Dive Brief:
- Retailers lag and energy companies lead in environmental disclosures, Sustainable Fitch said, as U.S. and global standard setters deliberate over how to best prompt companies toward accurately gauge climate-related risk.
- Retailers’ comparatively complex logistics and supply chains complicate efforts at environmental reporting, according to Sustainable Fitch, a unit of Fitch Group. Stakeholder pressure and current environmental disclosure requirements, especially those focused on climate risk, have prompted high performance in transparency by energy and utility companies.
- Among energy and utility firms, “the most highly rated on disclosures are entities based in Europe, which reflects the shift in the region in recent years toward higher and more detailed disclosure,” according to Marina Petroleka, Global Head of Research at Sustainable Fitch.
Dive Insight:
Biden administration efforts to require corporate disclosure on environmental, social and governance performance — including a Securities and Exchange proposal to mandate transparency on climate risk — have triggered a backlash by Republican lawmakers and state officials, corporate interest groups and other critics of tougher government oversight.
“ESG is just window dressing for liberal activism and radical, far-left ideology,” Rep. James Comer, a Kentucky Republican and chairman of the Oversight and Accountability Committee, said Wednesday at a hearing focused on sustainability.
Support for sustainability “is a coordinated effort by unelected shadow organizations to force their policies on U.S. taxpayers, investors and retirees,” he said.
The SEC let pass its April 30 target date for releasing a final rule mandating that companies describe on Form 10-K their levels of greenhouse gas emissions and strategy toward reducing climate risk.
The SEC plan to require some companies to report their so-called Scope 3 emissions by vendors and customers across their supply chains “has been controversial,” Sustainable Fitch said in a report.
“The policy remains under evaluation following public comment and concerns around legal liability for companies issuing securities,” Sustainable Fitch said.
The International Sustainability Standards Board, a panel backed by the Group of 20 advanced and developing countries, plans to release in June guidelines for reporting on climate risk and sustainability, with a proposed enactment date by regulators across the globe of Jan. 1, 2024.
While under fire from some U.S. lawmakers, the SEC and ISSB standards will help unify inconsistent and overlapping frameworks for corporate measurement of environmental impact, Petroleka said.
“There were a plethora of methodologies and standards, but we see consolidation or coalescing around a handful – the ISSB is a good example of that,” Petroleka said in an email response to questions.
Unified standards may help thwart efforts by some companies at greenwashing, or exaggerating their ESG performance, she said.
“As the reporting standards become more standardized, one of the intended outcomes is to increase transparency and comparability, which reduces the scope for greenwashing to some degree as there are more widely adopted and accepted guardrails on what and how to report,” Petroleka said.
Along with the energy and utility sectors, health care, technology and telecommunications firms also performed relatively well in environmental disclosures, Sustainable Fitch said. Public entities — less subject to investor pressure — lagged in the rankings.
Sustainable Fitch evaluates environmental disclosures, including transparency on natural resource use and greenhouse gas emissions, in the context of a company’s core business and strategy.
