SEC plans for corporate climate reporting in US, and Unilever’s blockchain palm oil pilot

In this latest news brief: publicly traded companies in the US to report on climate risks; EU and UK carbon border adjustment proposals; HSBC and Swiss Re going green(er); and, Unilever’s Indonesia palm oil blockchain pilot

The Securities and Exchange Commission in the US has proposed that publicly traded companies must report on their scope 1 and 2 direct and indirect emissions, and in some cases their scope 3 supply chain emissions. The proposed rules would require disclosure about a company’s governance, risk management and strategy regarding climate-related risks. In addition, companies would be required to disclose targets and commitments, and strategy to achieve those targets. Companies would disclose about scope 3 emissions if these emissions are material to its investors or if the company has made commitments that reference scope 3. 

Some companies – such as Microsoft and Apple already do publish detailed analysis. Others have been more reluctant to do so. The reaction to the proposal is mixed, with some Republican politicians and industry groups already lobbying against the proposals claiming they will increase costs and even that they go beyond the SEC’s mandate. 

EU/UK carbon border adjustment

In the European Union, details of what the proposed carbon border adjustment mechanism will look like is becoming clearer. The EU’s finance ministers have agreed details of this new carbon tax designed to protect high-emitting companies inside the EU complying with the bloc’s carbon reduction laws. Energy intensive goods such as steel, cement and fertilisers coming into the EU will be subject to tariffs to reduce the risk of carbon leakage – in other words excess emissions made in markets not subject to the EU’s tight regulation. In so doing, a level playing field for EU companies is created while reducing emissions overall. Or that’s the theory. 

There have been calls for the UK to introduce a similar carbon tariff to protect low-emission domestic manufacturers. A new report from business coalition Aldersgate Group proposes such a move as part of an overall push to develop low carbon economy in the UK. Businesses in high emission sectors, including automotive and construction are finding it challenging to decarbonise processes amid concerns that they will be undercut on price by cheap high-carbon imports, the report argues. It also proposes that more investment is required to help companies roll out low-carbon technology beyond pilot schemes. 

HSBC to finance net zero 

Banking giant HSBC has been criticised over its approach to reducing emissions and accused of providing $87bn finance to fossil fuel companies between 2015 and 2021. However, the bank has announced a period of consultation into how it should adjust its policy for financing high-emitting sectors. The bank says it wants to finance the transition to net zero and will ask fossil fuel businesses for net zero plans, and states a belief that its greatest impact on climate action can be through engaging its clients and developing robust transition plans. 

Swiss Re cuts carbon-intensive cover 

Insurance sector giant Swiss Re has pledged to stop providing cover to the top 10% most carbon-intensive energy sector projects from mid 2023. Swiss Re eventually will stop providing insurance and reinsurance to the remaining 90% of the oil and gas sector for companies that do not have net zero transition plans with 2050 or better deadlines, with a commitment to cutting by 50% cover for projects without such plans in place by 2025. 

Blockchain solution for palm oil  

Consumer goods giant Unilever has announced the successful pilot of a blockchain solution that tracked 188,000 tonnes of palm oil sourced from Indonesia. The GreenToken by SAP solution creates digital tokens that capture information throughout the palm oil’s journey along what is typically a complex supply chain. A key challenge is that palm oil from known and unknown sources is typically mixed in the supply chain, which makes determining origin practically impossible. Origin is of course important for brands and sourcing companies that that want to be able demonstrate a deforestation free supply chain. Unilever says it will scale up the use of the GreenToken solution as part of its commitment to a deforestation free supply chain by 2023.