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The U.S. Securities and Exchange Commission adopted the SEC Climate Disclosure in 2024 to mark a change in how publicly traded companies report their climate-related risks and greenhouse gas emissions. With these new policies in place, organizations should be better equipped to offer investors more transparency by supporting Scope 1, 2, and 3 emission disclosure.
Gary Gensler, SEC Chair, highlights the significance of consistent climate information for investors saying the rules will
“provide investors with consistent, comparable, and decision-useful information, and issuers with clear reporting requirements.”
This means companies will now be required to add climate-related information to their yearly reports. This move paradoxically parallels and contrasts with other directives, the Task Force on Climate-Related Financial Disclosures (TCFD) and the European Union’s Corporate Sustainability Reporting Directive (CSRD).
To help you thrive in this increasingly complex compliance space, we're covering the specifics of the SEC Climate Disclosure, including when they come into action and how to prepare for them.
What is SEC Climate Disclosure?
The SEC Climate Disclosure comes as a set of rules that apply to publicly traded companies. The latter will now have to disclose both how climate risks impact their financial performance and also what the impact of an eventual climate change scenario can have on the performance of their business.
This dual approach goes beyond simply reporting greenhouse gas emissions (Scope 1, 2, 3). It now urges organizations to share how they're preparing to respond to climate risks including severe weather events or the influence of a low-carbon economy.
Who must comply with SEC Climate Disclosure rules?
The SEC Climate Disclosure rules apply to publicly traded companies in the United States, particularly large accelerated filers (i.e. companies with a public float of $700 million or more). Smaller accelerated filers and other public companies will face similar requirements over time but with staggered deadlines.
Private companies don't have to formally comply with the SEC's Climate Risk Disclosure. You should still track and report your climate data for investors, stakeholders, and future directives. Remember that similar mandatory disclosure requirements apply regionally within the U.S. for states like California. Similarly, regulations such as the Corporate Sustainability Due Diligence Directive (CSDDD) apply in the EU with their own (yet similar) requirements for climate-related reporting.
Verena Radulovic, Vice President for Business Engagement at the Center for Climate and Energy Solutions, suggests that while the SEC rules may seem less stringent than those in the EU, companies reporting to both frameworks may find that the overlaps reduce the additional reporting burden:
"Large public companies have been reporting on sustainability and climate for a long time — at least two decades for greenhouse gas inventories in some cases. According to one estimate, 94% of the S&P is already reporting on climate performance. Many talented people are already working on engaging internal stakeholders, generating shareholder value, and mitigating risks, which should ostensibly reduce reporting burden."
Next is a complete breakdown of when different company types need to start reporting.
SEC Climate Disclosure timeline
The timeline for the SEC Climate Disclosure rules starts in 2025.
The first reports though will be focused on climate-related financial disclosures alone. They'll also apply to large companies the rules refer to as large accelerated filers with a public float of at least $700 million. These must begin disclosing climate-related risks in their annual filings, including their Scope 1 and Scope 2 greenhouse gas emissions. They also have to share how they plan to tackle climate-related risks and what financial planning looks like in those scenarios.
In 2026, the requirement for reporting emissions and climate-related risks expands to smaller accelerated filers with a public float of $75 million to $700 million. All companies will now have to add financial statement disclosures that show the impact of climate-related risks on their financial health.
In 2027, it's time for large companies to disclose Scope 3 emissions seen as material to their business or if the company has set emission reduction targets covering Scope 3.
By 2028, SEC Climate Disclosure requires companies to comply with attestation requirements for their greenhouse gas emissions reporting. At this point, large companies must get their Scope 1 and Scope 2 emissions verified by a third party to prove disclosure accuracy.
As 2029 approaches, smaller companies may be asked to use third-party verification for their emissions data.
How to comply with SEC Climate Risk Disclosure?
While the SEC Climate Disclosure rule compliance can look different from one case to another, you can follow a structured approach to cover it all.
Step 1: Gathering your climate data
The first step for the SEC rule on climate disclosure is collecting data on your greenhouse gas emissions, water and energy consumption, as well as other factors that might be impacting the environment during your business operations.
Step 2: Analyzing your climate risks
A risk assessment helps you identify both physical and transitional risks related to climate change that could affect your business operations. At this stage, focus on prioritizing risks by considering both the severity of their impact and the likelihood of them occurring.
Step 3: Discuss your climate-related goals and plans
Focus on what’s next by setting clear, measurable objectives focused on reducing greenhouse gas emissions, enhancing energy efficiency, and promoting sustainable supply chain practices.
You must then create a step-by-step action plan to cover timelines, responsible parties, and resources needed to achieve these goals, considering their potential impact on financial projections.
Tanya Nesbitt, Partner at Thompson Hine, emphasizes how organizations are required to disclose any mitigation activities undertaken:
"If a company has undertaken activities to mitigate or adapt to climate-related risks, they'll have to disclose that in the form of a quantitative or qualitative description of any material expenditures incurred and any material impacts on their financial estimates and assumptions that resulted from the mitigation.”
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