SEC approves first US climate disclosure rules: Why the requirements are much weaker than planned and what they mean for companies

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Sehoon Kim, University of Florida

(THE CONVERSATION) After two years of intense public debate, the U.S. Securities and Exchange Commission approved the nation’s first national climate disclosure rules on March 6, 2024, setting out requirements for publicly listed companies to report their climate-related risks and in some cases their greenhouse gas emissions.

The new rules are much weaker than those originally proposed. Significantly, the SEC dropped a controversial plan to require companies to report Scope 3 emissions – emissions generated throughout the company’s supply chain and customers’ use of its products.

The rules do require larger companies to disclose Scope 1 and 2 emissions, which are emissions from their operations and energy use. But those disclosures are required only to the extent that the company believes the information would be financially “material” to a reasonable investor’s decision making.

More broadly, the new rules require publicly listed companies to disclose climate-related risks that are likely to have a material impact on their business, as well as disclose how they are managing those...