by Michael L. Walker, PE
Vice President, Principal Engineer
The year was 1971. It was second ever Earth Day and it was spring, which meant baseball season. Fighting for the starting catcher job on my high school team, I was scheduled to start later on that afternoon. A couple of friends and I figured to celebrate Earth Day, we’d walk to school. Stopping at a friend’s house along the way, we reached the school campus an hour or two late. Of course, we had to sign in at the front office and receive a late pass, which required each teacher’s signature indicating we were in class; so, there was a record.
I didn’t know then that this little “opportunity” to miss a class or two would one day be a much larger part of my life. In fact, it was probably about five years later in college that I decided environmental protection and resource conservation was to be my “professional calling.” I also did not realize that this was the point of the spear and there was going to be much more attention given to these issues over the next 50 years.
In March, the Securities and Exchange Commission (SEC) proposed rules that would require public companies to report information about their climate-related financial risks and greenhouse gas emissions. Some companies, particularly large multi-national ones, voluntarily disclose some of that information with their financial records. But these rules change the game by requiring public companies to ensure the data they provide is consistent, accurate, and can stand up to scrutiny from outside groups. There has been little in the way of standardization associated with computation and reporting, and not that these rules will fully address these issues, but they will set the stage for the development of those standards.
The rules will require large companies (also known as “accelerated filers”) to start measuring next year’s emissions to report in their financials in their 2024 reports. So, the short runway has business leaders digging in to be prepared. In response, some companies are starting to collect and organize suppliers’ and customers’ operational and financial data, along with “emissions factors” to provide estimates of the greenhouse gas emissions that result from purchased electricity, distance traveled, or fuel combustion. These larger companies may be using commercially available software to record and track this information and compute a final figure that “provides a total emission” based on dollars spent on air travel, transportation of products, or other activities. This use of software and the effort begins to address the deficiency of not having a standardized method to compute carbon emissions across industries. Regardless of using software or spreadsheets, the effort to collect and synthesize information throughout the life cycle of the business is extremely rigorous and labor intensive.
It is not expected that the SEC will develop or release accounting standards for the collection of information and the calculation of carbon emissions that information. So, the issue of standardization will still be an issue for a means to report meaningful numbers across the spectrum of businesses. Some will rely on high-level data and industry averages, others will be more granular, and others might decide to not include certain assets or types of products. Standardization will ultimately fall to outside groups such as the International Sustainability Standards Board (ISSB) or the International Organization for Standardization (ISO).
Now, back to my high school Earth Day story. The game that evening was an away game, so us athletes would have need to leave class at a particular time, about an hour before school ended to make it to our opponent’s school. Remember, I WAS SCHEDULED TO START! I get up from my desk with my gym bag and the teacher stops me and says “where are you going?” Of course, I answer politely, “I have a baseball game.” He says, “please sit down, you got to school late this morning (remember, he signed my “late slip), so you cannot be excused from class for the game.” My response was something like “WHAT?!?!” So, I missed the game and caught the regular bus home. When I walked in the door and my mom asked, “why are you home already?” BUSTED!
The moral of the story: Don’t despise the day of small beginnings…for from small beginnings come great things.
If you have any questions or environmental compliance concerns, please contact Michael L. Walker, PE at (919) 459-5245 or mwalker@ei1.com.