When I say “revenues,” many people understand that revenues are a key financial metric to assess the health and performance of a business. But when I say “greenhouse gas emissions,” I often hear crickets.
We sorely need a standard approach for companies to produce climate information that investors and markets need. That is what the U.S. Securities and Exchange Commission (SEC) is working to create. In March, the SEC proposed a new rule that would require publicly traded companies to disclose climate-related data and how their business strategy and outlook includes management and board oversight of climate-related risks. This proposed rule materially amends the SEC’s guidance from over a decade ago.
The SEC is doing this because climate risks are now CEO and board-level issues, and investors need to know how they affect a company’s future performance. Companies will need to measure and track their greenhouse gas emissions in a systematic, comparable, and transparent way. This is a significant step forward that will help companies more efficiently and effectively disclose these risks.
Many major companies already voluntarily report climate-related risks. Last year, nearly half of all S&P 500 companies highlighted climate change as a risk factor in their annual disclosures — an enormous jump up from only 60 companies in 2019. By the government’s own count, nearly a third of the 7,000 annual corporate reports the SEC reviews include some discussion on climate. But much of that information is not comparable or of limited use to investors.
This push for a common vernacular that provides investors with useful information is decades overdue. Now, it’s time for corporate America to vocally support a regulatory framework and close a critical gap between investment decisions and key insights into a company’s exposure to climate-related risks and positioning to succeed in the transition.
Leading investors, analysts and consumers increasingly want to know what companies are doing in the area of sustainability. Companies and the SEC took special notice when a group of 680 investors managing $130 trillion in assets demanded greater environmental disclosures earlier this year. And in 2022, Ceres and Public Citizen released a poll that found 87% of Americans favor companies reporting their climate risks. The business consequences of neglecting rising sea levels, impacts of carbon pricing, and changing employee, customer and consumer preferences and expectations are simply too great.
Salesforce has been a leader in describing our Environmental, Social and Governance (ESG) activities in our Form 10-K. I vividly recall the internal deliberations five years ago about how much we should report on climate in our SEC financial filings, what to say about our risks, and what legal exposure we might take on by doing so voluntarily. It was personal to me as one of the co-signers on Form 10-K. A rule like the new SEC proposal to enhance and standardize these disclosures would have allayed most of my concerns.
We don’t currently have a comparable way to precisely telegraph our ESG progress, commitments, and values to the wider market. Disclosure requirements built on a bedrock of comparability, consistency, and reliability is the only way to separate the wheat from the chaff when it comes to climate risk and opportunity.
The SEC is taking steps to provide clarity and certainty. For one, this rule will give responsible companies a bullhorn to drown out the noise. With clear, measurable, and periodic disclosures, companies can communicate with investors about risks and opportunities that climate change presents to our businesses. We can level set and be judged objectively. That in turn will help create more value for companies that adapt and innovate and thus attract more investors.
The comment period for the proposed rule ends June 17, however the SEC will consider comments from companies after this date. Salesforce and other industry leaders will submit our comment letters to the SEC. If you support the proposed rule or have ideas to improve it, we ask you to weigh in and make sure your voice is heard.
So I ask my fellow stakeholders, chief accountants, and risk officers to please join the conversation and engage constructively in the SEC’s rule-making process. Join the chorus of responsible investors and business leaders in providing feedback on areas that you feel could be strengthened or require additional clarification. Let your voice be heard.
For more information on Salesforce’s commitment to Sustainability, please go here.