Last week, the U.S. Securities and Exchange Commission (SEC) announced new rules requiring many large U.S.-listed public companies to disclose climate-related risks that have a material impact on their financials, operations, or business strategy.
Specifically, companies registered with the SEC now must disclose their Scope 1 and 2 emissions, as in those resulting from both their direct emissions and purchases of electricity and fuel.
Critics of the ruling say it adds to the burden of reporting to multiple government agencies. Others believe the SEC is not going far enough, as its decision does not require the disclosure of Scope 3 emissions, which are generated by a company’s suppliers and customers.
Among the reasons the SEC decided against mandating the disclosure of Scope 3 emissions was the potential difficulty in collecting and measuring this data as well as potential high costs.
At SAP, we embrace the SEC’s ruling not just as a regulatory measure, but as a promising avenue for companies to thrive by leveraging technology to harness the power of business data.
We are not merely observing from the sidelines; we are actively partnering with our customers to empower them in accurately monitoring emission, reducing energy costs, and streamlining their business processes.
Our commitment goes beyond compliance — we are dedicated to enabling companies to stay agile in both voluntary and mandatory reporting, recognizing the ever-evolving landscape of emissions disclosure regulations. This sentiment is underscored not only by the recent SEC rule but also by the stringent laws such as the one passed last year in California and the EU’s Corporate Sustainability Reporting Directive (CSRD).
SAP has the technology to make Scope 3 emissions accurate, granular, and stable. We are seeing customers adopt digital technologies that will enable them to comply with all existing and anticipated regulatory requirements around the world up and down their value chains to track emissions accurately, including Scope 3, where applicable.
From our experience, sustainability management solutions from SAP can benefit businesses while helping them stay compliant with local and global regulations. SAP makes end-to-end carbon management seamless by embedding it into business processes through a cloud-based enterprise resource planning (ERP) system. This offers companies the ability to create a green ledger by connecting their financial data with accurate and verifiable emissions data. When this data is connected, they can innovate their operations and supply chains to be more sustainable and competitive.
The essence of the SEC’s impact lies in our unwavering belief in collaboration. Our business-to-business network enables our customers to meet the challenge of disclosing emissions data under various reporting requirements. This ability to accurately track emissions allows companies’ stakeholders, including their supply chain partners, to access that information on public websites or mobile apps so they can meet and even exceed the most stringent reporting requirements.
With SAP’s enterprise solutions, companies can operate today while increasing the overall availability and transparency of carbon data. These same solutions also allow for the proactive identification of supply chain partners so companies can further decrease their carbon emissions. Concurrently, government agencies can easily access companies’ emissions data using already available enterprise software to improve their emissions reduction goals.
SAP’s Holistic Approach to Cloud-Based Sustainability and Business Transformation
The reality of our future economy is that it is cloud-based and sustainable. That’s why we see our customers transitioning to more agile business models that drive sustainable outcomes.
SAP guides them through this new reality by providing the technology that allows for their business process shifts across their value chains. Whether they are new local or regional emissions rules, plastic taxes or extended producer responsibility requirements, SAP is ready to work with customers to minimize any disruptions with these new reporting requirements.
With a comprehensive and integrated approach to sustainability, SAP solutions move beyond compliance and operationalize sustainability across companies’ operations. Customers can build on their ERP solutions over time, transforming business processes for maximum sustainable impact. Companies can also deploy SAP Business AI to inform, predict, and optimize sustainable outcomes. These same tools can leverage sustainability regulations and help companies achieve business process transformation.
We are hopeful that governments will advance carbon accounting globally. Taking that step will harmonize regional and global reporting frameworks and ensure optimal reuse of companies’ existing data flows and business processes.
This SEC decision makes it more important than ever for companies to use digital technologies to track their emissions accurately and not rely on estimated data that often undercounts carbon emissions.
Regulations can actually drive innovation. We are in a world where businesses must pivot quickly due to externalities like economic shocks, political shifts, and climate-related disasters. SAP has the technology to help companies rapidly adapt to these changes and new regulations.
Sophia Mendelsohn is chief sustainability and commercial officer and co-general manager for SAP Sustainability.