Reliable Scope 3 Emissions Disclosures are Key to Addressing Climate-Related Financial Risks

A Plastics Industry Case Study

Read Reliable Scope 3 Emissions Disclosures are Key to Addressing Climate-Related Financial Risks here.

The Security and Exchange Commission’s proposal to mandate climate risk disclosures, introduced on March 21, 2022, represents important progress for investors and other market participants, but it fails to mandate a critical metric of climate-related risk: Scope 3 emissions disclosures for large registrants. Using the case study of plastic resin producers, we demonstrate in this paper that Scope 3 emissions disclosures are essential to investors and that Scope 1 and 2 emissions disclosures are not sufficient to evaluate material transition risks and opportunities for reducing those risks.

The plastics industry has high exposure to volatile fossil fuel prices and faces increasing and interconnected policy, litigation and reputational risks related to greenhouse gas (GHG) and other forms of plastic pollution that will drive demand destruction and increased liabilities along the plastics value chain. To fulfill its mission of protecting investors and enabling fair, orderly and efficient markets and capital formation, the SEC should mandate Scope 3 GHG emissions disclosures for large registrants with reasonable assurance.

Giving large registrants broad discretion to decide whether to disclose Scope 3 emissions and failing to require reasonable assurance will not fully address the market inefficiencies caused by the lack of comparable and reliable GHG emissions disclosures, nor fully protect investors from these risks. Claims that data are not available and reasonable assurance is infeasible are belied by the large number of companies already voluntarily disclosing Scope 3 GHG emissions and auditors’ existing approaches to data uncertainty.

Read Reliable Scope 3 Emissions Disclosures are Key to Addressing Climate-Related Financial Risks here.