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The Securities and Exchange Commission (SEC) has proposed new GHG disclosure requirements that will have significant implications for public companies. Under the proposed regulations, Scope 1 and Scope 2 GHG emissions disclosures by accelerated filers and large accelerated filers would be subject to assurance. These requirements will be implemented in a phased transition, as follows:

  1. Limited assurance:
    • Required one year after the first compliance date.
    • Accelerated filers and large accelerated filers will initially be required to obtain limited assurance for their Scope 1 and Scope 2 GHG emissions disclosures.
    • Limited assurance will involve the practitioner expressing a conclusion about whether they are aware of any material modifications that should be made to the metric for it to be in accordance with the relevant criteria.
  2. Reasonable assurance:
    • Required two years after the limited assurance requirement is implemented.
    • Companies will be required to obtain reasonable assurance for their Scope 1 and Scope 2 GHG emissions disclosures.
    • Reasonable assurance will involve the practitioner expressing an opinion about whether the subject matter is in accordance with relevant criteria in all material aspects and free from material misstatement.

The SEC would require forward-looking large companies to provide attestation of Scope 1 and 2 GHG emissions data within certain reported timeframes. The attestation could progress from limited assurance to reasonable assurance levels. Large emitters such as automobile industry will be one of the industries most impacted by SEC regulations limiting carbon dioxide emissions. 

The proposal permits registrants to apply any publicly disclosed attestation standards that were made available for public comment, such as the AICPA attestation standards. The attestation provider must have significant experience relevant to GHG emissions and be independent of the registrant and its affiliates.

The introduction of the SEC’s GHG disclosure requirements will further emphasize the importance of limited and reasonable assurance in the context of GHG emissions disclosure. Companies will need to ensure their GHG reporting processes are robust, and assurance providers must be well-versed in the relevant criteria to deliver accurate and reliable opinions on the disclosures.

As companies prepare for the upcoming SEC GHG disclosure requirements, they must consider the potential costs, benefits, and challenges associated with assurance engagements. By proactively addressing these concerns and adopting best practices for GHG emissions reporting and assurance, companies can enhance the credibility of their disclosures, bolster stakeholder trust, and contribute to global sustainability efforts.

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