SEC’s Climate Disclosure Rules: GHG Emissions Disclosure Requirements

Nick Grabar and Lillian Tsu are partners and Helena Grannis is counsel at Cleary Gottlieb Steen & Hamilton LLP. This post is based on a Cleary Sustainability Working Group publication by Mr. Grabar, Ms. Tsu, Ms. Grannis, Jonathan Povilonis, and Yuan He.

On March 21, 2022, the U.S. Securities and Exchange Commission issued for public comment a rule proposal that, if adopted, would require reporting companies to provide certain climate-related information in their registration statements and annual reports filed with the SEC. Specifically, the proposed rules would require:

  1. A new section in annual reports and registration statements titled “Climate-Related Disclosure,” which would include climate-related governance, risk, business impacts, targets and goals and other related disclosures.
  2. Within that section, disclosure of the registrant’s Scope 1, Scope 2 and, if material, Scope 3 greenhouse gas (GHG) emissions, together with an attestation report from an independent GHG emissions expert covering the Scope 1 and Scope 2 emissions disclosures.
  3. A new note to a registrant’s audited financial statements that provides climate-related metrics and impacts on a line-item basis.

This post addresses the second point above—the GHG emissions disclosure and attestation report requirements—and provides takeaways and possible issues for inclusion in comment letters on the proposal. Please see the other two memoranda in this series for a discussion of the Regulation S-K governance, business, risk and targets disclosure requirements and the Regulation S-X financial statements note disclosure requirements described above.

The comment period for the proposed rule is quite short: comments will be due on May 20, 2022, or 30 days after the proposal is published in the Federal Register, whichever is later. We expect that the SEC will aim to release the final rules before the end of 2022.

I. Background on Existing Framework

The SEC has based the proposed emissions disclosure rules on the Greenhouse Gas Protocol [1] (the “GHG Protocol”), which, according to the SEC, has become the leading accounting and reporting standard for GHG emissions. The rule proposal [2] uses the three-part “scope” framework of the GHG Protocol, which is intended to delineate direct and indirect emission sources, and to ensure that two or more companies will not account for the same emissions in the same scope (except with respect to Scope 3 emissions). Under the proposed rules:

  • “Scope 1 emissions” are direct GHG emissions from operations that are owned or controlled by the registrant. These might include emissions from registrant-owned or controlled machinery, vehicles or operations.
  • “Scope 2 emissions” are indirect GHG emissions primarily resulting from the generation of energy purchased and consumed by the registrant. These emissions include purchased or acquired electricity, steam, heat, or cooling that is consumed by operations owned or controlled by a registrant.
  • “Scope 3 emissions” are all indirect GHG emissions not otherwise included in a registrant’s Scope 2 emissions, which occur in the upstream and downstream activities of a registrant’s value chain. These emissions are a consequence of the registrant’s activities but are generated from sources that are neither owned nor controlled by the registrant. These might include emissions associated with the production and transportation of goods a registrant purchases from third parties, employee commuting or business travel, and the processing or use of the registrant’s products by third parties.

II. GHG Emissions Disclosure (Proposed Item 1504 of Regulation S-K)

The proposed rules would require domestic registrants and foreign private issuers to disclose in their registration statements and annual reports the GHG emissions and related information for their most recently completed fiscal year, and for the historical fiscal years included in their consolidated financial statements in the filing, to the extent such historical GHG emissions data is reasonably available. Notably, the proposed rules would not require GHG emissions disclosure for historical fiscal years if the registrant was not previously required to present such information and has not done so, and the historical information necessary to calculate or estimate such metric is not available to the registrant without unreasonable effort or expense. However, the proposed rules do not provide guidance on what constitutes “reasonably available” or “unreasonable effort or expense.”

While the proposed rules are based on the GHG Protocol, the SEC did not adopt all of the features of the GHG Protocol, which may undermine the burden-reducing benefit of basing the proposal on an existing standard. In particular, a registrant would not be required to adopt the methodology for collecting and calculating GHG emissions data provided by the GHG Protocol, but would have significant latitude to determine which methodology is appropriate so long as it would otherwise comply with the proposed disclosure requirements:

  • Disclosure of Scopes 1 and 2 emissions. If the proposal is adopted substantially as proposed, a registrant would be required to disclose its total Scope 1 and Scope 2 emissions separately, after calculating them from all sources that are included in the registrant’s “organizational and operational boundaries.” In an effort to avoid investor confusion, the proposed rules depart from the GHG Protocol by requiring that the registrant’s “organizational and operational boundaries” be defined consistently with existing U.S. GAAP, in particular by including all of the emissions from consolidated subsidiaries and a proportionate share of emissions of equity investees. Proposed compliance dates for Scopes 1 and 2 emissions disclosure vary by filer status, as discussed below.
  • Disclosure of Scope 3 emissions. A registrant (other than a smaller reporting company (“SRC”)) would be required to disclose Scope 3 emissions if “material” or if the registrant has set a GHG emissions reduction target or goal that includes its Scope 3 emissions. If applicable, a registrant’s compliance date for its Scope 3 emissions disclosure would be one year after the compliance date for its Scopes 1 and 2 emissions disclosure.

    The proposed rules do not define “material.” Rather, the proposing release provides narrative guidance that potentially expands (and perhaps blurs) the traditional definition of materiality. On the one hand, the proposing release states that the materiality qualifier with respect to Scope 3 emissions disclosure is intended to be consistent with the SEC’s definition of materiality and Supreme Court precedent—that is, a registrant would be required to disclose its Scope 3 emissions if there is a substantial likelihood that a reasonable investor would consider them important when making an investment or voting decision. Historically, that definition has been applied by reference to the impact on a registrant’s operations or financial performance or position. On the other hand, the proposing release specifically notes the reliance by some registrants on a threshold of 40% of their overall GHG emissions when assessing the materiality of Scope 3 emissions, a standard that has no obvious connection to a financial measure, as well as more traditional concepts such as the necessity of assessing qualitative factors and the more general principle of resolving doubts in materiality determinations in favor of investors. According to the SEC, disclosure of a registrant’s Scope 3 emissions may be necessary to present a complete picture of climate-related risks that a registrant faces (in particular, transition risks) and how GHG emissions sources from a registrant’s value chain may materially impact its business operations and financial performance, and it may also prevent a registrant from greenwashing or otherwise obscuring its climate-related risks by outsourcing high-intensity sources of GHG emissions.

    If required to disclose Scope 3 emissions, a registrant would be required to identify the categories of upstream and downstream activities that have been included in, as well as the data sources that have been used in preparing, the calculation. The proposed rules do not mandate which upstream and downstream activities must be included, but the proposing release does identify several categories of upstream activities (e.g., business travel and commuting by the registrant’s employees, transportation and distribution of purchased goods, raw materials and other inputs) and downstream activities (e.g., transportation and distribution of a registrant’s sold products, goods or other outputs, use by a third party of a registrant’s sold products) that can give rise to Scope 3 emissions. The proposed rules also identify potential data sources used to calculate Scope 3 emissions, including emissions reported by parties in the registrant’s value chain, data concerning specific activities as reported by parties in the registrant’s value chain and data derived from other sources like economic studies or government statistics.

  • Contents of GHG emissions disclosures. For each required disclosure of a registrant’s Scopes 1, 2 and 3 emissions, registrants would be required to disclose the emissions both disaggregated by each constituent GHG and in the aggregate, expressed in terms of carbon dioxide equivalent (“CO2e”). CO2e is the common unit of measurement used by the GHG Protocol to indicate the global warming potential (“GWP”) of each GHG, expressed in terms of the GWP of one unit of carbon dioxide.

    Constituent GHGs includes the seven GHGs covered by the Kyoto Protocol: carbon dioxide, methane, nitrous oxide, hydrofluorocarbons, perfluorocarbons, sulfur, hexafluoride, and nitrogen trifluoride. Requiring a standard unit of measurement for GHG emissions, rather than different units of measurement for the different GHGs, is intended to simplify the disclosure for investors and enhance its comparability across registrants with different types of GHG emissions.

    Disclosure of Scopes 1, 2 and 3 emissions would also be required to exclude the impact of any purchased or generated offsets. Registrants may be required to disclose such offsets elsewhere in the proposed “Climate-Related Disclosure” section. Please see our memorandum on the new rules added to Regulation S-K for a discussion of such proposed requirements.

  • Disclosure of GHG intensity for Scopes 1 and 2 emissions. A registrant would be required to disclose, using the sum of Scopes 1 and 2 emissions, GHG intensity in terms of metric tons of CO2e (a) per unit of total revenue (using the registrant’s reporting currency) and (b) per unit of production relevant to the registrant’s industry (e.g., per vehicle produced for an automobile manufacturer), for each fiscal year included in the financial statements. If a registrant is required to disclose its total Scope 3 emissions, it would also be required to separately disclose GHG intensity using Scope 3 emissions only.

    Consistent with the GHG Protocol, the proposing release explains that GHG intensity disclosure is intended to provide context to a registrant’s emissions in relation to its business scale, so as to allow investors to compare registrants, and to track a registrant’s progress over time.

  • Methodology of GHG emissions disclosures. A registrant would be required to describe the methodology, significant inputs, and significant assumptions used to calculate its GHG emissions. The description of the registrant’s methodology must include the registrant’s organizational boundaries, operational boundaries (including any approach to categorization of emissions and emissions sources), calculation approach (including any emission factors used and the source of the emission factors), and any calculation tools used to calculate the GHG emissions.

    A registrant may use reasonable estimates when disclosing its GHG emissions as long as it also describes the assumptions underlying the estimates and its reasons for using them. A registrant may also present its estimated Scope 3 emissions as a range as long as it discloses its reasons for using the range and the underlying assumptions.

  • Liability safe harbor for Scope 3 emissions disclosures. The rule proposal includes a limitation on liability with respect to certain statements regarding a registrant’s Scope 3 emissions. Pursuant to this limitation, any statement made in a document filed with the SEC regarding Scope 3 emissions required by the proposed rules is deemed not to be a fraudulent statement, unless it is shown that such statement was made or reaffirmed without a reasonable basis or was disclosed other than in good faith.

    According to the SEC, the proposed safe harbor is intended to mitigate potential liability concerns associated with providing emissions disclosure based on third-party information, by providing that a registrant would be liable for such disclosure only if it was made without a reasonable basis or was disclosed other than in good faith. The proposing release also states that the safe harbor may encourage the disclosure of more robust Scope 3 emissions information.

  • Compliance dates. Assuming the proposed rules are adopted with an effective date in December 2022, the expected compliance dates for the GHG emissions disclosures are set forth below. While the earliest compliance date for GHG emissions disclosure is not until 2024, registrants should begin identifying procedures for collecting information and validating data well before that time in order to obtain data that is appropriate for disclosure.

Registrant Type Disclosure Compliance Date [3]
All proposed disclosures, including GHG emissions metrics: Scope 1, Scope 2, and associated intensity metric, but excluding Scope 3 GHG emissions metrics: Scope 3 and associated intensity metric
Large Accelerated Filer Fiscal year 2023 (filed in 2024) Fiscal year 2024 (filed in 2025)
Accelerated Filer and Non-Accelerated Filer Fiscal year 2024 (filed in 2025) Fiscal year 2025

(filed in 2026)

SRC Fiscal year 2025 (filed in 2026) Exempted

III. Attestation of Scopes 1 and 2 Emissions Disclosure (Proposed Item 1505 of Regulation S-K)

Under proposed Item 1505 of Regulation S-K, a registrant that is an accelerated filer or a large accelerated filer would be required to provide an attestation report covering Scopes 1 and 2 emissions disclosure, if the registrant is required to provide such disclosure pursuant to Item 1504, as described above.

Any attestation report provided under Item 1505 must be prepared pursuant to standards that are publicly available at no cost and are established by a body or group that has followed due process procedures, including the broad distribution of the framework for public comment. The attestation report must be prepared and signed by a GHG emissions provider who is an expert in GHG emissions by virtue of having significant experience measuring, analyzing, reporting, or attesting to GHG emissions and is independent with respect to the registrant and its affiliates.

The form and content of the attestation report would be required to follow the requirements set forth by the attestation standard (or standards) used by the GHG emissions attestation provider. However, the proposed rules also outline minimum requirements for the attestation report, including:

  • an identification or description of the subject matter or assertion being reported on;

  • an identification of the criteria against which the subject matter was measured or evaluated;

  • a statement that identifies the attestation standard (or standards) used; and

  • the GHG emissions attestation provider’s conclusion or opinion, based on the applicable attestation standard(s) used.

Large accelerated filers and accelerated filers must also provide additional disclosures, including whether the attestation provider has a license from any licensing or accreditation body to provide assurance (and if so, the identification of the licensing or accreditation body), whether the attestation provider is a member in good standing of that licensing or accreditation body, and any oversight inspection program to which the service provider is subject (e.g., the AICPA’s peer review program).

Registrants subject to the proposed attestation requirements (i.e., large accelerated filers and accelerated filers) would have one additional year after the applicable compliance date with respect to the Item 1504 disclosures to obtain limited assurance, and three additional years after the compliance date to obtain reasonable assurance, as set forth in the table below. Limited assurance is equivalent to the level of assurance (commonly referred to as a “review”) provided over a registrant’s interim financial statements included in a Form 10-Q. Reasonable assurance is equivalent to the level of assurance provided in an audit of a registrant’s consolidated financial statements included in a Form 10-K.


Registrant Type

Scopes 1 and 2 GHG Disclosure Compliance Date [4]  

Limited Assurance


Reasonable Assurance

Large Accelerated Filer Fiscal year 2023 (filed in 2024) Fiscal year 2024 (filed in 2025) Fiscal year 2026 (filed in 2027)
Accelerated Filer Fiscal year 2024 (filed in 2025) Fiscal year 2025 (filed in 2026) Fiscal year 2027 (filed in 2028)

A registrant that is not required to include a GHG emissions attestation report pursuant to Item 1505 would nonetheless be required to disclose certain information if the registrant voluntarily obtained third-party attestation or verification of its GHG emissions disclosures. The required information includes the identification of the provider, the attestation standard used, the level and scope of the attestation provided, a brief description of the results of the attestation and information related to the provider’s independence and oversight.

IV. Key Takeaways

  • Likelihood of Adoption. The precise final form that the proposed GHG disclosure rules take is uncertain and will reflect the comment letter process and any potential litigation. However, it is highly likely that rules in some form will be adopted and that registrants will need to deploy resources and develop processes in order to comply.

  • Early Preparation and Collection of Data. While the proposed GHG emissions disclosure requirement is primarily based on aspects of the GHG Protocol, not all registrants have adopted the GHG Protocol and the SEC proposal deviates from the GHG Protocol in significant ways. Most registrants will likely face significant challenges in collecting the relevant data and preparing the required disclosure, given the breadth of the proposed rules and the disclosure controls required to include such disclosure in SEC filings. Registrants should not delay the process of evaluating their organizational boundaries for the purposes of the “scope” analysis or the development of procedures for gathering data, especially if they have not already been voluntarily disclosing their GHG emissions data.

  • Responsibility for preparation of GHG emissions disclosure. Given the nature of the data required for the proposed GHG emissions disclosure, many registrants will not have a dedicated unit or department in place that is capable of obtaining, validating and preparing the required information for disclosure. A registrant should consider creating a cross-function working group with representatives from accounting, finance, legal, sustainability departments and internal and/or external audit, as appropriate, to ensure that the relevant expertise on each subject matter is brought to bear on its GHG emissions disclosure.

  • Methodology for gathering data and calculating GHG emissions. The proposed rules do not mandate a specific methodology for gathering data and calculating GHG emissions. While the proposed rules do identify several factors to guide registrants in the preparation of their GHG emissions disclosures, a registrant nonetheless has significant latitude during several stages of the process. One issue to consider—and comment on—is whether the limited guidance on methodology for calculating GHG emissions will reduce the comparability, and therefore the utility, of the GHG emissions data. A registrant should assess its internal capabilities and expertise, and remediate any gaps or deficiencies, with respect to its ability to collect and calculate GHG emissions data consistently and accurately well in advance of the applicable compliance date.

    As acknowledged in the proposing release, tracking and collecting GHG emissions data presents a significant challenge for the Scope 3 disclosures in particular, and the SEC has sought to balance this concern with a general safe harbor, an exemption for SRCs and a delayed compliance date for Scope 3 emissions disclosure. Nonetheless, an issue to watch and comment on will be the inclusion of further accommodations, including with respect to the amount of time between adoption and effectiveness.

  • Review of corporate policies and procedures. Assuming the proposal is adopted substantially as proposed, the GHG emissions disclosures will be subject to a registrant’s disclosure controls and procedures, and to the certification requirements under Sections 302 and 906 of the Sarbanes-Oxley Act. Major changes in corporate policies and internal procedures governing the production and disclosure of GHG emissions data will likely be required for most registrants to support the certifications. In particular, internal procedures for sub-certification may be required to incorporate data and procedures for GHG emissions disclosure, which may involve significant effort to operationalize.

  • Engagement of independent attestation providers. The attestation report is one of the more controversial requirements of the proposal and will likely be the subject of extensive comments. While the TCFD framework and the GHG Protocol each contain general guidance on the verification of GHG emissions data, neither imposes (or even suggests) a mandatory requirement for the verification of such data by an independent third party. The cost of verification may be significant and the readiness of registrants to provide it at the required time, even with the delayed compliance date included in the proposal, may involve substantial challenges. Other issues to watch and comment on are whether the level of assurance required under the proposed rules—reasonable assurance—is realistic and appropriate in light of the proposed compliance dates, and who will be willing to provide this assurance and assume the liability of being an “expert” in the event that a registrant’s auditor is unable or unwilling to do so. If the rules are adopted substantially as proposed, registrants should engage potential attestation providers as soon as possible to assess their readiness to comply with all applicable requirements including assessing and adopting necessary policies and procedures to support the attestation when required.

  • Limited scope of safe harbor. The SEC’s proposed safe harbor is limited to Scope 3 emissions disclosure due to the SEC’s view that there are unique challenges associated with the collection and verification of information derived from third parties. The limitation on this safe harbor is another issue to watch and comment on, as much of the information required by the proposal presents novel and unique challenges for registrants, and the exposure of liability from third parties that registrants would face for such information is potentially high.

  • Foreign private issuers included. The proposed rules apply to foreign private issuers to the same extent as domestic registrants, subject to the compliance dates described above. A registrant that is subject to reporting obligations for GHG emissions or other climate-related information in another jurisdiction should carefully consider the proposed rules in light of such existing obligations to determine what further steps must be taken to comply with the proposed rules. The SEC has requested comment as to whether compliance with certain alternative reporting regimes should be deemed sufficient to satisfy the proposed rules, so this will be another issue to watch and comment on.


1GHG Protocol Corporate Accounting and Reporting Standard, available at back)

2The proposal is set forth in the SEC’s March 21, 2022 release, available here.(go back)

3The proposing release states that if the filer has a non-calendar-year fiscal year-end date that results in its fiscal year commencing before the compliance dates of the rules, it would not be required to comply with proposed GHG emissions disclosure requirements until the following fiscal year.(go back)

4If the filer has a non-calendar-year fiscal year-end date that results in its fiscal year commencing before the compliance dates of the rules, it would not be required to comply with proposed GHG emissions disclosure requirements until the following fiscal year. Accordingly, for such filers, the time period for compliance with the corresponding attestation requirements under proposed Item 1505 would be one year later than illustrated above.(go back)

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