The SEC announced last week proposed new climate disclosure requirements for public companies which are sweeping to the point of panicking management and disclosure professionals.  No doubt during the public comment period there will be many calls to cut back the regulations.  Why the furor?  Everyone knows climate is a big deal and can cause economic havoc and companies public and private to adjusting strategy because they clearly must.

Much of the required disclosure is obvious: what is the company policy to control emissions that might impact the environment.  There is also a requirement to discuss how a company is handling severe weather– perhaps not about energy policy but is anyone out there ignoring weather issues these days?

Well, there is a requirement to report on so-called “Scope 2” factors– how the company is dealing with emissions by suppliers of electricity, steam, heat and cooling.  And “Scope 3” disclosures seek  an overall report of a company’s environmental footprint based on emissions of suppliers and customers.  Since Scope 3 does appear outside the control of a company, at least as to customers, it feels like a stretch at best, and social engineering through the disclosure laws at the worst.

And the one still-surviving Republican SEC member raised these very points, questioning also the accuracy and relevance of such data: the data “are, in large part, highly unreliable.”

Whether this is just disguised global warming denial or not, nonetheless it surely is hard to picture how a company can measure actions of, or cause  impact  upon, its customers, and even measure  the degree to which effective pressure can be put on suppliers.  Maybe Germany can pressure its supplier Russia these days, but how that thinking translates to the economic marketplace is a bit more opaque.

I almost did not do this post; I delayed it.  I am all for a robust energy policy and better environment and fewer forest fires and tornados.  And there has been so much written in the general and business press about these proposed regulations that I wondered if the world really needed to hear my view on the subject. Indeed, corporate advisors and major accounting firms are tripping over themselves to offer Zoom meetings about what this means in the real world.

But I do think it is useful to ask the question in terms of how our government should operate, even if one endorses a liberal agenda and favors the control of emissions as a matter of government policy.  The question is, why is the SEC on point on this?  Seems to me the legislature, advised by government agencies in the sciences, ought to be the source of laws saying what you must do.  Why is this issue being approached by telling companies what they must to disclose, and this coming from an agency that is neither elected by voters nor informed by a deep dive in the science?  Is it simply that the administration can control the SEC but cannot get social policy passed by the Senate?

I am sure the SEC gathered a lot of data and that its heart is in the right place, but still– just makes me nervous that the SEC seems to be the cutting edge on climate control.