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Editor’s Choice: What Does the SEC’s Climate Disclosure Proposal Mean for Supply Chains?

By April 19, 2022Uncategorized

Note: Today’s post is part of our “Editor’s Choice” series where we highlight recent posts published by our sponsors that provide supply chain insights and advice. This article is from GEP and look at the impact of the SEC’s climate disclosure proposal.

With so much current focus on sustainability and climate change, it should not come as a surprise that a U.S. regulatory agency is proposing to require companies to report on their climate-related risks and greenhouse gas emissions. It might, however, be a surprise that the agency is not the Environmental Protection Agency but the Securities and Exchange Commission.

The SEC’s new proposed rules for climate-related disclosures would require public companies to report business exposure to climate-related risks and greenhouse gas emissions to help investors make informed decisions based on consistent and reliable data.

This approach is not entirely novel. SEC Chair Gary Gensler has indicated that the proposed rules are in line with recommendations of the Task Force on Climate-related Financial Disclosures, and similar requirements are in force in the European Union and other countries.

The SEC decision provides both challenges and opportunities for companies if they take the right steps today. What are some of the potential implications of the proposed rules?

The competitive advantage of digital transformation

Firms subject to the proposed requirements will benefit from partnering with technology providers who can help them capture emissions data, identify climate-driven risks in their operations and find opportunities to reduce costs.

Digitally mature companies that have mapped their supply chain and developed a unified data model will likely have a competitive advantage in terms of ramping up to meet the requirements.

Benefits to brand image and investor confidence

Climate-related disclosures can help or hurt a company’s brand image in the public sphere, as well as make it more attractive to investors and more favorable lending terms from financial institutions.

As a result, enterprises can leverage their climate-related disclosures to increase revenue and talk about how they are adapting to deal with climate risks.

For a more resilient supply chain, focus on sustainability

The pandemic showed companies that their supply chains can drive innovation and bottom-line impact, instead of being just a cost center.

The proposed SEC rules will incentivize companies to work with suppliers with more sustainable practices, thereby building greater supply chain resilience and helping companies innovate through their supply chain.

To read the full article, click HERE.

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