The Republican backlash to so-called ‘woke capitalism’ may be tanking a key climate proposal
By Kristoffer Tigue—Inside Climate News
This article originally appeared on Inside Climate News. It is republished with permission. Sign up for their newsletter here.
America’s top Wall Street regulator might scale back a proposal that would require public companies operating in the United States to disclose their greenhouse gas emissions and any financial risks they face from global warming. It’s a move that climate activists worry will prevent regulators from holding businesses accountable when their pledges to reduce their carbon footprints aren’t aligning with their actions
Financial regulators have come under increasing pressure in recent years to address the private sector’s role in exacerbating climate change. Some 10,000 publicly listed companies are responsible for 40 percent of all climate warming emissions, more than twice what was previously believed, recent research found.
In response to that pressure, the Securities and Exchange Commission proposed a new rule last year that, among other things, would require certain large, publicly traded companies to report the climate emissions generated by their supply chains and customers—known as Scope 3 emissions—which experts say often make up the majority of the private sector’s carbon footprint.
That means businesses would not only take responsibility for the direct emissions produced by their factories or office buildings, but also for their indirect emissions, including those caused by the distribution of their goods and the transportation needs of their employees. For oil and gas companies, it would also mean they would tally the greenhouse gas emissions created by customers who burn their gasoline while driving—by far the largest segment of the transportation sector’s massive carbon footprint.
But amid intense backlash from corporate America and legal threats from Republican lawmakers promising to wage war on what they call “woke capitalism,” Securities and Exchange Commission Chair Gary Gensler is now considering removing the Scope 3 requirements from the proposed rule, according to several news reports citing people familiar with the commission’s plans.
Conservative lawmakers and business trade groups, such as the U.S. Chamber of Commerce, have opposed the draft rule, saying it would impose overly burdensome costs on companies and force them to violate their fiduciary duties to investors. Proponents, however, say the rule is not only necessary for tackling climate change, but that it would actually help companies stay solvent in the long run as the climate crisis worsens.
“The facts are clear: Reducing emissions by half by 2030 is necessary to avoid the worst consequences of climate change, and the private sector has an important role to play,” Michael Sheldrick, cofounder of social justice advocacy nonprofit Global Citizen, wrote in an op-ed for Forbes on Sunday. “Ignoring growing climate threats may in the long run have disastrous effects on a business’ workforce, supply chain and business models.”
In fact, a growing number of economists now argue that the consequences of climate change are already imposing increased costs on businesses and governments around the world, and as countries transition to cleaner energy, companies that are slow to adapt risk losing out financially.
Climate-related natural disasters in the U.S. alone caused a whopping $165 billion in damages in 2021, recent government data revealed. And some of the world’s largest financial analysis firms have estimated that without stronger intervention, the impacts of global warming could slash the world’s gross domestic product anywhere from 4% to 18% by 2050, which translates to trillions of dollars in potential lost revenue.
Some research suggests that businesses also stand to make more profit by decarbonizing their operations sooner rather than later. A study last year that examined the financial performance of 465 companies between 2015 and 2020 found a correlation between stronger decarbonization efforts and higher profits. Another analysis published last month found that 99 percent of America’s 210 remaining coal power plants would be more cost-effective as solar or wind farms.
But despite that evidence, reports published in recent years have found that many of the world’s biggest companies are failing to reduce their carbon emissions quickly enough while overselling their climate efforts to the public. Adding to that body of evidence is an analysis published this week by environmental watchdogs Carbon Market Watch and the NewClimate Institute, which found that the net zero emissions pledges made by some of the world’s largest corporations will reduce their greenhouse gas emissions by just 36% by 2030. That’s less than half the amount needed to keep the world aligned with the goals of the Paris Agreement.
The report’s authors called for stronger regulatory oversight on corporate climate pledges to prevent companies from “greenwashing”—in other words, publicizing their actions as more environmentally friendly than they actually are. The vast majority of corporate climate pledges rely on carbon offsets that mostly claim to reduce emissions by planting trees, for example, but reviews of those programs have found that upwards of 90% of them have been entirely ineffective at achieving their aims.
Climate-conscious investors and other environmental activists, including Global Citizen’s Sheldrick, say that stronger financial regulations, like the proposed SEC rule, are needed to address those problems. But as the GOP drags the proposed U.S. rule into America’s culture war, many onlookers now worry those regulations will also fall short.
“In the face of opposing and conflicting views, it may be difficult for some business leaders to know what to do,” Sheldrick said. “In the end though, all of us will have to confront the hard reality of catastrophic climate change if action is not taken promptly.”
(26)
