Origin Report #6

PIKE ORIGIN

Redesigning American Businesses to become Earth Positive

Welcome to Origin Report #6

This report covers:

Earth Appreciation Photo of the Month
Article: The Great American Climate Opportunity
Climate Tool Box

Earth Appreciation Photo of the Month

Sunrise Over Lanikai Beach – Kailua, Hawaii

Climate Disclosures

Climate disclosures are reporting tools of an organization’s environmental risks and impacts. These disclosures provide transparency to the measurement, management, and communication of greenhouse gas emissions, as well as strategies to mitigate environmental risks. Climate disclosures are essential to the climate transition as they provide key information on an organization’s climate impact and risks.

In March 2024, the Securities and Exchange Commission (SEC) published a final rule requiring climate disclosures for publicly traded companies. This rule builds upon the proposed rule I mentioned in OR#5 on Carbon Markets, the rule requires disclosures to include discussion on carbon emissions and possibly carbon market activities (Note: This rule is pending various litigation). The European Union also has finalized policy in relation to climate disclosures.

Why should business owners & investors care?

To save the planet! Obviously!

OK – Jokes aside, there’s some real advantages here.

Stakeholder Expectations & Competitive Advantage: Your community (customers, investors, and employees) is likely becoming more environmentally conscious. Disclosures are an opportunity for your business to lead and communicate your commitment to sustainability leading to increased employee retention and customer share.
Access to Capital: I’ve harped on this in past Origin Reports, but investors and lenders provide incentives for businesses with strong environmental, social, and governance (ESG) practices, including VC $$$ and reduced rate loans.
Operational Efficiency: Since, climate disclosures require evaluation and reporting on operations, it’s likely that businesses will find opportunities to improve efficiency, which could mean cost savings. Also, identifying and mitigating environmental risks can also contribute to long-term resilience of your community.
Regulatory Preparedness: If you’re not public, then you won’t be immediately impacted by regulations, but there are opportunities to get ahead. Voluntarily adopting climate disclosures prepares for possible future regulatory requirements or become an attractive supplier to firms calculating their Scope 3 emissions (this means more $$$).

Critiques of Climate Disclosures

First – There is a lack of standardized reporting frameworks and guidance which may lead to inconsistencies and difficulties in comparing data across different organizations. However, in the past two years there has been some consolidation. Today, the top frameworks include:

For investors and analysts reading these disclosures, it may be valuable to read up on each of the standards as they all have their own advantages and disadvantages (if mapping these out would be of value to you – reach out).

Second – The climate impacts in a climate disclosure are estimated in the long-term future, which often rely on many inter-dependencies and assumptions, which may not hold. Although this is true, the counter to this critique is that conducting a climate disclosure exercise will likely help facilitate risk management and strategy and promote transparency and a sustainable outlook (see: Pike Origin Sustainable Business Model).

Last – Climate disclosures also face resistance for concerns about disclosing sensitive information, legal implications, or the fear of competitive disadvantages. The retort to this argument is that these risks would be common in any public report. Nonetheless, I believe the benefits listed above still outweigh the risks.

In conclusion, climate disclosures serve as a crucial tool for promoting environmental accountability and building a sustainable future. In the near term, climate disclosures will likely remain a bit scattered, however the essence of them will hold true. For investors, most trading platforms already include climate and ESG disclosures for companies that voluntarily started their own programs; these will likely become more robust. For business, regulators and standard bodies are pushing forward with standard reporting requirements to enhance consistency and comparability. And for non-profits, these disclosures may create further advances in climate resiliency and progress to multiple UN Sustainable Development Goals.

The Climate Toolbox

Shared language: Definition of Climate Positive or Carbon Negative

Tool: PlanIT Geo – This mapping software helps urban planners with their tree canopy and park green space planning! I haven’t personally used this tool, but discovered it as a potential resource in a recent geospatial mapping project I took on.

Cheers,

Chris