Navigating the SEC’s Climate Change Disclosure Rule: What Companies Can Learn from Delays

January 12, 2024by Team IRIS CARBON0

In the ever-evolving landscape of environmental regulations, one topic has been a focal point of discussion – the Securities and Exchange Commission’s (SEC) Climate Change Disclosure Rule. The journey towards finalizing this rule has been marked by delays, controversies, and legal challenges. However, amidst the uncertainty, there are valuable lessons that companies can learn and opportunities that can be seized. 

Understanding the SEC’s Climate Change Disclosure Rule

The SEC’s Climate Change Disclosure Rule, proposed in March 2022, aims to enhance and standardize climate-related disclosures for investors. The rule has far-reaching implications for public companies, introducing requirements such as scope 3 greenhouse gas emission disclosures, a 1%-materiality threshold for financial statement disclosures, and attestation of scope 1 and scope 2 GHG emissions for larger companies.  

However, the road to finalizing this rule has not been smooth. The SEC has faced strong pushback from public companies, particularly against what some view as onerous and challenging requirements. The debate has extended to questions about the SEC’s authority to prescribe rules that appear to influence business management and climate policy, a controversy that gained further traction with the Supreme Court’s ruling in June 2022 on West Virginia v. EPA. 

The SEC’s rulemaking process has been characterized by significant delays, and the latest report indicates that the likely finalization will be postponed until the spring of 2024. The anticipated delay has substantial consequences for organizations that are eagerly awaiting clarification over their forthcoming reporting responsibilities. However, in the midst of this uncertainty, there are positive aspects that companies can leverage. 

Thorough Analysis of Proposed Requirements

The extended timeline provides companies with a unique opportunity to thoroughly analyze the proposed requirements. With over 16,000 comment letters received by the SEC, this additional time allows businesses to engage in a meticulous examination of the rule’s implications. Companies can delve into the specifics of the proposed disclosures, assessing how they align with their existing sustainability reporting practices and identifying potential areas of improvement. 

Dave Brown, a partner with Alston & Bird LLP, emphasized the significance of this analysis, stating, “It remains to be seen if the SEC will repropose the rule or immediately shift to a final rule in the interest of time. Given the Fifth Circuit case on the SEC’s shareholder repurchase rules, hopefully, the SEC will engage in significantly more when it comes to the economic analysis relating to the burden the climate rules will have on companies.” 

Adaptation to Evolving Legal Landscape

The delays in finalizing the SEC’s Climate Change Disclosure Rule have coincided with significant legal developments, such as the European Union’s Corporate Sustainability Reporting Directive, the International Sustainability Standards Board’s sustainability standards, and California’s climate reporting law. Companies can use this time to align their strategies with these evolving legal frameworks, ensuring that their disclosure practices not only meet SEC requirements but also adhere to global and regional standards. 

Collaborative Approach with Regulators

The extended timeline presents an opportunity for companies to engage in a more collaborative dialogue with regulators. SEC Chair Gary Gensler has highlighted the record-breaking number of comment letters as a factor that needs thorough analysis. This suggests that the SEC is open to feedback and willing to consider the concerns and perspectives of various stakeholders. 

Companies can actively participate in this process, providing constructive feedback, and engaging in discussions that contribute to the refinement of the proposed rule. This collaborative approach can foster a regulatory environment where the needs and challenges faced by businesses are taken into account, leading to a more balanced and effective disclosure framework. 

Preparation for Potential Lawsuits

The specter of legal challenges looms over the SEC’s Climate Change Disclosure Rule, with the U.S. Chamber of Commerce hinting at the possibility of a lawsuit. Companies can use the additional time to prepare for potential legal scenarios. Learning from the Fifth Circuit case on shareholder repurchase rules, businesses can engage in rigorous economic analyses related to the burden the climate rules may impose. This proactive approach can position companies to navigate potential legal challenges with a well-informed and robust defence. 

Strategic Alignment with Global Reporting Requirements

The global landscape of sustainability reporting is evolving rapidly, with various jurisdictions introducing their own reporting standards. Companies can use the delay in the SEC’s rulemaking to strategically align their reporting practices with emerging global standards. Understanding the similarities and differences between the SEC’s proposed rule and other reporting frameworks will enable companies to adopt a cohesive and globally recognized approach to climate disclosure. 


While the delays in finalizing the SEC’s Climate Change Disclosure Rule may be frustrating for companies seeking regulatory clarity, there are silver linings to be found. The additional time provides an opportunity for thorough analysis, adaptation to evolving legal landscapes, collaborative engagement with regulators, preparation for potential legal challenges, and strategic alignment with global reporting requirements. 

In navigating these challenges, companies can position themselves not only to comply with regulatory requirements but also to enhance their overall sustainability practices. By proactively addressing the concerns raised by the proposed rule and actively participating in the rulemaking process, businesses can contribute to the development of a disclosure framework that is not only robust but also reflective of the dynamic and interconnected nature of global sustainability challenges.

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