WASHINGTON — The US Securities and Exchange Commission on March 6 adopted rules that require public companies to provide certain climate-related information in their registration statements and annual reports. The rules require disclosing Class 1 and Class 2 emissions in some instances but not Class 3 emissions.

The final rules will become effective 60 days after they are published in the Federal Register.

“The rules will provide investors with consistent, comparable and decision-useful information, and issuers with clear reporting requirements,” said Gary Gensler, chair of the SEC. “Further, they will provide specificity on what companies must disclose, which will produce more useful information than what investors see today. They will also require that climate-risk disclosures be included in a company’s SEC filings, such as annual reports and registration statements rather than on company websites, which will help make them more reliable.”

The rules will require disclosing information about climate-related risks that have materially impacted, or are reasonably likely to materially impact, a company’s business strategy, results of operations or financial condition.

Scope 1 and/or Scope 2 emissions will need to be disclosed on a phased-in basis by certain larger companies when the emissions are material, according to the SEC. Scope 1 emissions mean the direct greenhouse gas (GHG) emissions from operations owned or controlled by a company. Scope 2 emissions mean indirect GHG emissions from the generation of purchased or acquired electricity, steam, heat or cooling consumed by operations owned or controlled by a company.

Scope 3 emissions mean all indirect GHG emissions not included in Scope 2 emissions that occur in the upstream and downstream activities in a company’s value chain.

“Scope 3 emissions typically result from the activities of third parties in a registrant’s value chain, and, thus, collecting the appropriate data and calculating these emissions would potentially be more difficult than for Scopes 1 and 2 emissions,” the SEC said.

The SEC considered more than 24,000 comment letters, including more than 4,500 unique letters, submitted in response to the proposed rules issued in March 2022.

Some comments asserted the SEC lacks the authority to require disclosures of information from non-public companies involved in the value chain of public companies. Other comments cited the costs and burdens of gathering, validating and reporting on Scope 3 emissions. Disclosing Scope 3 emissions also potentially could put smaller suppliers at a competitive disadvantage if public companies select larger suppliers in a better position to supply information on Scope 3 disclosures.

IDFA is pleased that the SEC responded to our comments and listened to our industry by removing Scope 3 emissions from its final climate disclosure rules,” said Michael Dykes, president and chief executive officer of the International Dairy Foods Association. “The SEC proposal threatened to place significant financial burdens on millions of companies and businesses that fall outside of the SEC’s regulatory jurisdiction.”