The uncertainties associated with the timing and content of the SEC’s final climate disclosure rule notwithstanding, “Change in the Climate,” from Workiva and PwC imparts some critical information about companies’ state of preparedness for a climate disclosure mandate along the lines of the proposed rule based on a recent survey of 300 executives at US-based public companies with at least $500 million in annual revenue. Notably, 89% of respondents’ companies already report some ESG data, including 57% (171 companies) who say they include ESG data in their SEC filings.
Among the key takeaways:
Technology—85% of respondents are very concerned (48%) or somewhat concerned (37%) that their company does not have the right technology in place to support ESG reporting that meets the potential new requirements of the SEC’s climate disclosure rule. While the percentages of smaller and mid-size companies registering concerns exceeded that of larger companies by a wide margin, a majority of larger companies also expressed concerns.
People resources—36% of respondents are not confident that their company is appropriately staffed to meet the potential new disclosure requirements. Larger companies are less confident than smaller companies about the adequacy of their current staffing (see “Preparedness” observations below re: larger overall footprint and supply chain).
Monetary resources—For all issuers other than smaller reporting companies, excluding assurance costs, the SEC”s proposing release estimates initial compliance costs of $640,000 ($180,000 for internal costs and $460,000 for outside professional costs) and annual ongoing compliance costs of $530,000 ($150,000 for internal costs and $380,000 for outside professional costs). However, 61% of respondents estimate the initial compliance costs at $750,000 or greater.
Preparedness—Larger companies are more likely to report being unprepared to meet the proposed rules’ requirements than smaller companies, which the report attributes to larger companies’ larger overall footprint and more extensive supply chain. The current perceived level of preparedness likely drives respondents’ compliance timeline preferences, with just one-third or fewer respondents believing a one-year phase-in of the proposed enumerated reporting requirements is adequate, as shown below.
Actions in advance of final rule—All respondents reportedly have taken at least one action to date in anticipation of the final rule, most commonly (top four): (i) investing in ESG reporting technology (40%), (ii) accelerating climate ambitions/goal timelines (35%), (iii) hiring new employees to work on or oversee ESG reporting (33%), or (iv) establishing climate ambitions/goal timelines (29%).