Discover more from Net Zero by 2050
The SEC’s Climate Deckchairs
Regular readers at this site know that we track two different but related topics. The first topic is ‘Net Zero by 2050’ — what companies need to do to achieve zero greenhouse gas emissions by the year 2050. The second topic is ‘Process Safety Management’ — how companies in the process industries can maintain safe and profitable operations.
There is a surprising degree of overlap between these two topics. In particular, the climate community can learn a lot from the process safety discipline.
The SEC Proposed Rule
In the year 2022 the United States Securities and Exchange Commission (SEC) proposed a climate-disclosure rule. The rule would require public companies to include detailed information in their financial reports to do with their climate programs. The rule is very long: 490 pages supplemented by many other equally lengthy and difficult-to-read documents. But what the rule boils down to is that public companies in the United States must inform the investment community about:
The company’s current greenhouse gas emissions,
What the company is doing to reduce those emissions, and
The financial risks that a company faces due to changes in the climate.
Note: the SEC does not require companies to actually do anything about reducing emissions or climate-related risk — the agency merely requires that companies report on what they are doing.
A reason for not requiring action may be that, ultimately, addressing the climate crisis is not a financial issue; it is a matter of science, thermodynamics, engineering and project management.
The Process Safety Management Standard
The the philosophy behind OSHA’s process safety management (PSM) standard is in profound contrast to the SEC approach. The PSM standard itself is just 5 pages long (supplemented by about 17 pages of examples and appendices).
Why is the PSM standard so short relative to the SEC behemoth? The answer is that, instead of requiring companies to fill out lots of forms and file lengthy reports, OSHA basically says “Do what it takes to be safe at your facility. How you do that is up to you”. In other words, OSHA’s standard is performance-based, whereas the SEC’s proposal is rules-based.
The Titanic and Its Deckchairs
We started this post by stating that this blog discusses two different, but related topics: the SEC climate-disclosure rule and OSHA’s process safety standard. We also run another blog — Faith in a Changing Climate. Our most recent post at that site is The Church's Deckchairs. The essence of that post is that we have a tendency to resolve immediate problems, rather than addressing root causes. In the words of the well-known meme, ‘We are rearranging the deckchairs on the Titanic while the ship sinks below the waves’.
We see this difficulty with regards to the SEC’s proposed rule. They are requiring public companies to report reams of information while, in the meantime, the climate change freight train is bearing down on us. In other words, the SEC is rearranging the deckchairs on the Climate Change Titanic.
If the SEC is to help companies achieve their climate-related goals, it would make sense for them to de-emphasize detailed reporting, and move toward a performance-based philosophy.
Net Zero by 2050 is a reader-supported publication. To receive new posts consider becoming a free or paid subscriber.