, and environmental organizations are among those that have filed suits against the SEC. This could ultimately open things up for renegotiation. Supporting candidates and causes that matter to you can make your voice heard on the issue as things play out.
The Sierra Club and the Sierra Club Foundation argue that the agency allows "companies to 'selectively report' climate risks to their businesses, thus enabling them to not fully live up to the requirement to protect investors."
"The new disclosure rules fall short of providing us with the complete and consistent information we need to assess the significant financial risk that climate poses to companies and investments," Sierra Club Foundation executive director Dan Chu said.
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