The SEC Climate Disclosure regulations have now been passed. While legal challenges have already arisen and enforcement of the rules has been paused, companies should still consider taking — or continuing — action now.

The final rule, though not as robust as the proposed rule, is further evidence of disclosures moving from voluntary, investor facing disclosures to mandated disclosures — which are already seen in the recently passed legislation in California, CSRD in Europe, and additional proposals in many other states, geographies worldwide.

The direction of travel is clear — companies are now operating in a context where decarbonization and climate transition planning are increasingly table stakes.

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The passage of the SEC Climate Disclosure regulations follows two other key initiatives — the landmark legislation passed in California in 2023, and the Corporate Sustainability Reporting Directive (CSRD). Many companies, particularly those with a global footprint, will find themselves responsible for complying with all three, as well as any other broad state or international regulation that is passed. While complying as a deadline approaches could seem tempting, it will most likely prove more costly — in terms of cost, time, and resources — in the long run.

SEC Final Rules

Starting in 2025 (with phased in requirements based on size & classification), all U.S. companies must disclose the following in registration statements and periodic reports: Scope 1 & 2 emissions (if material), Material climate-related risks; Material climate-related targets or goals and transition plan. The SEC can impose fines and initiate legal actions against companies that fail to report.

SB 253 (California)

Starting in 2026 (for Scope 1–2) and 2027 (for Scope 3), companies with $1B or more in annual revenues (doing business in CA) must disclose Scope 1, 2, & 3 emissions in an annual emissions report. Failure to comply could see fines up to $500,000 in a reporting year.

SB 261 (California)

Starting in 2026, companies with $500M or more in annual revenues (doing business in CA) must disclose climate-related financial risks and risk mitigation measures in a biennial report. Failure to comply could see fines up to $500,000 in a reporting year.

CSRD

Starting in 2025 – 2029 (depending on company type), applicable EU and non-EU companies must disclose Scope 1, 2, & 3 emissions in a standardized digital format in annual reports, as well as material climate-related risks and a Climate Transition Plan. Non-compliance will lead to national administrative and/or criminal penalties, depending on the EU Member State responsible for the provision and enforcement.

Comprehensive accounting of GHG emissions data is an intensive but necessary process, aggregating disparate data to identify hot spots and benchmark performance to help disclose emissions for Scope 1, 2 and/or Scope 3 with confidence.

It is critical that companies have a clear understanding of material climate related risks and opportunities, and a process to embed those into the company's standard risk management processes.

The importance of climate-related targets or goals and a holistic decarbonization strategy with clear roadmaps to implementation is critical in achieving compliance, as well as stated targets and goals.

Companies can also consider a climate transition plan that lays out how the business will pivot its existing assets, operations, and business model toward an emissions trajectory aligned to a 1.5C temperature increase.

The disclosure criteria - voluntary and increasingly mandatory - all point to the need for a holistic approach to decarbonization. Companies need sound data, a clear understanding of risk, credible targets and roadmaps, and action to drive implementation.

Every company has a different starting point to comply with these requirements. Our experts can help you determine where your organization is on its decarbonization journey and tailor our solutions to your specific needs.

One of the most complex areas is the actual work of decarbonizing operations without compromising performance. Taking action with ENGIE Impact can help your company build business resilience through the enhanced ability to respond to climate risks, identify opportunities for efficiency, accelerate decarbonization, and ultimately prepare your company for the coming energy transition.

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