As the chief digital officer for a Fortune 300 company, I saw first-hand during the late 2010s the surging demand for climate data being driven successfully by investors. This trend quickly became an access to capital concern for boards and C-suites across the globe.
In conversations I would have with these investors, two things became clear: first, they were increasingly seeing climate risk as financial risk, and second, most simply wanted to compare one asset to another, a practical impossibility at the time given the vast number of reporting standards.
Global regulators would soon came to their aid, rapidly driving standardization toward the Task Force on Climate-Related Financial Disclosures. They, and the governments they represent, began issuing mandatory reporting along this standard, for any business, domestic or global, operating in or with the state.
And entrepreneurs like myself, seeing this major opportunity shift, began developing tools to reduce complexity, streamline the process, and lower cost.
Biden’s FAR proposal
It is, therefore, more with concern than surprise that we continue to see forces in the US ignore this global trend. To plant their heads firmly in the sand and fail to support US businesses that must compete in a global landscape that now requires these disclosures. By failing to lead and falling further behind, they jeopardize not only US firms’ success, but also the nation’s opportunity to capitalize on the trillion-dollar energy transition economy.
The most recent example of this recalcitrance is found in opposition to the Biden Administration’s Federal Acquisition Regulation (FAR) Proposal. To be clear, even this proposal is late; however, it brings the US closer to rules passed by other nations, rules that many US enterprise businesses must already conform.
Our neighbor to the north, Canada, most recently joined this chorus by requiring major suppliers to its government to disclose greenhouse emissions and set targets to reduce them from April 2023.
Under the current proposal, 1,394 “major” contractors with more than $50m in annual federal contracts will be required to publicly disclose Scope 1, Scope 2, and relevant categories of Scope 3 emissions, and in so doing, report climate-related financial risks and set science-based emissions reduction targets. Most of these companies already provide climate data, and the majority also do business in nations like Canada, the UK, and others that require it today.
Rather than acknowledge this reality and work with industry to support US businesses, some instead stubbornly cling to a reality that no longer exists. They support “alternative facts” often for their own financial benefit, rather than supporting their nation’s businesses that are falling behind competitors.
Per the FAR proposal, the few small businesses that are impacted will not be required to do anything more than Scope 1 and 2, and Scope 3 is hardly the bogeyman its detractors falsely claim it to be. It’s just math. And hardly impossible. We know through our work that companies of all sizes are calculating their Scope 3 emissions.
At least in terms of economic might, the US continues to let the tail wag the dog. Much as we abdicated responsibility for data privacy to Europe and have spent the past 10 years playing catch up to GDPR, we are increasingly in danger of losing our seat at the table for arguably the greatest economic driver of this century – the energy transition economy.
Then again, it’s difficult to lead with your head in the sand.