On March 21, 2022, the U.S. Securities and Exchange Commission (SEC) released its draft rule on climate-related risk disclosure (Roshitsh, 2022). This rule would require companies to provide both their greenhouse gas emissions and risks that climate change may pose to their bottom lines by 2023 (Chua, 2022).
How the carbon disclosure mandates would impact brands and retailers worldwide
While many companies already share their emissions data, the rule would require consistency in reporting both direct and indirect greenhouse gas emissions. This is something that European companies have thus far focused on more than American corporations (Chua, 2022).
A recent KPMG and Serai survey found that right now only 19% of brands, retailers, suppliers, manufacturers, and sourcing agents in Europe, North America, and the Asia Pacific claim full visibility across their whole supply chains. Beyond this, only 15% claimed full traceability of materials used in their products. If the disclosure rule is put in place, businesses that fail to clearly lay out their impact could be subject to fraud litigation (Chua, 2022). With the complexity of supply chains, collecting and reporting accurate data will test many companies.
Why this would improve the future
The end result of the SEC’s proposed rule would be better data and more complete transparency. Organizing emissions data consistently will create a reliable and comparable framework allowing both investors and issuers to make more informed decisions. When the fashion industry sees where emissions are the worst, it can more effectively move toward reduction (Chua, 2022). This will, of course, benefit the industry, consumers, and the environment.
In the meantime, consumers can have an impact and support increased sustainability by shopping conscientiously, carefully caring for clothing, and seeking out performance features, to name a few ways. Such actions will show the desirability of the mandate, which will eventually help consumers feel more confident in their purchasing decisions.
References
Chua, J. M. (2022, April 11). Is fashion ready for SEC’s carbon disclosure mandate? Sourcing Journal. https://sourcingjournal.com/topics/sustainability/sec-carbon-disclosure-fashion-climate-change-rick-saines-aafa-risilience-338628/
Roshitsh, K. (2022, March 21). Fashion may soon be mandated to disclose emissions as SEC considers new climate ruling. Women’s Wear Daily. https://wwd.com/sustainability/business/esg-fashion-sec-climate-ruling-meaning-effects-business-strategy-1235138578/
