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SEC Climate Disclosure Rule: Implications for Businesses and Facilities Managers

Apr 9, 2024 | Public | 0 comments

Editor’s note: FM Perspectives are industry op-eds. The views expressed are the authors’ and do not necessarily reflect those of Facilities Management Advisor.

In recent years, the conversation surrounding climate change has intensified, prompting many businesses to take greater responsibility for their environmental impact. Recognizing the urgency to address climate-related risks and opportunities, regulatory bodies such as the U.S. Securities and Exchange Commission (SEC) have stepped up their efforts to mandate climate disclosure requirements for businesses.

Following months of anticipation, the SEC recently issued new regulations on climate-related disclosures. Amid legal challenges, the SEC just announced it is pausing implementation while defending the rule in court. However, assuming the regulations move forward as approved, they will require publicly traded companies or those preparing for an IPO to provide climate disclosures in their annual reports and registration statements starting the year ending Dec. 31, 2025.

The current regulations focus on Scope 1 and Scope 2 emissions. Scope 1 emissions are “direct emissions” from sources that are owned or controlled by the company (e.g., transport from the combustion of fuel in fleet vehicles or combustion of fuels in sources like boilers, furnaces, and incinerators). Scope 2 emissions are “indirect emissions,” which are emissions released into the atmosphere from the use of purchased energy from utility companies. For many companies, energy is one of the largest sources of emissions.

The SEC’s ruling on climate disclosure marks a significant shift in regulatory expectations for businesses. Under this ruling, companies are obligated to disclose climate-related risks and their potential impact on financial performance. This includes disclosing greenhouse gas emissions, climate-related litigation risks, physical risks associated with climate change, and strategies for mitigating these risks. The ruling underscores the growing recognition of climate change as a material financial risk about which investors need to be informed.

For businesses, compliance with the SEC ruling on climate disclosure represents both a challenge and an opportunity. Failure to adequately disclose climate-related risks could lead to reputational damage, regulatory scrutiny, and legal liabilities. On the other hand, businesses that proactively address climate risks and transparently disclose their strategies for mitigating them can enhance their reputation, attract socially responsible investors, and gain a competitive edge in the marketplace. And while these SEC regulations apply only to public companies, private companies would be wise to pay close attention to the processes used to obtain the data and the lessons learned.

The Role of Facilities Managers and Smart Building Technology

Facilities managers will play a crucial role in helping businesses meet these new climate disclosure requirements. As overseers of building environments, facilities managers are uniquely positioned to implement sustainable practices, create strategies to reduce carbon emissions, and enhance climate resilience within their organizations. However, the “how” and “what” of disclosure remains largely uncharted waters in these early days following the SEC’s announcement. Many facilities managers are seeking guidance for how to start these audits and which tools to use.

The good news is, smart building technology offers an easy and straightforward solution for companies to begin tracking. These solutions ensure effective and efficient control of building facilities—saving energy, enabling timely maintenance, and improving the overall quality of occupancy.

Advanced smart building solutions, which include networked lighting and HVAC control systems, help streamline a building’s maintenance and provide a path for future facility upgrades. These solutions feature a customizable analytics dashboard that captures data insights for setting and tracking building performance and efficiency goals. Data overlays on floor plans highlight potential efficiency outliers in a visual map view and help determine solutions based on location using a device- and protocol-agnostic platform for all building data.

Since environmental, social, and governance (ESG) reporting is predicated on capturing and analyzing data on a company’s environmental impact, having analytics integrated into a smart building solution gives organizations an automatic read on their systems’ performance (e.g., lighting, heating, ventilation, and air conditioning) to show how much energy they’re consuming and how much they’ve saved (which could be upwards of 60-80% thanks to smart lighting and tech installations).

Whether required to disclose Scope 1 and/or Scope 2 emissions, companies that adopt smart building solutions will find themselves better equipped to adhere to the evolving guidelines specific to carbon emissions from building operations.

The Importance of Data

Understanding your facility’s energy use and where your energy comes from is something every company wants to know. The biggest initial challenge in meeting SEC regulations is aggregating data, which is especially daunting for organizations with multiple sites that use different utility companies. Tracking data from multiple sources, understanding the particular energy source, and which energy credits an organization may have in place can be time consuming and confusing.

A smart building management platform will not only help in calculating and preparing those reports, but also identify areas for improving a company’s efficiency scores over time by offering critical insights to pinpoint and target the worst offending buildings and processes, then actively manage them to reduce energy consumption.

Another benefit of smart building tools for facilities managers is to collaborate with executives to model and make decisions on future facilities strategies. For instance, companies that seek to expand their facilities could use data-driven insights to assess a variety of factors such as: Which type of building should we construct? Should we build now or wait? What’s the ideal location for our facility based on energy costs? Data can also be used to help make decisions about when and how to update existing equipment and facilities.

In short, the power of smart building solutions can arm you with trusted data about how your buildings operate, helping you make better decisions now and in the future, that not only help you comply with SEC regulations, but potentially give your organization a competitive business advantage.

In Conclusion

The SEC’s ruling on climate disclosure signals a new era of accountability for businesses to transparently disclose their climate-related risks and opportunities. Facilities managers play a pivotal role in helping organizations navigate these requirements by implementing sustainable practices, reducing emissions, and enhancing climate resilience within their facilities. Taking proactive steps by leveraging technology helps facilities managers support their companies in meeting regulatory obligations while also driving long-term environmental and financial sustainability.

Dan Hollenkamp is chief operating officer of Toggled, a provider of intelligent building management solutions.

The post SEC Climate Disclosure Rule: Implications for Businesses and Facilities Managers appeared first on Facilities Management Advisor.


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