Tag Archives: ghg

EHS Journal Article on Sustainability, Financial Valuation

Recently, Elm posted a piece discussing comments from Kevin Parker, the CEO of Deutsche Asset Management, an investment firm with three-fourths of US$1 trillion under management.

We expanded that original post for EHS Journal, who just published it.  The expanded version dives deeper into trends in the past decade supporting Parker’s assessment of why capital markets are bullish on carbon-intensive investment opportunities even in light of this era of sustainability.

View the article in its entirety here.

PlayPlay

WalMart’s Hot Air

Yesterday, the world’s largest retailer and its cadre of sustainability advisors released the 61-page Walmart Supplier GHG Innovation Program: Guidance Document.

Elm has read through this document and provides a brief overview of what we think are several important points.  What follows is a combination of excerpts from the document combined with Elm comments.  Not all of these points are implementation “how-to’s”.  Some of our comments reflect potential problems that should be evaluated by suppliers who are impacted by Walmart’s supplier sustainability initiatives.

The program will initially focus on the following product categories:

Animal feed, apparel, candy, cheese, frozen food, fruit, grains, household detergents, meat, media, milk, motor oil, pharmaceuticals, produce, sanitary paper products, snacks, soap & shampoo, soft drinks & beverages, televisions, and vegetables.

GIVING CREDIT WHERE CREDIT IS DUE (TO WALMART)

In past articles, Elm discussed our view there is a true business risk – rather than competitive advantage – to first-mover adoption of GHG reduction programs.  We had anticipated that such risk would be rooted in regulatory requirements.  While that may still be a concern in the longer term, it appears now that the more significant risk relates to Walmart suppliers.  The retailer has specified that no credit will be given to reductions that are not directly related to Walmart’s GHG program, such as reductions required by law or reduction programs that began prior to 2010.

Further, to get a sense of how little the supplier appears to be in the overall process, take a look at the graphic on page 9.  Of the 6 steps in the Opportunities Identification, Prioritization, and Engagement Process, only one (Step 5 – Engage & Implement) includes the suppliers as an “actor” in the process.

Generally, for a project to count towards Walmart’s reduction goal, it can either be a carbon reduction for a product that Walmart sells or a reduction at a facility/process that supplies Walmart.

The reduction achieved must also be “additional” and beyond business as usual (BAU) in terms of emissions accounting. Specifically, the activity must:

1. Demonstrate that the initiative is truly additional, meaning that the action would not have otherwise happened without Walmart’s influence, and

2. That the initiative represents performance beyond BAU, indicating that the improvement is well beyond existing business trends and has the overall impact of emissions reductions within a product category.

Walmart is accounting for carbon reductions that occur by comparing a new product, or change to a facility, to a baseline. The baseline is determined by an assessment of the “business as usual” (BAU) case. BAU is defining what would have been the carbon emissions of a product or a facility if Walmart had not encouraged, introduced, or catalyzed the implementation of an innovation. It is important to note that the carbon reduction claims, rules for quantifying reductions, and monetization within this document are written under current regulatory standards in the U.S. If Federal or other laws change that effects the guidance prescribed in this document, they will be re-assessed at that time. This includes, but is not limited to: public reporting on carbon emissions regulated by the SEC, regulations set by FTC for marketing claims, carbon tax or cap and trade legislation or regulation by EPA, or carbon reporting by EPA.

MORE COOKS IN THE KITCHEN

As if manufacturing sites don’t already have enough folks wandering the production floor and telling them how to make product….

Generally speaking, Walmart can reduce product life cycle emissions by either influencing the development or design of the products them selves and/or by improving the facilities and processes used to make and transport products.

UNDER THE INFLUENCE

The document speaks in terms of Walmart’s “influence” on suppliers in order for GHG reductions to qualify.  The use of such a loose term may create potential conflicts in the future.

For a project to qualify, it must have happened because of Walmart’s influence, showing additionality. This does not exclude projects that were also influenced by other entities, programs, incentives, etc.

The Walmart Project Champion must be able to prove that the project would not have happened at the time it did without Walmart’s involvement. In this project, Walmart’s influence on the project is deemed as “additionality.” Additionality for products means that for a lower-carbon product:

  • Walmart directly influenced the development or redesign of the products, or
  • Walmart influenced the increased sales of the product.

Influencing the product directly means that Walmart engaged with a supplier to design or influence the design of a new product that is more carbon efficient. For instance, if Walmart encouraged a supplier to re-design laundry detergent to have a lighter-weight package than is currently offered, this would be influencing the redesign. If Walmart sought out a new detergent that was concentrated or eliminated specific raw materials that are more carbon intensive to extract, then this would also be an influence of the redesign.

And to further the point above about Walmart’s attempt to become involved at the production floor level:

For facilities and processes, additionality means that:

  • Walmart directly contributed to the improvement of a facility or process, or
  • Walmart influenced energy management.

GET A LIFE (CYCLE)

Product-based reductions require that a complete lifecycle analysis (LCA) be executed by either the supplier or as part of an industry effort. To claim a reduction, the LCA must be compared against a defined baseline of a reference product.   And of course that reference is selected by WalMart.

Reductions may be identified in any phase of a product’s life cycle. A product’s life cycle includes the following primary stages:

  • Raw material extraction
  • Manufacturing
  • Packaging
  • Distribution
  • Usage
  • Disposal

The WalMart Champion must identify a reference product against which to benchmark this product. The reference product may be another product that serves a similar function. As a reference product may vary significantly from the product in question in terms of technology, materials, or size, it is important to compare them on this basic level of function, also known as a “functional unit”. This is particularly crucial for products whose impacts greatly depend on how they are used at the consumer level.

For each product, the Champion must define and describe the methodology used to calculate the baseline and forecasted reduction potentials. The Champion may use a methodology that is best suited for the calculation, but documentation and an explanation is required. Suggested life cycle and corporate accounting methodologies include ISO 14040 and ISO 14064 standards, WRI/WBCSD ’s GH G Protocol Corporate and Product Life Cycle Reporting and Accounting Standards (currently in draft form), and British Standards Institution’s PAS2050 (see Part 5 for additional information).

ClearCarbon will quantify the difference between a “BAU” case and the impact of the project from a product improvement perspective solely. The difference between the two, or the delta, will be calculated at the initial submittal based on projected trends for five years or until December 31, 2015, whichever comes first.

BAU in this context would appear to include any existing GHG programs – or those that become regulatory requirements between 2010 and 2015 – and therefore become incorporated into the baseline, so no credit is given for those reductions.

SHOW ME DA MONEY

Walmart will not resell, retire, or trade carbon reduction claim s under this Program.  Additionally, the carbon reduction claims may not be “exclusive” to Walmart. It may be the case that Walmart will help a supplier, through this Program , to achieve a carbon reduction project that the supplier also wants to report publicly. In this case, both parties (Walmart and the supplier) may state a claim of reduction. Since the reduction is not being sold or traded there is no legal claim over the reduction that would make it exclusive to Walmart or to the supplier. The supplier may monetize (sell, trade, etc) carbon reductions at their discretion, though Walmart will not be involved in these transactions.

But per comments from CEO  from Mike Duke, the supplier should expect Walmart to demand that the economic benefit from monetization be reflected in the product pricing to Walmart.

GHG reductions that come from facility or process based projects require different financial value accounting than product GHG reductions. Quantifiable financial value to customers may include savings to the customer on energy or resource consumption during use of the product, resulting in lower energy bills and lower carbon emissions.

Financial value to the Walmart supplier might include the following:

  • Fuel or electricity savings at a factory or facility level translated into cost savings through industry averages (e.g., average price of kWh x total kWh saved), or
  • Material savings from reduced input purchases or a switch to cheaper materials/inputs.

In some instances either product or project based initiatives will result in a savings to the customer or a benefit to Walmart that are not financially measureable. In these cases, a qualitative description of the positive impact should be included in the worksheets. Benefits to suppliers and businesses may include:

  • Improved business conditions,
  • Public relations opportunities, or
  • Increased positive stakeholder engagement.

The document contains no recognition of or reference to the economic value of EHS risk reductions for WalMart or the supplier.  But beware about claims of financial benefits – as indicated above WalMart intends for those savings to be passed on to WalMart by the suppliers.  Suppliers may find benefits in claiming “savings to the customer or a benefit to Walmart that are not financially measureable.”

THE BIG HOLE

The guidance is written in a manner suggesting that all suppliers manufacture their products at their own facilities.  A massive gap seems to exist relative to contract manufacturing.  Fascinating, given the astounding number of products sold by Walmart that are manufactured in China on behalf of a Walmart supplier.  Perhaps the company has lost sight of the fact that overwhelming cost pressures they impose on their suppliers has driven much of the actual manufacturing off-shore to third party contractors over which the Walmart supplier has no direct operational control.  And what about the overall supply chain GHG impact of the consumer having to more than 1 of a particular item after the initial item breaks/fails prematurely due to poor quality (like my daughter’s new $1 calculator that broke after less than 24 hours after purchasing it at WalMart)? I wonder if the retailer will take responsibility for something like that.

Well, There You Have It…

NYT reports that Washington has abandoned hope of issuing carbon legislation this year, including cap-and-trade.   The inaction is also dragging down regional/state programs as well, including the well-hyped RGGI trading program.  This shouldn’t come as a real surprise to anyone.

But it does continue to increase the business uncertainty surrounding emissions in the US.  Tune in again next year.  Or the year after….

CNBC Airs Feature on “Carbon Hunters”

Last night (April 20, 2010), CNBC aired an hour-long TV segment on the burgeoning industry labeled “carbon hunting”, the practice of finding, aggregating, marketing and selling carbon credits.

While the story illustrated successful projects, it also highlighted a myriad of risks in the carbon trading industry.

Check your local TV listings for the next airing.

“Surprised and Concerned” About Illegitimate Government-Sponsored CER Trading?

Environmental Leader has reported

that the Hungarian government sold 2 million previously used CERs, the market became tepid. Then when prices fell from more than 12 euro per credit to less than one euro, trading was suspended on two exchanges, Bluenext and Nord Pool.

The NYT provided more details of the transaction, stating

The credits appear to be part of massive blocks of CERs awarded to Eastern European states and Russia after the collapse of Soviet-era industry.  This created a loophole used by Hungary to reintroduce used CERs back into the market…

Carbon traders said countries like Hungary were exploiting the loophole to earn more money from the carbon trading system than they could by selling the credits that they had previously earned under the Kyoto system…

The traders said at least one other E.U. member state had acted similarly earlier this year.

The EU said they were “surprised and concerned” about the situation.  BusinessWeek quoted others who expressed more urgency about the matter:

“The supply and demand dynamics have been changed,” said Paul Kelly, chief executive officer of JPMorgan’s EcoSecurities unit. While the scope of the problem has yet to be determined, buyers are “questioning the authenticity” of what they are buying.

Unfortunately, this isn’t the only recent development that may cause market participants concern.  This is just the latest in a barrage of credibility and financial damage for GHG emissions trading, including:

  • Last year swindlers robbed governments of about 5 billion euros in revenues — about $6.8 billion — by selling carbon credits and disappearing before paying the required Value Added Tax on the transactions.
  • In January, swindlers used faked e-mail messages to obtain access codes for individual accounts on national registries that make up the bloc’s Emission Trading System, and then used the stolen codes to gain access to electronic certificates that represent quantities of greenhouse gases.
  • In Australia, recent fraud enforcement involved forcing a green power company, Global Green Plan, to purchase carbon credits it had promised to buy on behalf of customers, but never did.  The government is currently pursuing action against carbon capture company Prime Carbon over allegedly misleading claims made by the firm.
  • In Belgium, authorities have charged three Britons suspected of value added taxes (VAT) fraud on CO2 emissions permits.

In the U.S.,  the Regional Greenhouse Gas Initiative (RGGI), a group of Northeastern U.S. states that have a cap-and-trade program for utilities, faced its own demons.

  • The New Jersey government reallocated about $65 million in funds raised in the RGGI auction. The funds were intended for use in developing renewable energy projects, but instead are going to the state’s general fund, Reuters reports.
  • Last year, New York similarly took $90 million from its carbon fund.

So Now What?

Companies with a major stake in the GHG emissions game must conduct a detailed risk assessment of their GHG programs, solutions and exposures.  Given what has developed in the trading market in the past six months, it would be wide to carry out exposure identification, failure analyses, contingency planning and desktop exercises.

Such analyses and assessments may be critical for publicly traded companies in the United States due to SEC’s recent announcement and the newly effective EPA rule requiring reporting of greenhouse gas emissions from fossil fuel suppliers and industrial gas suppliers, direct greenhouse gas emitters and manufacturers of heavy-duty and off-road vehicles and engines.

Lawrence Heim, Director of The Elm Consulting Group International’s Atlanta office, said

Close to 10 years ago, I began posing the question ‘what if the GHG emissions trading market collapses?’  Assuming cohesive legally-enforceable emissions standards existed, the cost proposition presented by emissions trading in comparison to capital expenditures for pollution control equipment was quite attractive.  The impact of a material failure of the trading framework was significant.  This line of thought became incorporated into client risk assessments even back then.

In the US, we can look at the pollution control expenditures related to EPA’s New Source Review (NSR) enforcement initiative to provide insight into GHG control equipment costs.  Of course, NSR enforcement involves pollutants for which there are well-established and commercially-viable emissions control technologies.  We don’t have that luxury with carbon dioxide, which will likely translate into dramatically higher costs.

Further erosion of the viability of GHG emissions trading could have a significant impact on your company.  Please contact us if you would like to understand more about climate business risk assessments and potential risk mitigation options.

The Elm Consulting Group International, LLC and Sentiment360 Announce Solution to Reputational Risk Component of SEC Interpretive Guidance on Climate Risk Assessment

Use of New Technology Tracks Public Perception of Companies’ Sustainability/Climate Programs

In the Federal Register dated February 8, 2010 (75 Fed. Reg. 6290), The Securities and Exchange Commission (SEC) published its Interpretive Guidance on financial disclosure/reporting requirements as they apply to climate change matters, which is EFFECTIVE IMMEDIATELY.  Among the specific risk factors that SEC highlighted in this Interpretive Guidance is the potential business risk associated public opinion/reputational risk.  SEC stated:

Another example of a potential indirect risk from climate change that would need to be considered for risk factor disclosure is the impact on a registrant’s reputation. Depending on the nature of a registrant’s business and its sensitivity to public opinion, a registrant may have to consider whether the public’s perception of any publicly available data relating to its greenhouse gas emissions could expose it to potential adverse consequences to its business operations or financial condition resulting from reputational damage.

In response to this SEC mandate, The Elm Consulting Group International, LLC has partnered with Sentiment360, a global online monitoring company that delivers new media business intelligence SaaS solutions. With offices in the US, UK and the Philippines, Sentiment360 has a proven track record in collecting, analyzing, understanding and responding to online content, be it social media (mircrosites, blogs, forums, etc.), traditional media, video sites, image sites, and more.  Sentiment360 analysis can be delivered on-demand via a wide variety of customizable web dashboards.

“Combining the leading edge data tracking and analytics of Sentiment360 with Elm’s sustainability, climate and risk assessment expertise creates a unique solution to meeting SEC’s requirements,” said Lawrence Heim, Director in Elm’s Atlanta office.  “Our team can aggregate real-time unfiltered public opinion data without the need for surveys, screen it for relevance to sustainability/climate, and frame it in a business risk context. This will provide clients with ready-to-use information in a dramatic labor- and cost-saving manner.”

Heim continued, “Publicly-traded companies that sell products or services outside the US must assess their climate reputation risk globally to adequately determine their business risk and potential reporting needs.  Sentiment360’s worldwide data aggregation and tracking capabilities make this easy.  Elm’s global sustainability and risk expertise can assist in understanding cultural contexts of the subject matter as well.”

Sentiment360, with offices in the US, UK and the Philippines, delivers new media business intelligence SaaS solutions. As a spin-off from the Global Reach group of outsourcing companies, S360 has been offering new media analysis solutions through indirect channels since 2006. As of January 2010, S360 has begun selling directly to end-user clients under the Sentiment360 brand.

As a provider via 3rd party partners we have delivered new media analysis for a variety of entities including advertising and PR agencies, manufacturers, governments, law enforcement and more. As of January 2010, we have become the preferred provider for several global communications firms. More information is available at www.sentiment360.com.

Details and Excerpts from the SEC’s Climate Risk Disclosure Interpretive Guidance

As we previously reported, the SEC issued their interpretive guidance concerning the need for publicly-traded companies to identify, assess and (if necessary) report climate-related business risks within existing SEC reports.  This interpretive guidance document was published in the Federal Register of February 8, 2010.

Elm has reviewed this publication and provides the following excerpts that we feel may be most critical to companies who are looking to address the requirements of the new Interpretive Guidance.    These excerpts may be slightly edited for length and clarity, but we have attempted to ensure that substantive information remains as in the publication.

The Commission has not quantified … a specific future time period that must be considered in assessing the impact of a known trend, event or uncertainty that is reasonably likely to occur. As with any other judgment required by Item 303, the necessary time period will depend on a registrant’s particular circumstances and the particular trend, event or uncertainty under consideration.

[Management] should not limit the information that management considers in making its determinations. Improvements in technology and communications in the last two decades have significantly increased the amount of financial and non-financial information that management has and should evaluate, as well as the speed with which management receives and is able to use information. While this should not necessarily result in increased MD&A disclosure, it does provide more information that may need to be considered in drafting MD&A disclosure. In identifying, discussing and analyzing known material trends and uncertainties, registrants are expected to consider all relevant information even if that information is not required to be disclosed, and, as with any other disclosure judgments, they should consider whether they have sufficient disclosure controls and procedures to process this information.

If management cannot make a determination concerning the known trend, demand, commitment, event or uncertainty likely to come to fruition, it must evaluate objectively the consequences of the known trend, demand, commitment, event or uncertainty, on the assumption that it will come to fruition. Disclosure is then required unless management determines that a material effect on the registrant’s financial condition or results of operations is not reasonably likely to occur.’’  Identifying and assessing known material trends and uncertainties generally will require registrants to consider a substantial amount of financial and non-financial information available to them, including information that itself may not be required to be disclosed.

Registrants should consider specific risks they face as a result of climate change legislation or regulation and avoid generic risk factor disclosure that could apply to any company.

Management must determine whether legislation or regulation, if enacted, is reasonably likely to have a material effect on the registrant, its financial condition or results of operations.

Examples of possible consequences of pending legislation and regulation related to climate change include:

  • Costs to purchase, or profits from sales of, allowances or credits under a ‘‘cap and trade’’ system;
  • Costs required to improve facilities and equipment to reduce emissions in order to comply with regulatory limits or to mitigate the financial consequences of a ‘‘cap and trade’’ regime; and
  • Changes to profit or loss arising from increased or decreased demand for goods and services produced by the registrant arising directly from legislation or regulation, and indirectly from changes in costs of goods sold.

We reiterate that climate change regulation is a rapidly developing area.  Registrants need to regularly assess their potential disclosure obligations given new developments.

Registrants also should consider, and disclose when material, the impact on their business of treaties or international accords relating to climate change.

Depending on the nature of a registrant’s business and its sensitivity to public opinion, a registrant may have to consider whether the public’s perception of any publicly available data relating to its greenhouse gas emissions could expose it to potential adverse consequences to its business operations or financial condition resulting from reputational damage.

Significant physical effects of climate change, such as effects on the severity of weather (for example, floods or hurricanes), sea levels, the arability of farmland, and water availability and quality.

Possible consequences of severe weather could include:

  • For registrants with operations concentrated on coastlines, property damage and disruptions to operations, including manufacturing operations or the transport of manufactured products;
  • Indirect financial and operational impacts from disruptions to the operations of major customers or suppliers from severe weather, such as hurricanes or floods;

Clearly, SEC’s position is that such a risk identification and assessment framework be robust and extend far beyond a technical environmental scope.

These excerpts are presented for convenience and informational purposes only and should not be solely relied on in developing appropriate information/response to the SEC requirements.  Qualified expertise should be engaged to properly meet these requirements.

Dark Clouds on the Climate Horizon

In 2009, there was a general sense in the US that some regulatory and economic certainty would finally be established relative to greenhouse gases, and CO2 in particular.  The current administration made highly public moves and statements to that effect, which were mirrored by action in Congress and the Senate.  EPA issued its finding of endangerment.  And there was significant optimism that the COP15 Copenhagen meeting would bear fruit.

Fast forward to February 2010.  There has been quite a shift in direction and now there is arguably more business risk related to CO2/GHG than there was going into 2009.  Among recent highlights:

  • Nike formally announced that they are abandoning the use of carbon offsets and Renewable Energy Certificates (RECs), citing, among other concerns:

there is substantial scrutiny of the use of RECs, in particular related to whether they in fact help create new renewable power, or whether they are simply payment to a project that would have existed anyway. … Moving forward, however, our preference is to achieve climate neutrality through a combination of energy efficiency and the purchase of more direct forms of renewable energy, through on-site applications and other means.

  • The German Emissions Trading Authority (DEHSt) computer system was hacked and fraudulent European Union carbon allowance transactions were completed.  Read a report here.
  • Europol, the European law enforcement agency, reported on December 9, 2009 that

the European Union (EU) Emission Trading System (ETS) has been the victim of fraudulent traders in the past 18 months. This resulted in losses of approximately 5 billion euros for several national tax revenues.

As an immediate measure to prevent further losses France, the Netherlands, the UK and most recently Spain, have all changed their taxation rules on these transactions. After these measures were taken, the market volume in the aforementioned countries dropped by up to 90 percent.

  • The Copenhagen meeting failed to achieve the concrete results that had been expected.
  • The accuracy and veracity of data published by key climate scientists was called into question, creating the “Climategate” scandal.
  • The UK government published a report supporting a fixed price or auction reserve on carbon emissions over the current market-driven cap and trade.
  • National-level climate bills in the US are no longer getting the support they enjoyed in 2009.  Read more.
  • Arizona declined to participate in a regional GHG trading program, citing the difficult economy.

However, in contrast to the overarching trend, the US did see two important developments.  First, EPA promulgated its CO2 emissions reporting regulation in October 2009, which is effective calendar year 2010.  Second, SEC issued Interpretive Guidance on the inclusion of climate risks in financial disclosures.

There continues to be significant  uncertainty related to the financial value/risk of climate-related activities.  And that is not likely to change in the near future.

NGOs Win Court Battle Against Ex-Im Bank, OPIC on Project Financing

According to EnvironmentalLeader.com,

San Francisco’s federal court settled a lawsuit in which environmental groups and four U.S. cities accused the Export-Import Bank of the United States, the country’s official export-credit agency, and the Overseas Private Investment Corp., of financing energy projects overseas without considering impacts on global warming, Santa Monica Daily Press reports.

Friends of the Earth, Greenpeace, Boulder, Colorado. and the California cities of Arcata, Oakland and Santa Monica, filed the lawsuit in 2002, claiming that “the two agencies provided more than $32 billion in financing and loan guarantees for fossil fuel projects over 10 years without studying their impact on global warming or the environment as required by the National Environmental Policy Act,” FoxReno.com reports. The cities claimed they would feel the environmental impacts of overseas projects.

The two agencies have agreed to provide a combined $500 million in financing for renewable energy projects and take into account GHG emissions associated with projects each company supports.

Under the settlement, Ex-Im agreed to develop a greenhouse gas policy and start considering CO2 emissions when evaluating fossil fuel projects for investment.

OPIC agreed to reduce the GHG emissions associated with projects it supports by 20 percent over the next 10 years.

The Santa Monica Daily Press, also covering the court decision, clarified

The projects at the center of the lawsuit included a coal-fired power plant in China; a pipeline from Chad to Cameroon; and oil and natural gas projects in Russia, Mexico, Venezuela and Indonesia. Many of the projects are well under way or already completed and provided oil to the U.S.

SEC Votes to Require Public Disclosure of Financial Risk of Climate Change

The Securities and Exchange Commission (SEC) today voted to require public companies to disclose the financial risks they face related to climate change.

In her opening remarks, SEC Chairman Mary Shapiro emphasized that

we are not opining on whether the world’s climate is changing; at what pace it might be changing; or due to what causes. Nothing that the Commission does today should be construed as weighing in on those topics.

The Commission is also not considering amending well-defined rules concerning public company reporting obligations, nor redefining long-standing interpretations of materiality.

The vote requires that the SEC develop and issue an “interpretive release” – guidance that can help public companies in determining what does and does not need to be disclosed under existing rules.

Specifically, the SEC’s interpretative guidance highlights the following areas as examples of where climate change may trigger disclosure requirements:

  • Impact of Legislation and Regulation: When assessing potential disclosure obligations, a company should consider whether the impact of certain existing laws and regulations regarding climate change is material. In certain circumstances, a company should also evaluate the potential impact of pending legislation and regulation related to this topic.
  • Impact of International Accords: A company should consider, and disclose when material, the risks or effects on its business of international accords and treaties relating to climate change.
  • Indirect Consequences of Regulation or Business Trends: Legal, technological, political and scientific developments regarding climate change may create new opportunities or risks for companies. For instance, a company may face decreased demand for goods that produce significant greenhouse gas emissions or increased demand for goods that result in lower emissions than competing products. As such, a company should consider, for disclosure purposes, the actual or potential indirect consequences it may face due to climate change related regulatory or business trends.
  • Physical Impacts of Climate Change: Companies should also evaluate for disclosure purposes the actual and potential material impacts of environmental matters on their business.

Although the Commission ultimately voted in favor of the mandate, The NYT reported that Commissioner Kathleen L. Casey said it made little sense to issue such guidance “at a time when the state of the science, law and policy relating to climate change appear to be increasingly in flux.”

The SEC’s interpretive release will be posted on the SEC Web site as soon as possible.

Once the guidance is available, companies will need to review and evaluate the current risk assessment and reporting framework to determine if it is robust enough to comply with the new SEC action.  With our substantial experience with EHS risk assessment and management that extends well beyond basic regulatory compliance, Elm is uniquely suited to assist companies with this.  Please feel free to contact us to discuss further.