Tag: GHG Protocol

Is there an alternative to Scope 3?

As you know, the SEC has proposed a sweeping set of regulations for disclosure on climate (see this PubCo post, this PubCo post and this PubCo post), and we anxiously wait to see what the final rules have in store (obviously not happening in October as the SEC had previously targeted). One controversial part of that proposal draws on the Greenhouse Gas Protocol, requiring disclosure of a company’s Scopes 1 and 2 greenhouse gas emissions, and, for larger companies, Scope 3 GHG emissions if material (or included in the company’s emissions reduction target), with a phased-in attestation requirement for Scopes 1 and 2 data for large accelerated filers and accelerated filers. There haven’t been many complaints about the Scope 1 and Scope 2 requirements, but Scope 3 is another matter. According to the SEC, some commenters indicated that, for many companies, Scope 3 emissions represent a large proportion of overall GHG emissions, and therefore, could be material. However, those emissions result from the activities of third parties in the company’s “value chain,” making collection of the data much more difficult and much less reliable. In two articles published in the Harvard Business Review—“Accounting for Climate Change” and “We Need Better Carbon Accounting. Here’s How to Get There”—Robert Kaplan and Karthik Ramanna from Harvard Business School and the University of Oxford, respectively, propose another idea—the E-liability accounting system. The GHG protocol is, at this point, deeply embedded. Would the E-liability system work? Should the SEC or other regulators make room for a different concept?