Earlier this week, the Securities and Exchange Commission issued a proposed rule change that would require companies to make specific climate-related disclosures when filing a Securities Act or Exchange Act registration statement or an Exchange Act annual or other periodic report, including:
This is no "modest proposal". The proposing release consists of nearly 150,000 words and exceeds 500 pages. Indeed, the sheer prolixity of the release is itself an argument against its adoption.
It does seem that the SEC has vastly underestimated the impact of its proposal on smaller entities. While the SEC is proposing to exempt "smaller reporting companies" from the mandatory "Scope 3 disclosures", they and other small businesses are likely to incur significant costs if they are in the "value chain" of a company required to make Scope 3 disclosures. The SEC describes Scope 3 disclosures as emissions that result from third parties in a company's "value chain". If adopted, therefore, companies mandated to make Scope 3 disclosures are likely to require disclosures from others, including small companies that are not subject to the SEC's reporting requirements. Thus, the SEC could indirectly impose massive costs on small businesses even though they may not be subject to SEC reporting requirements.