How SEC ESG disclosure rules will impact private companies

Public companies are waiting to see when and how the Securities and Exchange Commission makes its proposed environmental, social and governance (ESG) disclosure rules final. But private companies can’t ignore what comes out if they’re part of a covered company’s value chain or if they’re thinking about going public in the near future, a specialist on the matter says.

“If the private company is within the value chain, upwards or downwards, of a company that has to provide the Scope 3 metric in their report, they will be asked to help provide that information,” says Julie Rizzo, a partner in the capital markets group of K&L Gates. “They’ll roll up into that company’s Scope 3 emissions that have to go into their SEC reporting.”

Scope 3 refers to greenhouse gas emissions from companies that help a covered company make money, either by being part of its supply chain or providing other value-added services. And whether or not they are subject to SEC reporting requirements themselves, they are expected to cooperate with the covered company. That means measuring and sharing the emissions that stem from their work for that company.

“So, you’re going to have companies that aren’t necessarily thinking that they would be covered by this rule having to provide information to companies that need to provide that information,” Rizzo told Legal Dive.

Read the original article from CFO DIve