What Is CDP Reporting?

A beautiful photo of the iconic Spirit Island at Maligne Lake in Jasper National Park at the heart of the Canadian Rockies. Blue sky and white clouds are reflected in the blue green lake.

These days, integrating environmental considerations with everyday operations has moved beyond good corporate citizenship to a critical part of managing both legal obligations and investor relations. Identifying proactive environmental performance is a key part of how investors make their decisions, and more and more they expect standardized environmental disclosures as part of annual financial reports.

Knowing where to start with environmental reporting can be daunting, and the landscape is a tangle of acronyms and competing standards designed for organizations across a multitude of sectors and regions.

Using a framework like the CDP can help streamline your efforts, and provide reporting in an internationally-recognized format that is useful to investors while also creating transparency for other stakeholders, leadership, and customers.

Who Does CDP Work With?

Many climate, sustainability, and ESG standards and frameworks are designed with specific industries in mind. They may support the oil and gas industry, or be designed for carbon emissions reporting in the real estate sector. The CDP works with organizations and groups across private, public, and institutional sectors, including:

  • Companies
  • Cities
  • Governments
  • Supply Chains
  • Investors
  • States and regions
  • Public authorities
  • Private markets

This makes it one of the most comprehensive programs out there, with resources and information available regardless of where you’re coming from.

What Is Reported to CDP?

CDP is an environmentally focused reporting framework. Originally called the Carbon Disclosure Project, the change to the CDP acronym reflects the way the program has shifted to now include reporting under multiple themes and categories. In 2024, the CDP is combining its three existing questionnaires (Climate, Water, and Forests) into one CDP Corporate Questionnaire. The new CDP Corporate Questionnaire is made up of 12 modules:

  1. Introduction
  2. Identification, assessment, and management of risks and opportunities
  3. Disclosure of risks and opportunities
  4. Governance
  5. Business Strategy
  6. Environmental Performance – Consolidation Approach
  7. Environmental Performance – Climate Change
  8. Environmental Performance – Forests
  9. Environmental Performance – Water Security
  10. Environmental Performance – Plastics
  11. Environmental Performance – Biodiversity
  12. Environmental Performance – Financial Services

Under each of these modules are a variety of questions based on your industry and size. Below are details on typical information to be included in each of the modules.

Module 1: Introduction

Data reported in the introduction module provides context for the rest of an organization’s disclosure. This includes the reporting year, reporting boundary, and currency that will be applied across all modules of the questionnaire. Other information collected in this module include:

  • Language of response
  • Description of organization
  • Unique identifiers (ISIN etc.)
  • Countries
  • Financial services organizational activity selection
  • Organizational activities (high-impact sectors)
  • Commodity dependence
  • Value chain mapping
  • Plastics mapping
  • Commodity mapping

Module 2: Identification, Assessment, and Management of Risks and Opportunities

This module determines if the organization has a system in place to identify, evaluate, and address environmental issues. This allows data users to assess the organization’s awareness of its environmental dependencies, impacts, risks, and opportunities throughout its direct operations, value chain, financed activities, and assets. Some of the information collected in this module includes:

  • Definition of time horizons
  • Process for identifying, assessing, and managing dependencies, impacts, risks, and opportunities (including biodiversity impacts/ dependency assessment)
  • Priority locations
  • Definition of substantive effects
  • Pollutant management procedures
  • Tailings dams management procedures

Module 3: Disclosure of Risks and Opportunities

This module delves into a company’s exposure to environmental risks and opportunities. Organizations will provide detailed reports on each risk or opportunity that could significantly impact their business, along with summary figures that capture their overall exposure. Additionally, this module includes disclosures of risks that have already materialized, with a particular emphasis on regulatory violations and compliance issues. Information collected in this module includes:

  • Risks disclosure
  • Risks exposure by River basin
  • Compliance and fines
  • Carbon pricing, emissions, and tax systems regulations
  • Probable maximum loss (PML) attributed to insurance payouts related to natural peril catastrophe events
  • Opportunities disclosure 

Module 4: Governance

This module explores the governance frameworks established to ensure accountability and responsibility for environmental issues within the board and senior management. It includes detailed information on environmental policies, public commitments, engagement in public policy, and the communication of environmental information beyond a company’s CDP response. This module collects information on:

  • Board oversight
  • Board competency
  • Management responsibilities
  • Management competency
  • Incentives
  • Environmental policies
  • Pension schemes
  • External collaborative frameworks and initiatives
  • Public policy engagement
  • Communications/reporting

Module 5: Business Strategy

This module aims to explore how the organization’s strategy has been shaped by various risks and opportunities, as well as by tools like scenario analysis, transition planning, and carbon/water pricing. Furthermore, it emphasizes the importance of aligning capital expenditure (CAPEX) and operational expenditure (OPEX) decisions with the overall strategy and plans. Additionally, organizations will be required to explain how they engage with stakeholders across their value chain on environmental issues within this module. This includes collecting information such as:

  • Scenario analysis
  • Transition plans
  • Influence of Risks and Opportunities on Strategy and Financial Planning
  • CAPEX/OPEX/revenue aligned with strategy/transition plans (including Taxonomy alignment & trend in water-related CAPEX/OPEX questions)
  • Low-carbon R&D investment
  • CAPEX breakdowns & breakeven price
  • CAPEX Trend
  • Pricing environmental externalities
  • Value chain engagement (including suppliers, smallholders (F only), customers, clients & investees)
  • Collaborative Opportunities
  • Environmental requirements for suppliers and asset managers
  • Shareholder voting

Module 6: Environmental Performance – Consolidation Approach

In the past, organizations were asked to detail their consolidation approach for reporting environmental performance data within the introductory sections of each of CDP’s corporate questionnaires. Starting in 2024, this question has been relocated to immediately precede the ‘Environmental Performance’ modules specific to each environmental issue. This change aims to clarify that the chosen consolidation approach directly influences the performance data the organization needs to disclose throughout these modules. Moreover, the updated question will now enable respondents to explain the reasoning behind their selected consolidation approach, aligning with IFRS S2 standards.

Module 7: Environmental Performance – Climate Change

When thinking about climate change reporting, many people go immediately to carbon emissions quantification, and while this is an essential part of a CDP report, it’s not the only factor to consider. Other elements to report are:

  • Emission methodology and exclusion
  • Scope 1, 2, and 3 Emissions Inventory
  • Biogenic Emissions
  • Emissions Data- Agricultural commodities
  • Emission Breakdowns
  • Energy Related Activities
  • Electricity Transmission and Distribution
  • Production Data
  • Intensity and Efficiency Metrics
  • Other Climate-Related Metrics
  • Targets
  • Emissions Reduction Initiatives
  • Best Available Techniques
  • CCS/U 
  • Land Management Practices
  • Life-Cycle Emissions Assessment
  • Product-level emissions
  • Low-carbon products and services
  • Project-based carbon credits 

Module 8: Environmental Performance – Forests

Forests disclosures document an organization’s use and dependence on forest commodities and the risks and opportunities related to this. The level of detail in the forest disclosures will vary significantly by industry or the companies within an investment portfolio. Some of the information collected in this module includes:

  • Exclusions
  • Commodity breakdown
  • Own land usage and location (production volumes)
  • Commodity sourcing locations (sourced volumes)
  • Biofuels
  • Commodity-specific targets
  • Traceability
  • Deforestation and conversion free (DCF) status metrics and methods to determine DCF
  • Status and progress towards Deforestation and Conversion Free (DCF)
  • Certified commodity volumes sold
  • Emissions
  • Legal compliance
  • Landscape and Jurisdictional approaches
  • Initiatives/activities
  • Ecosystem restoration projects 

Module 9: Environmental Performance – Water Security

Water quality and water scarcity are critical concerns for businesses, governments, and everyday people around the world. The CDP’s water disclosures help companies understand and reduce their dependence on freshwater sources, including throughout their value chain. These disclosures include:

  • Exclusions
  • Company-wide water accounting
  • Facility-level water accounting & verification
  • Water efficiency and Water
  • Products and services
  • Water-related targets: water quantity, water quality, WASH, other  

Module 10: Environmental Performance – Plastics

The annual increase in plastic production presents serious threats to global ecosystems, economies, and communities. Enhancing the visibility of plastic footprints through comprehensive corporate disclosure is crucial. This transparency serves as a vital foundation, enabling companies to develop effective strategies to reduce their plastic usage and mitigate the associated pollution. This module aims to address this need for transparency around plastic usage. Some of the information collected in this module includes:

  • Plastics targets
  • Plastics activities
  • Plastics metrics for plastic polymers
  • Plastics metrics for durable goods/products and durable components
  • Plastics metrics for plastic packaging
  • Metrics for end-of-life management 

Module 11: Environmental Performance – Biodiversity

CDP acknowledges the interconnectedness of biodiversity, climate change, and all nature-related issues. Consequently, starting in 2024, all corporate disclosers, except for SMEs and public authorities, will be required to report basic biodiversity data points. Some of the information collected in this module includes:

  • Exclusions
  • Actions on biodiversity-related commitments
  • Biodiversity indicators
  • Land resourced and land disturbed
  • Areas important for biodiversity
  • Artisanal and small-scale mining (ASM)
  • Biodiversity Action Plan (BAP)
  • Impacts on biodiversity
  • Strategic business plan
  • Biodiversity-related targets
  • Mitigation hierarchy
  • Additional conservation actions
  • Closure and rehabilitation
  • Engagement activities 

Module 12: Environmental Performance – Financial Services

The module remains dedicated to addressing questions specifically pertinent to the financial services sector, including topics like financial products and services, portfolio valuations, portfolio emissions, and the broader environmental impact of investment portfolios. Some of the information collected in this module includes:

  • Environmental impact of portfolio and emissions breakdown
  • Portfolio values
  • Environmentally sustainable products/services
  • Portfolio targets

How Is CDP Reporting Used?

While conscientious and detailed environmental reporting is critical to slowing the effects of global warming and protecting fragile natural resources, the impact of the CDP goes beyond the efforts of the companies that report to it.

CDP data is a tool used by investors and purchasers when making business decisions. Low carbon opportunities and climate risks reported to the CDP are evaluated by 680 institutional investor signatories with a combined US$130 trillion in assets and more than 280 major purchasers with over US$6.4 trillion in procurement spend.

The CDP meets the requirements of the Task Force on Climate-related Financial Disclosures (TCFD). As of 2024, CDP disclosure will be aligned with the ISSB climate standard (IFRS S2) as well as partially aligned with the European Sustainability Reporting Standards (ESRS), the TNFD recommendations, and the the United States SEC’s climate disclosure rule. Programs like the CDP and organizations like the TCFD and TNFD aren’t simply about compliance or good corporate citizenship. They’re actively shaping the future of business and how investment decisions are made. 

In addition, reports submitted to the CDP are publicly available through the CDP website. This helps meet transparency requirements within governance disclosures and may also meet further public reporting requirements in broader ESG programs. To view reports, one needs to register an account, but even without one, anyone can search for reports based on geography and view submissions along with CDP Scores.

What Is a CDP Score?

No one likes a failing grade, but the CDP Score is an important part of tracking a reporting organization’s progress to achieving their environmental goals and improving their overall sustainability performance year-over-year.

The CDP assigns a score to each submitted report by category, so an organization’s climate change disclosure may have a different CDP Score than their forests disclosure. Plastics and biodiversity will remain unscored as CDP wishes to empower more companies to begin disclosing these environmental issues before starting scoring. And while scores can (and hopefully should) improve over time, the CDP stresses that achieving an A grade does not mean the organization has achieved its environmental goals, only that it has the policies, awareness, and competences in place to achieve them and demonstrate leadership over time.

Scores are given to each disclosure and are, broadly speaking, as follows:

  • F – This is a Failing score where the necessary information has not been disclosed.
  • D-/D – This is the Disclosure level score. A D- or D score indicates that a disclosure has been made, but that it perhaps doesn’t include the level of detail needed to show a real awareness of the implications of the disclosure on a business’s operations or organizational strategy into the future.
  • C-/C – This is the Awareness level score. Here, the organization has moved beyond simple disclosure and shows a better-documented awareness of how the information disclosed has real implications for both the current state of operation and future planning.
  • B-/B – This is the Management level score. Moving beyond awareness, now the reporting organization has taken real action to manage its environmental impacts. The company has moved past data gathering and is now actively managing risks and seeking opportunities to improve its environmental performance.
  • A-/A – This highest score is the Leadership score. The organization is showing true environmental leadership. Their disclosures show best practices and how environmental considerations are fully integrated into strategy and policy. The definitions for leadership follow the recommendations of the TCFD Accountability Framework.

As mentioned above, CDP scores are publicly available for anyone searching for reports on the CDP website. This is meant to incentivize reporting organizations to strive toward higher grades as new annual reports are filed.

Benefits of Reporting to the CDP

As climate and environmental-related disclosures become an increasingly important consideration in investment decisions, reporting to the CDP and programs like it are a standardized way of documenting your environmental performance for investors and may even be mandated by capital partners and financial institutions. 

Beyond investor requirements though, there are a number of additional benefits for organizations submitting public environmental reports. These include:

  • Improved reputation – Whether you’re a corporation or government entity, showing conscientious environmental performance and particularly improvement over time improves your reputation with customers, stakeholders, and even your own employees.
  • Greater competitive advantage – One of the major benefits of improved reputation and more access to investment is business growth and greater competitive advantage.
  • Documented progress and benchmarks – Claims to sustainability are a de facto feature of most corporate and institutional websites these days. Having a well-documented and independently-verified and scored environmental report validates these claims and documents your successes.
  • Future-proof your operations – The term “future-proof” comes up in many environmental reporting frameworks, but the truth is completing the CDP’s environmental risk assessments helps uncover previously unknown risks within an organization and in the value chain.
  • Proactively manage regulatory obligations – New environmental regulations are emerging all the time, particularly as we approach the 2030 date to limit global temperatures to a 1.5℃ increase. Building a CDP-compliant reporting program proactively reduces the workload when new legal obligations arise.

Fully embracing a program like the CDP takes reporting organizations beyond vague and largely unquantifiable claims of sustainability and moves them toward real documented action that can only benefit them over time.

Need Help?

Reporting to the CDP can be a labor-intensive undertaking. There is a lot of information to collect from multiple parties, departments, offices, and even from customers and suppliers. If your organization is new to environmental reporting and you need to manage your learning curve, or if you want to streamline your data collection, a software partner like FigBytes can help.

FigBytes is a CDP-accredited partner. Our platform will help you keep track of the data you need to compile, use verified methodologies to quantify environmental impacts like carbon emissions and water discharges, and provide a report that is CDP-compliant and can be customized as you need. If you’re ready to get your CDP reporting program off on the right foot, contact a FigBytes team member today.

ESG & Climate Disclosure Regulations Around the World
[2024 Guide]

Aerial view of white wind turbines in the bright blue ocean

Rules and regulations around environmental, social, and governance (ESG) and climate-related disclosures have increased significantly over the past several years. 

Regulators around the world are creating country-specific and regional legislation that aims to standardize how disclosures are reported and what information needs to go into them. The ultimate goal is to limit global warming and assist in achieving net zero targets by 2050.

In this article, we summarize ESG, sustainability, and climate-related disclosure from major countries and regions around the world, including:

  • Australia
  • Canada
  • European Union
  • India
  • USA

For each region, we answer the following questions: What is the disclosure requirement? Who does it apply to? What are the major requirements? And, where can you look for more information?

Since these issues are evolving practically every day, it’s important to treat the information below as a starting point, and look to individual organizations for the latest updates.

Australia: Climate-Related Financial Disclosure [Proposed]

What Is Australia’s Proposed Climate-Related Financial Disclosure?

In June 2023, the Australian Treasury released a Climate-Related Financial Disclosure Consultation Paper. The paper outlines the requirements that certain Australian companies may have to follow in the future related to climate disclosures – as soon as 2024.

The proposed climate disclosure requirements align closely with the Task Force on Climate-related Financial Disclosures (TCFD) framework, meaning companies who already follow this framework should be well positioned to meet the new requirements.

Who Will the Requirements of Australia’s Proposed Climate-Related Financial Disclosure Apply To?

The Australian Treasury is proposing a phased approach to implementation. Large listed and unlisted businesses and financial institutions will start reporting in the 2024-2025 financial year and, by the 2027-2028 financial year, the requirements will be expanded to all other proposed parties. Small and medium entities (e.g., under 100 employees) would not be required to report.

What Are the Main Requirements of Australia’s Proposed Climate-Related Financial Disclosure Expected To Be?

The Australian Climate-Related Financial Disclosure is still under development, but some of the items expected to be included are:

  • Governance: Companies would be required to disclose information about governance processes, controls and procedures used to monitor and manage climate-related financial risks and opportunities.  
  • Strategy:
    • Scenario Analysis: Reporting entities would be required to use qualitative scenario analysis to inform their disclosures, moving to quantitative scenario analysis by end state. Additionally, reporting entities would be required to disclose climate resilience assessments against at least two possible future states, one of which must be consistent with the global temperature goal set out in the Climate Change Act 2022.  
    • Transition Planning & Climate-Related Targets: Transition plans would need to be disclosed, including information about offsets, target setting and mitigation strategies. Further, all entities would be required to disclose information about any climate-related targets (if they have them) and progress towards these targets.  
  • Risks and Opportunities: Entities would be required to disclose information about material climate-related risks and opportunities to their business, as well as how the entity identifies, assesses and manages risk and opportunities.  
  • Metrics and Targets: Scope 1 and 2 emissions for the reporting period would be required to be disclosed. Disclosure of material scope 3 emissions would be required for all reporting entities from their second reporting year onwards. Scope 3 emissions disclosures made could be in relation to any one-year period that ended up to 12 months prior to the current reporting period.  

Where Can I Learn More About Australia’s Proposed Climate-Related Financial Disclosure?

To stay informed about Australia’s climate-related disclosure proposal, visit The Treasury’s website.

Canada: Disclosure of Climate-Related Matters [Proposed]

What is Canada’s Proposed Disclosure of Climate-Related Matters?

In 2021, the Canadian Securities Administrators (CSA), which regulates securities and publicly-traded companies in Canada, proposed a climate-related disclosure requirement for financial institutions and ESG-related requirements for large and listed entities. The proposed legislation is called 51-107 Disclosure of Climate-related Matters.

The climate-related disclosure requirement for financial institutions follows the Task Force on Climate-related Financial Disclosures (TCFD) framework, which, as of 2023, now falls under the International Sustainability Standards Board (ISSB) standards.

The requirements are expected to come into force in 2024, however they are, as of April 2024, still in the proposal stage. The CSA are currently awaiting the completion of the Canadian Sustainability Standards Board’s (CSSB) consultation on Canadian Sustainability Disclosure Standards 1 and 2 to potentially incorporate modifications appropriate for the Canadian capital markets into their proposed rules.

Who Will the Requirements of Canada’s Proposed Disclosure of Climate-Related Matters Apply To?

Potentially beginning in 2024, large Canadian banks, insurance companies and federally-regulated financial institutions will have to provide ESG reporting and climate-related disclosures.

Additionally, listed Canadian companies will have to comply with ESG reporting requirements.

What Are the Main Requirements of Canada’s Proposed Disclosure of Climate-Related Matters Expected To Be?

The CSA’s proposed requirements outline four core areas of disclosure, in line with the TCFD recommendations. These include, as stated by the CSA:

  • Governance: An issuer’s board’s oversight of and management’s role in assessing and managing climate-related risks and opportunities.
  • Strategy: The short-, medium- and long-term climate-related risks and opportunities the issuer has identified and the impact on its business, strategy, and financial planning, where such information is material. As a modification from the TCFD recommendations, the proposed disclosure would not include the requirement to disclose “scenario analysis”, which is an issuer’s description of the resilience of its strategy within different climate-related scenarios, including a 2°C or lower scenario.
  • Risk Management: How an issuer identifies, assesses and manages climate-related risks and how these processes are integrated into its overall risk management.
  • Metrics and Targets: The metrics and targets used by an issuer to assess and manage climate-related risks and opportunities where the information is material.

Where Can I Learn More About Canada’s Proposed Disclosure of Climate-Related Matters?

To stay informed about these evolving disclosure requirements, visit the Canadian Securities Administrators (CSA) website.

European Union: Corporate Sustainability Reporting Directive (CSRD)

What Is the CSRD?

In January 2023, the European Union’s (EU) new Corporate Sustainability Reporting Directive (CSRD) entered into force. The CSRD takes over from its predecessor, the Non-Financial Reporting Directive (NFRD), as the latest in ESG reporting for European businesses.

The NFRD only applied to large public-interest entities with over 500 employees. However, the CSRD is much broader and will phase in smaller and non-EU companies over the next three years.

By the time the CSRD is fully phased in, more than 50,000 organizations will be required to report under the program. By expanding participation in the program, the CSRD is anticipated to take significant steps in reaching Europe’s carbon neutral goals by 2050.

The CSRD will also help consumers, investors, organizations, and other stakeholders evaluate the sustainability performance of companies and make decisions based on standardized data.

Who Does the CSRD Apply To?

As mentioned, the CSRD applies to a wide range of businesses. It requires all large companies, SMEs and listed companies, with the exception of listed micro-enterprises, to disclose information on risks and opportunities arising from social and environmental issues, and on their impact on people and the environment.

The first companies that will be required to report using the new rules will have to do so in the 2024 fiscal year, with their reports published in 2025. These companies will be required to report using the European Sustainability Reporting Standards (ESRS). 

The requirement to report will be phased in, with longer phase-in periods for companies with fewer than 750 employees. 

What Are the Main Requirements of the CSRD?

The ESRS have been finalized by the European Commission as of July 2023. The final version of the ESRS is made up of two cross-cutting standards and include disclosures in the following areas:

  • General disclosures
  • Environmental disclosures
    • Climate change (e.g., disclosing the release of greenhouse gas emissions including carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFCs), perfluorocarbons (PCFs), sulphur hexafluoride (SF6) and nitrogen trifluoride (NF3) to report Scopes 1, 2 and 3 with data gathered from up and down the supply chain)
    • Pollution (e.g., disclosing pollution of air, land and water, including the emissions of air pollutants, inorganic pollutants, ozone-depleting substances, microplastics, etc.)
    • Water and marine resources (e.g., disclosing annual water consumption, the amount of water recycled and stored, etc.)
    • Biodiversity and ecosystems
    • Resource use and circular economy
  • Social disclosures
    • Own workforce (e.g., disclosing information about collective bargaining, diversity, wages, social protection, persons with disabilities, etc.)
    • Workers in the value chain
    • Affected communities
    • Consumers and end users
  • Governance disclosures
    • Business conduct (e.g., disclosing policies related to corporate culture, management of relationships with suppliers, avoiding corruption and bribery, protection of whistle-blowers, animal welfare, payment practices, etc.)

The reporting requirements are highly aligned with the standards of the International Sustainability Standards Board (ISSB) and the Global Reporting Initiative (GRI).

Where Can I Learn More About the CSRD?

Learn more about the CSRD in our CSRD Reporting Guide eBook or visit the European Commission’s website.

India: Business Responsibility and Sustainability Report (BRSR)

What Is the BRSR?

The Business Responsibility and Sustainability Report (BRSR) came into effect in 2023 and is the first framework in India that requires eligible Indian companies to report metrics on sustainability-related factors.

Although the BRSR is India’s first ESG reporting framework, it is an evolution from the earlier voluntary guidelines that were first issued in 2009 and later released as the Business Responsibility Report (BRR) in 2012.

The BRSR was initiated by the Securities Exchange Board of India (SEBI), which is India’s regulatory body for its securities market. The SEBI created the BRSR in a way that would align with other international reporting frameworks including the Global Reporting Initiative (GRI), Sustainability Accounting Standards Board (SASB) and the Task Force on Climate-Related Financial Disclosures (TCFD).

Who Does the BRSR Apply To?

As of the 2022-2023 fiscal year, all eligible Indian companies must prepare a BRSR-compliant report. 

Eligible companies defined as those that are listed as one of the top 1,000 companies by market capitalization by the SEBI. These companies must file a BRSR-compliant report to the SEBI as part of their annual report. 

Other listed companies wishing to report under the BRSR framework are welcome to do so though, as of late 2023, they are not required to report. 

What Are the Main Requirements of the BRSR?

The SEBI has prescribed the format the report should follow and provides additional guidance for reporting companies.

The report is split into three sections. Section A involves General Disclosures, Section B covers Management and Process Disclosures, and Section C deals with Principle Wise Performance Disclosure.

As a general overview, here is some of the key information required by each section. 

Section A: General Disclosures asks for information such as:

  • Key details about the company including its Corporate Identity Number (CIN), year of incorporation, name of the stock exchanges where shares are listed, contact details, etc.
  • Details about its products/services and business activities.
  • Information about its operations such as where plants/offices are located, markets and customers served, percentage of exports, etc.
  • A breakdown of its employees and workers, including demographics, representation of women, turnover rates, etc.
  • Disclosure of complaints and grievances under specific principles of the National Guidelines on Responsible Business Conduct.
  • An overview of its business conduct and sustainability issues.

Section B: Management and Process Disclosures helps companies show how they’re adopting India’s National Guidelines on Responsible Business Conduct (NGRBC) Principles and Core Elements and asks for information such as:

  • Specific commitments, goals, and targets set, as well as performance data.
  • An ESG statement demonstrating things like the company’s vision, strategy, strategic priorities, etc.
  • The name of the highest authority responsible for implementation and oversight.
  • If the company has a committee responsible for decision-making on sustainability issues.

Section C: Principal Wise Performance Disclosure requires companies to show how they’re integrating the BRSR’s nine principles into their processes and decision-making. These principles are:

  • Principle 1: Businesses should conduct and govern themselves with integrity, and in a manner that is ethical, transparent, and accountable.
  • Principle 2: Businesses should provide goods and services in a manner that is sustainable and safe.
  • Principle 3: Businesses should respect and promote the well-being of all employees, including those in their value chains.
  • Principle 4: Businesses should respect the interests of and be responsive to all its stakeholders.
  • Principle 5: Businesses should respect and promote human rights.
  • Principle 6: Businesses should respect and make efforts to protect and restore the environment.
  • Principle 7: Businesses, when engaging in influencing public and regulatory policy, should do so in a manner that is responsible and transparent.
  • Principle 8: Businesses should promote inclusive growth and equitable development.
  • Principle 9: Businesses should engage with and provide value to their consumers in a responsible manner.

Where Can I Learn More About the BRSR?

Learn more about the BRSR in our BRSR 101 Guide or visit SEBI’s website to read the regulations.

USA: SEC Climate Disclosure Standards

What are the SEC Climate Disclosure Standards?

In March 2022, the US Securities and Exchange Commission (SEC) announced that it would be proposing rule changes to require registered companies to include specific climate-related disclosures in their registration statements and periodic reports.

Now finalized, these disclosures would cover information about climate-related risks that could have a material impact on their business, along with including key climate-related metrics in their audited financial statements. This includes greenhouse gas emissions disclosures.

The SEC’s main objective is to create a standardized reporting format and method, allowing investors and other stakeholders to confidently interpret, compare, and use data for decision making.

While some parties feel the SEC is overstepping their authority with the new rules, SEC-registered organizations have been required to provide details on business costs and litigations related to environmental compliance since the 1970s. Reporting on climate-related risks and opportunities is seen by many as an extension of that 50-year-old mandate.

On March 6, 2024, the Securities & Exchange Commission (SEC) finalized and adopted these rules to enhance and standardize climate-related disclosures by public companies and in public offerings. Known as The Enhancement and Standardization of Climate-Related Disclosures for Investors, this disclosure is one of a number globally put forward to formalize and harmonize climate disclosures for the business community.

Who Will the SEC Climate Disclosure Standards Apply To?

The SEC’s climate disclosure rules will apply to publicly traded companies operating in the U.S., including those in the retail, technology, oil, and gas sectors. Approximately 2,800 U.S. businesses are expected to disclose the required information, while around 540 foreign companies with U.S. operations will also need to report their climate disclosure data.

The final rules will be phased in for all U.S. publicly traded companies with the compliance date dependent upon the status of the business as an large accelerated filer (LAF), accelerated filer (AF), non-accelerated filer (NAF), smaller reporting company (SRC), or emerging growth company (EGC).

What Are the Main Requirements of the SEC’s Climate Disclosure Standards?

With the standards now finalized, companies will have to include information about climate-related risks in their annual financial statements and annual reports, including Securities Act or Exchange Act registration statements and Exchange Act annual reports.

The SEC’s climate disclosure rules will require companies to disclose information on:

  • The role and responsibility of corporate governance in relation to identifying and managing climate-related risks.
  • Potential and actual impacts of climate-related risks on business operations or financial performance over the short-, medium- and long-term.
  • How climate-related risks have, will, or might impact business strategy and outlook.
  • Processes for identifying, assessing, and managing climate-related risk and a description of how these processes are integrated into wider risk management systems.
  • The impact of climate-related events, like severe weather, or transition activities, like changing business operations to mitigate climate-related risk, on financial statements.
  • Scopes 1 and 2 GHG emission metrics, with additional Scope 3 reporting where the organization has documented Scope 3 emissions reduction targets.
  • Any climate-related targets, goals, or transition plans.

Where Can I Learn More About the SEC Climate Disclosure Standards?

To learn more about the proposed SEC Climate Disclosure Standards, check out our latest guide on the topic or visit the SEC’s website.

Impacted by a Disclosure Requirement? FigBytes Can Help.

Whether your business needs to meet a disclosure requirement now, or in the future, FigBytes can help make the process easier. 

As a leading sustainability platform, FigBytes helps companies automate and manage their entire ESG and sustainability reporting programs, for carbon accounting and beyond.

Schedule a call with a FigBytes expert to learn more.

US Climate Policy in 2024: What to Expect and How Companies Can Prepare

wind turbine with sunset in background

Climate change continues to be a growing concern – one that affects every region of the world, particularly those living in more vulnerable areas. Climate change hazards such as flooding, wildfires, tropical storms, failed crops and severe droughts are putting hundreds of millions of lives at risk. 

We cannot afford to remain stagnant. 

Fortunately, there is a global movement towards a sustainable future with ESG climate policy initiatives, which will have a significant impact on global industry. 

With the US rejoining the United Nations Paris Agreement, and committing efforts towards a Net-Zero goal, US climate policy will continue to expand and evolve in 2024. Additionally, climate-risk disclosure rules are becoming more mainstream and substantive, and this will continue. 

As we near the second quarter of 2024 however, there are many questions and concerns that companies have regarding the future of US climate policy.

In this article, we will unpack the most recent and relevant additions and amendments to climate policies, including the more prominent ones such as ISSB, the Clean Competition Act, and California Regulations SB 253 and SB 261. We will also talk about how these policies will impact US manufacturing and the future of US sustainability.

Let’s dig in.

What Is the Securities & Exchange Commission (SEC) and Why Are They Mandating Disclosure?

The Securities & Exchange Commission (SEC) is an independent agency in the US federal government that was created for the purpose of enforcing law against market manipulation. The SEC has been active since the Wall Street Crash of 1929, and in recent years, has overseen policy and legislation related to climate-risk activities in the marketplace, including manufacturing and industry.

The purpose of the SEC climate disclosure rules is to standardize ESG reporting. Because there are so many different ESG frameworks that businesses need to navigate, the SEC seeks to unify and standardize these requirements.

Because the SEC is a U.S. entity, it may or may not recognize international policy standards regarding ESG and climate-risk activities. That has recently been the case in the wake of the March 6, 2024 finalization of The Enhancement and Standardization of Climate-Related Disclosures for Investors

While initial SEC drafts suggested an alignment with the International Sustainability Standards Board (ISSB), this has not been the case as the SEC has explicitly stated that:

“While we acknowledge that there are similarities between the ISSB’s climate-related disclosure standards and the final [SEC] rules… those jurisdictions have not yet integrated with the ISSB standards into their climate-related disclosure rules. Accordingly, at this time we decline to recognize the use of the ISSB standards as an alternative reporting regime.”

To familiarize yourself with the ISSB regulations, head over here.

What Is The Enhancement and Standardization of Climate-Related Disclosures for Investors?

Initially proposed in March 2022, the primary purpose of the ruling is to formalize and harmonize climate disclosures for businesses, their stakeholders, investors, and customers.

The disclosure requirements will apply to all publicly traded companies operating in the US. This includes oil and gas, technology, and retail, and encompasses approximately 2,800 U.S. domestic businesses and around 540 foreign businesses with operations in the U.S.

The final rules will apply to all publicly-traded U.S. companies. Compliance dates with be dependent on the status of the businesses as either:

  • Large accelerated filer (LAF)
  • Accelerated filer (AF)
  • Non-accelerated filer (NAF)
  • Smaller reporting company (SRC)
  • Emerging growth company (EGC)

How Will the SEC Ruling Affect US Companies?

Ultimately, the SEC ruling will help companies standardize their ESG reporting, across the board, and help create transparency in climate-risk activities. 

In general, the new rules will require businesses to disclose:

  • Potential and actual impacts of all climate-related risks on business operations, including financial impacts over the short-, medium-, and long-term (including climate-related events)
  • Rules and responsibilities of corporate governance as it relates to the identification and management of climate-related risks within the organization
  • How climate-related risks will impact business operations, theoretically, actually, and historically
  • The outlines process of identifying, assessing, and managing climate-related risks
  • Scopes 1 and/or scope 2 GHG emission metrics
  • All climate-related targets, transition plans, or goals

During the drafting of the SEC’s many iterations of this regulation, the final ruling has removed the Scope 3 emissions requirement that was initially proposed. 

The first wave of disclosure reporting will be required by the financial year beginning 2025.

For everything you need to know about the SEC’s new disclosure rulings, read the comprehensive guide here

What Is the Clean Competition Act?

As we talked about in detail here, as part of the expanding US climate change policies, the Clean Competition Act is an amendment to the Internal Revenue Code of 1986. It now includes a carbon border adjustment on all energy intensive products. 

The Act will require companies to submit reports, starting no later than June 30, 2026, that itemize greenhouse gas emissions produced as a result of industry activity. These reports will be based on products imported or exported into and out of the US, and will include:

  • All information eligible under the Greenhouse Gas Reporting Program
  • A breakdown of what electricity was used through an electric grid or a dedicated generation source
  • Any greenhouse gas emissions associated with the production of electricity must be reported for any electricity not provided through the electric grid 
  • The total weight (in tons) of each eligible primary good produced at that facility for each facility 

Carbon border adjustments will be imposed on all energy intensive imports to incentivize the decarbonization of domestic manufacturing. These adjustments will apply to:

  • Fossil fuels and hydrogen
  • Refined petroleum products 
  • Petrochemicals, fertilizers, and adipic acid
  • Cement, iron, steel and aluminum
  • Glass, pulp and paper, and ethanol

A portion of the fees collected from the border adjustments on these products will be allocated to research and development of clean energy technologies, working towards a Net Zero effort.

How Does the Clean Competition Act Affect US Manufacturing Companies?

The Clean Competition Act is not the only piece of legislation that will affect US manufacturing companies. For some time now, ESG disclosure requirements and regulations – particularly in the manufacturing sectors – have become more commonplace, not just in the US but abroad as well. 

The US has historically been lagging behind in the initiation and enforcement of climate related disclosures and reporting policies. However, companies are now being required to pivot and inculcate ESG data collection and reporting systems similar to financial data collection and reporting. 

In fact, ESG reporting is now being required by not just legislation and policy, but by investors, stakeholders, and customers who are demanding transparency and accountability. The Clean Competition Act is just one example of legislation that reflects all of this.

Many manufacturing companies will be impacted by the Clean Competition Act, although the Act only applies to larger, multi-armed companies, not smaller or family-owned businesses.  

While many large manufacturing companies already have ESG data collection and reporting systems, keeping on top of the latest regulations and requirements might make it necessary to create an in-house ESG rules and regulations committee in order to ensure that all regulations are met. To learn more about this, read our recent blog post on the Clean Competition Act.

What Are California Regulations SB 253 and SB 261?

California Regulations SB 253 and SB 261 are two separate pieces of legislation that have been formally ratified following the SEC’s ruling on The Enhancement and Standardization of Climate-Related Disclosures for Investors in October 2023. 

Together, SB 253 and SB 261 apply to California-based companies or companies that conduct business inside the State of California. These bills are also known as the Climate Data Accountability Act (the CCDAA) and the Climate-Related Financial Risk Act (the CRFRA), respectively.

The CCDAA and CRFRA require California businesses to disclose their scopes 1, 2, and 3 greenhouse gas emissions along with other climate-related financial risk details. 

While intended to work together, SB 253 and SB 261 are two separate entities and as such, we will talk about each individually below. 

What Is the Climate Data Accountability Act (CCDAA; SB 253)?

The CCDAA is an act that beginning in 2026, will require companies with revenue over $1B to provide “limited assurance” on scope 1 and 2 greenhouse gas emissions. These requirements will increase in 2030 to “reasonable assurance.”

Companies will be required to provide limited assurance disclosure for scope 3 emissions beginning in 2030, and in 2027, will be subject to review by the California Air Resources Board (CARB).

Any businesses found in violation of the act can be fined by the State up to a maximum of $500,000. The one exception applies to scope 3 emissions, which amendments have been made to scale back on company liability and penalty for errors made under scope 3 reporting, within reason. 

What Is the Climate-Related Financial Risk Act (CRFRA; SB 261)?

The Climate-Related Financial Risk Act (CRFRA or SB 261) requires companies entities doing business within the State of California, with revenue over $500M, to prepare and submit climate-related financial risk reports. Reports should be consistent with the recommendations made under the Task Force on Climate-Related Financial Disclosure (TCFD) framework. The first reports will be required by January 1, 2026.  

In addition and in light of the ongoing transparency that US climate change policy is attempting to achieve, applicable companies are required to make these disclosure reports available publicly on their websites.

How Do the CCDAA (SB 253) and the CRFRA (SB 261) Affect US Industry?

For the most part, many large companies who fall under the requirements of the CCDAA and the CRFRA have already begun the process of collection and reporting of climate change data and climate-related financial data. As ESG regulations continue to evolve in 2024, however, companies will need to become more efficient in data collection. 

If companies have not already done so, establishing internal protocols in the form of a charter or governance team is strongly advised. Additionally, using some form of ESG data collection and reporting software can significantly streamline workflows, reduce redundancies and inefficiencies, increase accuracy, and save time and money overall. 

As the world continues to shift towards a Net Zero goal, countries that have inculcated strong climate policies in domestic manufacturing and climate-risk industries will become strong contenders for positive trade, negotiations, and expansion in the global economy. Naturally, this can trickle down into healthier and more competitive domestic markets. 

The continued expansion of US climate change policies can help numerous US industry sectors position themselves in both the global and domestic markets. 

The Future of US Climate Policy

Thus far, the future of US climate policy is anchored in transparency and disclosure. As investors, shareholders, and customers become more climate aware, and as global markets are moving towards a Net Zero goal, US climate policy is also responding. 

The current US Administration has rejoined the Paris Agreement, which helps position the US as a global leader, and has established the National Climate Task Force (NCTA) – composed of leaders from across agencies. The goals of the NCTA is as follows:

  • The reduction of greenhouse gas emissions to 50-52% below 2005 levels by 2030
  • Achieving 100% carbon pollution-free electricity generation by 2035
  • Net-zero emissions economy by 2050
  • Investing 40% of the benefits from federal investments in climate and clean energy into disadvantaged communities

The US is also focused on expanding the availability of clean energy jobs, along with partnership with Indigenous communities and leaders, working towards a sustainable future. 

While these goals appear hopeful, the future of US climate policy rests mostly in the hands of elected leaders, and commitment to strong core beliefs in reducing climate-risk activities needs to be bipartisan and consistent. 

How Can Companies Prepare For the Future of US Climate Policy?

While many US companies have already begun collecting ESG data and making reports available, preparing for the continual evolution of US climate policy requires a systematic approach that is universal. 

To respond to new US climate policies, companies need to identify where their ESG data lives – both qualitatively and quantitatively. From this, workflow systems can be set up to identify, collect, and report all ESG data. 

Creating a governance board, along with an ESG data collection and reporting charter can be extremely helpful, particularly for multi-armed companies, with facilities across the country (and even globally). This charter should outline all current ESG rules and regulations, all personnel involved in the collection and distribution of data, safeguards against errors and protocols in the event of discrepancies. 

Additionally, continual education on ESG data collection, current rules and regulations, and the importance of remaining vigilant about ESG data will help bolster company-wide buy-in. 

Take Action Today

As we move forward into 2024 with ongoing and evolving ESG rules and regulations, companies need to keep up with what is required of them in their ESG reporting and disclosures. 

If your company is already reporting under multiple different regulations, redundancies and errors can occur. Software like FigBytes can be that key tool that optimizes your ESG data collection and reporting workflows. 

If your company is likely to fall under any of the current or new reporting requirements, it’s time to take action. Speak to a FigBytes expert for all your ESG data collection, management, and reporting needs.

Comprehensive Guide to the US Clean Competition Act

Aerial photo of wind turbines near field

Manufacturing accounts for nearly a quarter of the pollution in the US, with the country as a whole ranking as one of the largest producers of carbon emissions. As the manufacturing and industry sectors continue to grow at a rapid pace, reducing climate pollution is now non-negotiable. 

If nothing is done to stave the growing impact that manufacturing in the US has on climate change – both nationally and internationally – this problem will compound, putting vulnerable populations at risk due to climate disasters such as floods, wildfires, deadly heat waves, and failed crops. 

There is a global movement towards not just creating policies that help with transparency and accountability, but to incentivizing manufacturing companies to make concerted efforts towards mitigating climate-risky behaviors. Last January, the European Union introduced a new climate directive, the Corporate Sustainability Reporting Directive (CSRD) which requires organizations under the program to report ESG data and carbon emissions. This aims to standardize data and reporting mandates across the EU. 

One of the US’s new policies that falls in alignment with global initiatives is the Clean Competition Act

In this article, we’ll go over what the Clean Competition Act is, how it aligns with US Climate Policy, how companies can take action, and what this means for the future of US manufacturing. 

What Is the Clean Competition Act?

The Clean Competition Act is an amendment to the Internal Revenue Code of 1986, to include a carbon border adjustment that’s based on industry carbon footprint. 

The Clean Competition Act is an effort to create transparency and accountability regarding the carbon footprint of industrial companies throughout the US. This is another step in the ongoing US Climate Policy advancements towards meeting the UN Net Zero effort and is an acknowledgement of the impact that industry in the US has on the environment. It’s also an effort to reward manufacturing companies that strive towards a net-zero carbon footprint. 

Because the Act sets out a plethora of parameters, following the legislation can be a bit confusing for companies that have not encountered this type of reporting before.

Essentially, the Act will require companies to submit reports, starting no later than June 30, 2026, that itemize greenhouse gas emissions. These reports must itemize emissions for each eligible facility under the purview of the company, and will include: 

  • All information eligible under the Greenhouse Gas Reporting Program, the total amount of electricity used at each facility during the previous calendar year
  • The report must breakdown whether this electricity was provided through an electric grid or a dedicated generation source
  • For any electricity not provided through the electric grid, any greenhouse gas emissions associated with the production of electricity must be reported
  • For each facility, the total weight (in tons) of each eligible primary good produced at that facility

Additionally, the Clean Competition Act will impose a carbon border adjustment on all energy intensive imports and incentivize the decarbonization of domestic manufacturing. As of right now, these adjustments will apply to energy intensive industries such as: 

  • Fossil fuels 
  • Refined petroleum products 
  • Petrochemicals and fertilizers
  • Hydrogen
  • Adipic acid
  • Cement, iron, steel and aluminum
  • Glass, pulp and paper, and ethanol

In 2026, this will expand to include importing finished goods that are at least 500 pounds of covered energy intensive primary goods.

In 2028, the threshold will be lowered to 100 pounds.

Anything above these thresholds will be subject to a fee. 

Why Is the Clean Competition Act So Important?

Each year, the earth’s temperature has increased by an average of 1.1 degrees Celsius. While this might seem insignificant, the ramifications of this temperature increase are huge and potentially disastrous. 

Manufacturing sectors in the US play a vital role in mitigating climate change by curtailing climate-risk activities, inculcating ESG reporting and transparency, and supporting initiatives that are already being rolled out around the world that work towards a more sustainable future for everyone. This includes the Clean Competition Act. 

What Does the Clean Competition Act Mean for US Companies?

As US Climate Change Policy has evolved, so must US manufacturing companies. 

One of the aims of the Clean Competition Act is to encourage manufacturers to decarbonize their operations and products, while also providing investments in the future of clean energy research and development. Together, industry in the US can work towards a net-zero carbon future. 

These investments will come from border fees paid by manufacturers whose goods surpass the 500 pound and 100 pound thresholds. A portion of the fees collected will be used for climate change research and development. 

This climate policy initiative falls in line with other emerging global rules and regulations, but can present a challenge for companies that have not had to manage any climate related disclosures. 

What Does the Clean Competition Act Mean for Companies Outside the US?

One of the crucial aspects of the Clean Competition Act is that the rules apply not just to domestically produced products, but also internationally imported products. This means that regardless of where a company is situated globally, any products brought into the US that fall under the purview of the Clean Competition Act’s product list will be subject to a border fee. 

This can give rise to the potential of working collaboratively with other export countries towards the greater goal of reducing climate-risk activities. As many other countries are already establishing their own climate-risk policies applicable to manufacturing, the Clean Competition Act could potentially give US manufacturers wider access to partnerships abroad, bolstering domestic industry sectors.

How Can Manufacturing Companies in the US Prepare for the Clean Competition Act?

The Clean Competition Act is not the only piece of climate change legislation that’s impacting manufacturing companies. As we discussed previously, disclosure of climate-risk activities – including production, transportation, and energy use – is starting to become the standard, not just in legislation, but investors, stakeholders and customers are demanding corporate transparency and accountability.

As with other climate change policies and initiatives, companies will be required to keep rigorous data regarding climate-risk activities and products in alignment with ESG regulations. Understandably, this can become an extremely complex task, particularly for large, multi-armed companies. 

One of the complaints that have arisen from the ongoing changes to legislation across the board, is that all the new disclosure rules will levy extra burden on companies, particularly small businesses. However, the rules and regulations – for the most part – only apply to large companies, and will not affect small and family-owned businesses.

Having said that, many manufacturing companies in the US will be impacted by this. Furthermore, all manufacturing companies in the US should be adopting the collection of ESG data and reporting as a standard practice, particularly if they are supporting larger companies that do fall under the purview of the ESG rules and regulations. 

Preparing for the Clean Competition Act is largely the same as preparing for many new and amended pieces of legislation that work towards addressing climate change within the manufacturing industry. 

It all comes down to ESG data collection, reporting, and transparency.

While many companies already have some form of ESG data collection and reporting systems – particularly those who rely on investors and stakeholders who demand this transparency –  to develop a data collection and reporting system from the ground up can be a monumental task. 

The good news is that there are steps you can take to smooth the transition, throughout all arms of the company. Here’s what we recommend:

1. Create an ESG Team Across All Arms of the Company

As the legislation continues to evolve regarding climate-risk activities that demands more robust ESG reporting and transparency, it’s crucial to create a cross-functional team within the company, composed of personnel who are fully trained and versed in current regulations and requirements.

This team can create a charter of roles and responsibilities, including all procedures on a daily basis as well as in the event of data discrepancies. This team can then educate the rest of the personnel as required, ensuring everyone is on the same page.

When it comes to undertaking a task as complex as ESG data gathering and reporting, education, accountability, and clear communication and expectations are the key to obtaining company-wide buy-in.

2. Articulate Clear Workflows Company-Wide Using ESG Reporting Software

Creating systems for all ESG data gathering and reporting company-wide is a huge task that requires meticulous care. Implement workflow systems that align with all applicable rules and regulations, including the Clean Competition Act, and have personnel on-staff ready to onboard employees responsible for data-gathering and reporting. 

For many large companies, this could mean across multiple departments, facilities, and even in different regions of the world. 

ESG data gathering and reporting software can work with your specific requirements and departments. Additionally, check in with your team and conduct audits regularly to catch any issues during the process. This will help catch any errors or discrepancies, and will save time and money in the long run.

3. Create an Internal Governance Charter 

As we’ve mentioned previously, creating an internal governance and controls protocol is essential in ensuring ESG data integrity. Do this by creating a company-wide internal governance charter that articulates all aspects of ESG data collection and reporting. This should also include a list of active players, roles and responsibilities, as well as what to do in the event of any errors or discrepancies in reporting deadlines – both hard and soft.  

Additionally, create a system where your team can continually update their education regarding various legislations, including the Clean Competition Act, that might apply to your company, as well as responsible reporting. 

4. Go Beyond by Inculcating Company-Wide Carbon Positivity

Working away from corporate “greenwashing” is essential in making positive climate friendly manufacturing policies. But it’s not just that. 

Carbon positive” is a term used when articulating climate action goals. It is a step further than carbon neutral policies, and moves towards making additional positive impacts to atmospheric levels. Basically, it’s actions taken that not just offset carbon emissions to result in a net zero effect, but to go beyond by creating positive change.

Keep in mind that carbon positive actions only apply to carbon emissions. However, this is a step in the right direction. 

What Does This Mean for the Future of US Manufacturing?

Given the extensive efforts that many countries have made in order to mitigate climate-risk activities within the manufacturing sectors, the future of US manufacturing has now become predicated on following suit. 

The Clean Competition Act, while not perfect, is a step in the right direction. It encourages carbon neutral manufacturing through transparency and accountability. It also signals to other nations that US manufacturers are taking action in mitigating climate-risk activities. 

By moving forward with ESG policies and procedures, the US manufacturing industry can remain robust and competitive on both the global and domestic marketplace. 

Take Action Today

To learn more about how your company can efficiently and accurately collect, manage, and report any climate-risk data, speak to a FigBytes expert today

SEC Climate Disclosure Rules Are Finalized: Here’s What You Need to Know

Pink cherry blossom branches in front of stone pillars in Washington, DC

On March 6, 2024, the Securities & Exchange Commission (SEC) finalized and adopted rules to enhance and standardize climate-related disclosures by public companies and in public offerings. Known as The Enhancement and Standardization of Climate-Related Disclosures for Investors, this disclosure is one of a number globally put forward to formalize and harmonize climate disclosures for the business community.

With the initial proposal released in March 2022, it has been a long road to get to these rules finalized. Here’s what you need to know about the finalized SEC climate disclosure rules.

Who Will Have to Disclose?

The SEC’s climate disclosure rules will apply to publicly traded companies operating in the U.S., including those in the retail, technology, oil, and gas sectors. Approximately 2,800 U.S. businesses are expected to disclose the required information, while around 540 foreign companies with U.S. operations will also need to report their climate disclosure data.

The final rules will be phased in for all U.S. publicly traded companies with the compliance date dependent upon the status of the business as an large accelerated filer (LAF), accelerated filer (AF), non-accelerated filer (NAF), smaller reporting company (SRC), or emerging growth company (EGC).

Why Is the SEC Mandating Climate Disclosures?

Sustainability reporting and ESG are not new for most publicly traded companies. The rising demand for this information from investors, stakeholders, and customers means that many companies already prepare some kind of annual sustainability report. In fact, 90% of S&P companies publish sustainability reports.

The aim of the SEC climate disclosure rules is to standardize these reports into a format and using data that can easily be accessed and interpreted by the SEC and investors. With so many different ESG frameworks out there, it can be hard to consistently compare data across reports. 

Some of the feedback on these climate disclosures is that the SEC does not have the authority to mandate this type of reporting. Yet SEC-registered organizations have been providing details on litigation and other business costs related to environmental compliance since the 1970s. Reporting on climate-related risks and opportunities can be seen as an extension of that 50-year-old mandate.

Learn How With FigBytes Ad - Worried About SEC Climate Disclosure? The FigBytes Sustainability Platform Can Transform Your Complex Data Into Simple Reporting.

Why Is Consistency So Important?

The demand for climate disclosures is only growing. Financial managers responsible for trillions of dollars in investments have called for reporting consistent with the Task Force on Climate-Related Financial Disclosures (TCFD) and GHG Protocol so they can make responsible climate-informed decisions.

Including climate-related financial disclosures is becoming standardized globally. The TCFD was part of the expert panel that helped develop standards for the International Sustainability Standards Board (ISSB)

Businesses may be familiar with the ISSB’s parent organization, the International Financial Reporting Standards Foundation, which also administers the International Accounting Standards Board (IASB). IASB’s accounting standards are adopted around the globe and, with input from organizations like the TCFD, since the ISSB standards were finalized they are slowly being adopted too.

What Is Included in the SEC Climate Disclosure Rules?

The detailed climate reporting requirements will be discussed more broadly below, but in general, the rules will require organizations to disclose:

  • The role and responsibility of corporate governance in relation to identifying and managing climate-related risks
  • Potential and actual impacts of climate-related risks on business operations or financial performance over the short-, medium- and long-term
  • How climate-related risks have, will, or might impact business strategy and outlook
  • Processes for identifying, assessing, and managing climate-related risk and a description of how these processes are integrated into wider risk management systems
  • The impact of climate-related events, like severe weather, or transition activities, like changing business operations to mitigate climate-related risk, on financial statements
  • Scopes 1 and/or Scope 2 GHG emission metrics
  • Any climate-related targets, goals, or transition plans

Despite the fact that Scope 3 emissions can account for 50% or more of a company’s total emissions, the SEC removed this requirement after considering comments on the original proposal. The removal may dramatically impact the push for more reporting transparency and effectiveness of emissions reduction initiatives.

When Will the SEC Ruling and Disclosure Requirements Come Into Effect?

The finalized climate disclosure rules will become effective 60 days following publication of the SEC’s adopting release in the Federal Register, and compliance dates for the rules will be phased in for all registrants, with the compliance date dependent on the registrant’s filer status. Compliance will be phased in as follows:

Source: https://www.sec.gov/files/33-11275-fact-sheet.pdf

How Will SEC Climate-Related Disclosures Be Reported?

Similar to what has been proposed in other jurisdictions, climate-related disclosures to the SEC will be included in annual financial statements including Securities Act or Exchange Act registration statements and Exchange Act annual reports. Climate disclosures would go in a separate and clearly identified section of the report.

In addition to quantitative disclosures, reports will need to include a narrative assessment of climate-related risks and opportunities as part of management discussion and analysis (MD&A). 

What Climate Risks Will Be Reported to the SEC?

The SEC has defined two types of climate-related risks that should be considered and included in reporting. These are physical and transitional risks.

Physical risks are those that pose an actual tangible risk to business operations. These might be issues like facilities located in areas prone to drought, wildfires, or hurricanes, which continue to grow in intensity every year. 

Along with documenting the nature of the physical risk, the report will also need to provide details of the location where the risk exists or could exist. These details include the physical address for a facility, along with the size and number of employees who work there. 

Transitional risks are those that may occur as a result of efforts to reduce climate impacts or market changes resulting from a more climate-conscious economy. These might include production downtime as a facility is retrofitted or operations are relocated. They might also include changes in consumer buying habits that leave a company vulnerable until they can adapt.

Regardless of whether a risk is identified as being physical or transitional, organizations should disclose not only actual risks, but potential ones as well. As we’ve learned through the COVID-19 pandemic, market and business conditions can change nearly overnight, and companies need to be prepared to address potential risks quickly.

Identifying Material Risks

A critical element of risk disclosure is a materiality assessment. The scope and scale of ESG reporting can quickly get out of hand if boundaries aren’t clearly defined up front, and the payback for risk management declines rapidly if time and energy is spent on risks that may seem manageable but have little material impact on an organization’s operations.

A climate risk materiality assessment takes into consideration two elements: the importance of the risk to business operations and to external stakeholders. These stakeholders could be investors or the community at large.

Priority should be given to risks that are material to both business and stakeholders. If there is additional bandwidth to address them available, additional risks can be added to the disclosure too. 

Materiality also takes into consideration issues like time horizons. One risk might be high priority to stakeholders, but is only likely to become an issue over the medium term, while another may be lower priority, but with impacts that will be felt in the near future. In this case, the second risk might be more material initially while the first would be addressed at a later date.

Ultimately, the SEC—following Supreme Court rulings—views materiality as the degree to which a risk would influence an investor’s decision to purchase or sell securities, or how they would vote as a shareholder. 

If you’re not sure how to go about identifying material climate-related risks for your organization, check out our Materiality Workbook for additional guidance.

What Climate Impacts Will Be Reported to the SEC?

One of the challenges in disclosing climate-related risks is that they are largely hypothetical. A hurricane may impact operations at a plant near the Gulf of Mexico. Market demand for low-carbon products may accelerate dramatically in the next 1-5 years. 

It can be easy for companies to reiterate boilerplate scenarios in each annual report, without providing any meaningful information.

This is where it is important to also document known and quantifiable climate-related impacts, particularly carbon dioxide and other GHG emissions. This could include impacts on:

  • Business operations
  • Products or services
  • Suppliers or customers up and down the value chain
  • An organization’s ability to mitigate climate-related risks or adopt new climate-friendly technologies
  • Funding for research and development

By not only disclosing risks but also impacts, the reporting company will provide a narrative discussion of how these impacts have affected their financial statements, similar to what is already required for MD&A as described above.

What About Carbon Offsets or Renewable Energy Credits?

As part of disclosures on climate impacts, the report also needs to include details on carbon offsets or renewable energy credits (RECs) used, if any. This will not apply to organizations across all sectors, but is an important element to discuss because the use of these provides important context regarding how organizations are meeting their GHG reduction targets. 

While carbon offsets and RECs can be part of a broader approach to help balance climate-related expenditures in the short- or medium-terms, as carbon reduction targets become more and more stringent, they may not be an effective management strategy long term. These types of disclosures will help investors better understand future performance in a carbon-neutral economy.

What Isn’t Included in the SEC Climate Disclosure Rules?

Words like environmentally-friendly, sustainable, low-carbon and climate-conscious often get used interchangeably when they aren’t in fact the same thing in many contexts. In relation to the SEC rules on climate disclosure, it’s important to understand both which terms are used and which aren’t relevant.

The climate disclosure reporting requirements reference various ways to reduce carbon intensity and emissions through approaches like:

  • Transitioning to lower carbon economies, both in terms of production and also using low emissions modes of transportation and supporting infrastructure
  • Renewable power generation and use
  • Producing and using low waste, recycled or other low-carbon-intensive consumer products and production methods
  • Setting conservation goals and target to reduce GHG emissions
  • Providing goods and services to support other efforts in the transition to the low carbon economy

In addition to tactical steps and strategies to achieve goals and manage financial performance during transitional business activities, the rules also required documented details of sustainability governance and a narrative review of how all of this integrates into large business operations and strategy, similar to the MD&A.

But what isn’t included in the rules are other elements of environmental and sustainability reporting that you may be familiar with. For example, forestry stewardship may be top of mind for some companies based on where they are located or their industry sector but not explicitly called out in the SEC’s climate disclosure requirements. 

This may require some organizations to set new targets when they were previously focused on other elements of sustainability, while others will have to look more closely at how carbon reduction is tied to other sustainability efforts.

As discussed above, the SEC’s finalized climate disclosure rules also left out Scope 3 emissions reporting due to pushback on the difficultly and cost of collecting this data from a company’s supply chain.

Ready to Start?

There is a lot of overlap between the carbon and climate reporting requirements in the SEC’s climate disclosure rules and other ESG standards, but they will not be fully interchangeable. If you’re already reporting to other frameworks, it won’t simply be enough to attach a copy of that report to SEC filings. 

To avoid unnecessary duplication, you need to know exactly how the SEC’s final ruling and requirements are similar to other ESG programs and where it differs. A software tool like FigBytes powered by AMCS can be a critical element of streamlining your reporting efforts and managing staff and resources effectively and efficiently.

If your organization is likely to be impacted by the SEC’s new climate disclosure requirements, the time to start compiling information is now. To begin on the right foot, speak with a FigBytes advisor today. 

California’s Climate & ESG Policy: What You Need To Know in 2024

Silhouettes of palm trees are dark brown and black in the foreground. The buildings of the Los Angeles skyline are in the background in front of a pale yellow, dusty sky.

Climate change is upon us and governing bodies are paying attention. The Intergovernmental Panel on Climate Change (IPCC), an intergovernmental arm of the United Nations which assesses climate change science, has affirmed that in the near future, every region of the world will face climate change hazards, from flooding due to rising sea levels, to wildfires and tropical storms, to severe drought and failed crops. 

Fortunately, there is a global movement towards legislation that requires corporations and businesses to report any climate-risk information in relation to conducting business. This is part of global ESG climate policy initiative, and is in alliance with the EU’s Corporate Sustainability Reporting Directive (CSRD).

While we still wait for more broader and final regulations from the Securities & Exchange Commission (SEC) regarding US climate policy, the State of California is forging ahead with climate-risk reporting legislation in the form of California SB 253 and SB 261. 

This legislation proposes a positive shift towards more robust ESG rules and regulations in the US. It can also be confusing to some business leaders. 

In this article, we’ll discuss California SB 253 and SB 261 in more detail, what corporations’ responsibilities are, and how this will impact the future of business in California.

Let’s dig in.

What Are California SB 253 and SB 261, and Why Are They Important?

California’s climate action and governance has worldwide implications. Being the fifth largest economy in the world, the passing of the most recent corporate climate responsibility legislation is a positive step forward, but can also present some confusion among businesses.

Following the SEC’s ruling on The Enhancement and Standardization of Climate-Related Disclosures for Investors in October 2023, California Senate Bills 253 and 261 have been formally ratified, and will be enacted into law beginning January 2026. 

The California SB 253 and 261 bills are two separate pieces of legislation that together, apply to businesses and corporations that conduct business inside the State of California. These bills are also known as the Climate Data Accountability Act (the CCDAA) and the Climate-Related Financial Risk Act (the CRFRA), respectively.

Essentially, the CCDAA and CRFRA require California businesses to disclose their scopes 1, 2, and 3 greenhouse gas emissions and other climate-related financial risk details. 

SB 253 and SB 261 are also an attempt to create more corporate transparency regarding climate responsibility, and ultimately, ESG reporting. This makes sense given that climate change – and how we respond to it – is a public issue.

What Do the CCDAA and the CRFRA Mean for Businesses in the US?

The new California climate disclosure law requires all public and private companies with an annual revenue in excess of $500M (CRFRA) and $1 billion (CCDAA), conducting business in California, to disclose emissions. As of right now, this applies to over 5,000 companies doing business in the state, and potentially has a wider impact globally.

While this legislation aligns with other ESG requirements regulations moving forward in 2024, for businesses not already equipped with the resources to undertake this reporting responsibility, this can lead to consequences, environmentally, legally, and financially. 

What Is Required Under These Disclosure Rules?

While the legislation is detailed, and can be found on the State of California website, the broad requirements of sustainability disclosure are:

  • Roles and responsibilities of corporate actors in identifying and managing climate-related risks
  • Potential and actual impacts of climate-related risks on financial performance and/or operations, short-, medium-, and long-term
  • Detailed processes for identifying, analyzing, and preparing a strategy for managing climate-related risks
  • Potential impact of climate-related events, such as wildfires and severe storms
  • Any potential or actual changing in business operations taken in order to mitigate climate-related risks 
  • Scopes 1, 2, and 3 emission metrics (this is detailed more thoroughly below)
  • Any other climate-related goals

Scope 3 emissions reporting mandates are fairly soft. Prior to finalization of this legislation, there were some concerns regarding the lack of proposed targets required in these reports. This still appears to be an issue, which can potentially stall meaningful change. 

However, as we outlined previously, the ultimate goal is that while these companies are now legally mandated to provide transparency in ESG reporting, this may also drive companies into going beyond just compliance with their goal-setting to meet more aggressive internal targets. 

What Does the CCDAA (SB 253) Require and What Are the Implications?

Beginning in 2026, the CCDAA will require companies with revenue over $1B to provide limited assurance on scope 1 and 2 emissions. This will increase in 2030, requiring companies to provide reasonable assurance. For scope 3 emissions disclosure, limited assurance must be given beginning in 2030, and will be subject to review by the California Air Resources Board (CARB) in 2027. 

In the first year of disclosure, starting in 2026, companies must provide assurance on scope 1 and 2 emissions.

CCDAA (SB 253) gives the State authority to bring civil actions against any business that are in violation of the act, with a maximum fine of $500,000. 

For scope 3 emissions, amendments have been made to scale back the liability via introduction of “safe harbor,” which essentially means that legal implications are reduced, provided certain requirements are met. 

Under the new amendment, companies would not be subject to penalty for errors in scope 3 emission reporting, on a reasonable basis.

Why Mandating Climate Disclosures Is So Important

While disclosing ESG reports is not new for a lot of companies, there is a worldwide rising demand for transparency, particularly from stakeholders, investors, and customers. This means that many businesses must prepare and disclose sustainability reports, 90% of which are S&P companies that are already publishing reports. 

This is a step in the right direction.

However, standardization across business sectors is critical, which is one of the purposes behind the CCDAA (SB 253) and the CRFRA (SB 261). As there have been a plethora of ESG frameworks that require interpretation, setting a standardization baseline is important. This will help investors and other stakeholders make well-informed decisions, bolster customer confidence, and create more sustainable and climate-aware industries.  

What Does the CRFRA (SB 261) Require and What Are the Implications?

While the two pieces of legislation are very similar, there are some key differences. 

The CRFRA, or SB 261, requires entities doing business in California with revenue over $500M to prepare and submit climate-related financial risk reports. These reports should be consistent with the recommendations made under the Task Force on Climate-Related Financial Disclosure (TCFD) framework for climate-related financial risk reporting. 

As an example, if a business has budgeted for increased compliance insurance costs, this would be a climate-related financial cost that would be reported under the CRFRA.

Additionally, companies will need to make these climate related disclosure reports available publicly on their websites. 

First reports will be required by January 1, 2026. 

When Will SB 253 and SB 261 Disclosure Requirements Come Into Effect?

The Net Zero deadline is just around the corner, and in accordance with that, first reports for scope 1 and 2 emissions will be expected by January 1, 2026.

Scope 3 emissions reports will be expected by 2027.

How Will This Legislation Impact Business in California?

While there are a lot of companies under the $500M and $1 billion annual revenue threshold, the sheer business power that operates in the State of California means that the CCDAA (SB 253) and the CRFRA (SB 261) are a positive step in the right direction. 

How Can Your Company Prepare For the California Climate Bill?

While many companies operating in California are already preparing ESG disclosure reports, there are actionable steps that can be taken to ensure any new requirements under the California Climate Bill are met.

1. Assemble a Cross-Functional Team and Educate Company Personnel Responsible for Reporting

Climate ESG reporting is complex and operates across multiple arms of a company. A lot of information can be lost in translation throughout departments and key players. 

The first step is to create a cross-functional team that will not only be thoroughly educated in the CCDAA (SB 253) and the CRFRA (SB 261), but will have the ability to identify reporting risks, teach interdepartmental team members on reporting requirements, and ensure all disclosure requirements are met. 

Secondly, educate yourself and your cross-functional team on all aspects of the CCDAA (SB 253) and the CRFRA (SB 261). Identify how these might differ from previous disclosure requirements, particularly the CCDAA’s inclusion of scope 3 emissions. 

Your cross-functional team should work closely together to define each department’s roles and responsibilities.

2. Articulate a Clear Plan for Gathering Data

As you create your plan for reporting implementation, understanding what information to gather and how to go about doing it will set you on the right path. 

As an example, a logistics company may have scope 1 emissions data that includes fuel, scope 2 including electricity used, and scope 3 might include emissions from outsourced companies required for regular business operations. 

Armed with this information, develop a workflow that helps streamline data collection across departments. This workflow should include all timelines and responsibilities in order to avoid missed deadlines or data reporting errors, which can be costly. 

3. Streamline Workflows Across Departments

Accurate and efficient data collection company-wide is not negotiable. Implement workflow systems, such as ESG reporting software, that is consistent across all departments and accurately collects all data required under the legislations. 

Even regardless of the CCDAA (SB 253) and the CRFRA (SB 261), collecting data and creating ESG reports, quickly and accurately, is quickly becoming a standard requirement demanded by investors and stakeholders. As climate-risk data has to become more accessible and transparent, a workflow system to do this is imperative. 

As your workflow is implemented, check in with your team and conduct audits regularly. Catching errors or bottlenecks in data gathering processes will save you time and money in the future. 

4. Establish Internal Governance and Controls

Approach your climate data like you would your financial data. Internal governance and controls will always be necessary to ensure consistency, efficiency, and most importantly, accuracy in data gathering and reporting. 

Create an ESG data gathering and reporting governance charter – a document that clearly sets out all parameters, permutations, requirements, roles and responsibilities. Include both soft and hard deadlines for reporting. Additionally, create a system where your team can continually update their education regarding various legislations that might apply to your company, as well as responsible reporting. 

Your charter should lay out steps to be taken in the event of discrepancies, data gaps, or other inconsistencies, and how these issues should be addressed and by whom. 

If you are working with specialized ESG reporting software, utilize the onboarding personnel to help train an ongoing education team. 

5. Achieve Company-Wide Buy-In

Every level of an organization needs to be on the same page. Along with ESG data gathering and reporting software onboarding, hold regular educational seminars, made available company-wide. Outline the importance of the CCDAA (SB 253) and the CRFRA (SB 261), and how they impact the company and individual roles and responsibilities. 

Use concrete examples that align with workers’ daily tasks. Consider incentive programs for departments when they meet their data collection goals. Integrate these objectives into performance metrics and compensate accordingly. 

Acknowledging any extra labor these initiatives might require is critical in gaining stakeholder buy-in and keeping it. 

What Does This Legislation Mean for Businesses Outside the US?

While the CCDAA (SB 253) and the CRFRA (SB 261) are California State laws, any company that operates within the state, regardless of where the company originates, will be required to submit reports as per the legislation. 

If a company’s business extends beyond California, the operations that occur within California will still need to be reported. 

Less tangibly, this legislation signals California’s vested interest in climate change mitigation, particularly at a corporate level. This is also in alignment with the United Nations Net-Zero commitment. It aims to alleviate corporate greenwashing and will require more tangible action against climate change.  

Take Action Today

ESG reporting is becoming more important every day – but with the right software, it doesn’t have to be complex. To learn more about FigByte’s leading ESG data collection, management, and reporting solution, speak to a FigBytes expert today.

Guide to COP28: What You Need to Know

Sunrise view of Downtown Dubai and Burj Khalifa.

COP28 is taking place in the United Arab Emirates (UAE) from November 30 to December 12, 2023, and some are saying it could be the most contentious COP in years. 

In this guide, we break down what COP28 is, what’s on the agenda, and why it’s become controversial. Let’s jump right in.

Why Is It Called COP28?

COP28 stands for the “28th Conference of the Parties to the United Nations Framework Convention on Climate Change”. Since this is quite a mouthful to say, it’s been shortened to simply COP28. 

What Is the COP28 Summit?

COP28 is an international climate conference that occurs as part of the framework of the 1992 treaty, the United Nations Framework Convention on Climate Change (UNFCCC). It’s typically held annually and is a forum for world leaders to discuss issues related to climate change.

COP is attended by 198 Parties, which includes representation from 197 countries plus the European Union. At COP, these leader discuss a wide range of issues such as:

  • How to tackle climate change in an effective and coordinated manner
  • How to decrease emissions with the goal of limiting global temperature rise to 1.5°C above pre-industrial levels
  • How to drive progress to meet the goals of the Paris Agreement
  • How to adapt to the impacts of climate change
  • How to support vulnerable countries that have experienced, or are at risk of experiencing, devastating impacts of climate change

Attendees at COP also include participants from the private sector, civil society, intergovernmental organizations, nongovernmental organizations, industry groups, media and other climate change leaders, influencers and experts. With so many participants and topics discussed, COPs have become large and complex, spanning multiple weeks.

This year, COP is taking place at Expo City, Dubai in the UAE from November 30 to December 12, 2023. The location for each COP is determined by the UNFCCC secretariat, after countries put forth their offers to host. The selected host country typically rotates between the different regional groups of the UN:

  • The African Group
  • The Asia-Pacific Group
  • The Eastern Europe Group
  • The Latin American and Caribbean Group
  • The Western European and Others Group

What Are COP’s Blue and Green Zones?

Similar to previous COPs, COP28 is divided into two zones: the Blue Zone and the Green Zone. The Blue Zone refers to the space managed by the UNFCCC. It’s where accredited parties, observer delegates, world leaders, and the media come together to undertake official negotiations plus side events like panel discussions, speaking events, and cultural events.

The Green Zone refers to the space managed by the hosting country – in this case, the UAE Presidency. In the Green Zone, non-accredited delegates get together to promote awareness about climate change, participate in activations, and attend panel discussions. Non-accredited delegates include people from civil society, the private sector, youth groups, Indigenous groups, and more. The Green Zone is also where the private sector is able to showcase their solutions and innovations to climate change.

At each COP, a large number of “fringe” activities also occur. These are usually held by groups who weren’t able to secure space in the Green Zone and are not official COP events.

What’s on the COP28 Agenda?

This year, COP is following a thematic program, meaning each day has a different thematic focus.

COP28’s thematic days are:

  • Day 1 (November 30, 2023) – Opening Day
  • Day 2-3 (December 1-2) – World Climate Action Summit
  • Day 4 (December 3) – Health / Relief, Recovery and Peace
  • Day 5 (December 4) – Finance / Trade / Gender Equality / Accountability
  • Day 6 (December 5) – Energy and Industry / Just Transition, Indigenous Peoples
  • Day 7 (December 6) – Multilevel Action, Urbanization and Built Environment / Transport
  • Day 8 (December 7) – Day of Rest
  • Day 9 (December 8) – Youth, Children, Education and Skills
  • Day 10 (December 9) – Nature, Land Use and Oceans
  • Day 11 (December 10) – Food, Agriculture and Water
  • Day 12 (December 11-13) – Final Negotiations

This year, day 7 is particularly significant because it marks a halfway point. It’s the half-way point for the COP28 events, and it’s the half-way point for the global commitment. The Paris Agreement was signed 7 years ago and there are 7 years to go before we reach 2030, the year by which we must achieve critical climate targets.

Why Is There Controversy Over COP28?

Even before COP28 began, it was surrounded by controversy. As the days have gone on, various issues have threatened to derail the conversations. Here’s an overview of some of the key areas of controversy at COP28. 

1) COP28’s President Has Deep Ties to Oil

COP28’s President, Sultan al-Jaber, is also the chief executive of the UAE’s national oil company, ADNOC. UAE is the world’s seventh largest oil producer. Environmental advocates have called this a conflict of interest. 

Sultan al-Jaber was also in the spotlight when he made comments that there is “no science” behind the demand to phase out fossil fuels in pursuit of climate action. He later said his comments were misinterpreted. 

2) Climate Conditions Have Deteriorated

Not only has progress not been made since the Paris Agreement was signed, conditions have actually gotten worse. The World Meteorological Organization declared 2023 the warmest year recorded in human history and the UN Secretary General António Guterres said, “We are living through a climate collapse.” 

3) Fossil Fuel Production Is Set to Increase

Despite calls to curb fossil fuel production, scientific experts predict that by 2030, it will more than double. Specifically, major producers plan to produce about 110% more fossil fuels in 2030 than would be consistent with limiting global warming to 1.5°C. Moreover, despite 50 oil giants committing to cap methane emissions from their operations, none of them said they intend on cutting back oil and gas production.

Adding to this controversy, COP28 is being held in the OPEC region and, for the first time, the group will have its own pavilion space at the conference. 

4) Some Fear Greenwashing Is Occurring

Since their inception, reliance on carbon credits has been questioned. Carbon credits, put simply, allow corporations and sometimes countries to buy credits to offset their greenhouse gas emissions. However, some scientists have said that their benefits may be overstated and that they’ve become a passport to continue polluting. 

At COP28, the US introduced their new Energy Transition Accelerator for developing countries. This is one of several initiatives around the world aimed to revitalize the idea of carbon credits. However, environmental organizations say this is a case of greenwashing and an attempt to distract from a lack of real climate finance action. 

Key Outcomes From COP28

With over 97,000 participants at COP28, it’s safe to say that a lot has happened. Impossible to cover everything, here, we briefly summarize key highlights from official events.

Highlights From Week One

As showcased in the COP28 UAE Midpoint Summary, the following highlights happened in week one of COP28.

  • Energy Transition: The COP28 Presidency and partners launched the Global Decarbonization Accelerator (GDA), a cross-sectoral package to slash emissions to accelerate a just, equitable and orderly energy transition.
  • Methane Reduction: $1.2BN was mobilized to support the reduction of methane and other non-CO2 GHG across sectors. Governments and oil companies discussed effective pathways to zero methane emissions by 2030.
  • Decarbonization: The Oil & Gas Decarbonization Charter (OGDC) was endorsed by 52 companies across all continents.
  • Renewable Energy: 124 countries endorsed the Global Renewables and Energy Efficiency Pledge, committing to tripling renewables and doubling annual energy efficiency improvements by 2030. $5BN was mobilized to facilitate the implementation of the pledge globally.
  • Climate Cooling: 65 countries endorsed the Global Cooling Pledge and committed to reducing cooling-related emissions across all sectors by at least 68% by 2050 versus 2022 levels. 
  • Climate Finance: 12 countries launched a new vision for climate finance through the COP28 UAE Declaration of Leaders on a Global Climate Finance Framework, which summarizes the need for collective action, opportunity for all, and delivering at scale.
  • Food Security: 146 Heads of State and Government endorsing the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action to address food’s high vulnerability to climate impacts and its contribution to emissions. 
  • Health: 133 countries endorsed the COP28 UAE Declaration on Climate and Health, and finance providers mobilized an initial tranche of $2.6BN for climate and health solutions.
  • Vulnerable Communities: 75 governments and 42 organizations endorsed the COP28 UAE Declaration on Climate, Relief, Recovery, and Peace, which gives political visibility to communities that are experiencing extreme vulnerability, fragility, and conflict.
  • Gender Equity: 74 countries endorsed the COP28 UAE Gender-Responsive Just Transitions & Climate Action Partnership, which aims to mainstream women’s leadership, decision making, and financing for a just transition.
  • Children and Youth: A Global Youth Statement was delivered as part of the first Youth and Education session, giving greater visibility and voice to children and youth. 

Highlights from Week Two

In week two, conversations continued, with the following points to note.

  • Youth, Children, Education and Skills: 38 countries signed the UNESCO Greening Education Partnership, Declaration on the common agenda for education and climate change at COP28. Additionally, The Youth Stocktake Report was officially launched by YOUNGO with support from the Youth Climate Champion.
  • Nature, Land Use and Oceans: 21 countries endorsed the science-based Mangrove Breakthrough target. 
  • Food, Agriculture and Water: Additional countries stepped up to endorse the COP28 UAE Declaration on Sustainable Agriculture, Resilient Food Systems, and Climate Action, bringing the total to 154. 
  • Negotiations: 2 days of final negotiations were held, where parties had their voices heard on a wide range of issues.
  • UAE Consensus: 198 parties united behind the UAE Consensus, a package to accelerate climate action.

What’s Next: Looking Ahead to COP29 and COP30

With COP28 coming to a close, the world is wondering what’s next. Will momentum continue? Will commitments be met? Will change actually occur?

Next year’s COP29 will likely be held in Azerbaijan, another country that’s heavily dependent on oil and gas production. In fact, these exports make up 90% of their economy. This has some advocates feeling skeptical. 

COP30 is set to take place in Brazil in the Amazonian city of Belém do Pará. Brazil has struggled with deforestation in the past but is taking actions to reverse that.