MHI Solutions Improving Supply Chain Performance
BY , PRESIDENT OF PRESTIGE ECONOMICS®, CHAIRMAN OF THE FUTURIST INSTITUTE®
Critical sustainability developments have occurred this year for companies in the supply chain, logistics and material handling industries. At the top of the list is the Securities and Exchange Commission (SEC) rule on emissions, which after being approved was put on hold while litigation plays out. Additionally, global geopolitical risks threaten to exacerbate supply chain costs and emissions output as companies go to great lengths to avoid conflict hotspots.
SEC Emissions Rule
After a two-year process, this spring, the SEC approved requirements related to public company disclosures about greenhouse gas emissions and risks. However, there was a critical change to the 2022 SEC rule’s original proposal, which excludes Scope 3 emissions reporting timelines—for now.
While the SEC rule was paused in April 2024 while litigation plays out, some form of Scope 1 and Scope 2 emissions reporting along the lines proposed is likely to be implemented in the future.
The SEC website, sec.gov/news/press-release/2024-31, highlights that the final rule will have many requirements, including that SEC registrants disclose material climate-related risks, climate-related board oversight, climate-related targets or goals and Scope 1 and 2 emissions.
Additionally, for large accelerated filers (LAFs) and accelerated filers (AFs) that are not otherwise exempted, information about material Scope 1 emissions and Scope 2 emissions disclosures is required, as well as an assurance report at the limited assurance level, which, for LAFs following an additional transition period, will be at the reasonable assurance level.
A Recap of Emissions Scope
Because of the SEC rule focus, reviewing the difference between emissions scopes is worthwhile.
Scope 1 emissions are direct emissions from assets owned or controlled by a company. This includes the fuel used by company vehicles and power in company facilities. Calculating these emissions is straightforward.
Scope 2 emissions are indirect and related to the production of energy that a company consumes. These emissions occur offsite from a company’s facilities and are usually produced by a power or fuels company.
To determine Scope 1 and 2 emissions, you can consult the EPA emissions reporting guidelines. Go to www.epa.gov/climateleadership/scope-1-and-scope-2-inventory-guidancreporting to learn more.
Scope 3 emissions are indirect and produced across a company’s supply chain. They include emissions from vendors upstream in the supply chain that are not Scope 2 emissions. Scope 3 emissions also include downstream emissions that result from the use or disposal of a company’s goods or services.
SOURCE: EPA
SEC Rule Implications for Material Handling Companies
Calculating and gathering data around Scope 3 emissions is more difficult and complex than for Scope 1 and Scope 2 emissions, especially if the reporting requires a high level of fidelity. Scope 3 emissions reporting requires significant transparency up and down corporate supply chains, and any level of confidence in the data would require considerable effort to confirm. For material handling businesses, a reprieve on Scope 3 emissions reporting should reduce corporate pressures to meet a challenging data collection and reporting timeline.
Click here to read the full feature.