The SEC’s focus on GHG emissions reporting reflects growing investor demand for transparency surrounding greenhouse gas emissions, climate-related risks, and long-term sustainability performance. As climate change drives regulatory action globally, the SEC aims to standardize emissions reporting, so companies provide accurate, comparable information to the market.
These new ESG reporting requirements primarily affect public companies, with timelines and expectations varying by filer status. The shift also aligns U.S. reporting with international frameworks, improving consistency across global disclosure rules.
Investors increasingly expect clear data on carbon, carbon dioxide, and overall emissions trends as part of their risk assessment. New disclosure rules, along with emerging assurance requirements, reinforce the importance of reliable, well documented methodologies and strong internal oversight.
What Types of Emissions Must Be Reported? (Scopes 1, 2, and 3)
Under the SEC’s framework, companies must classify GHG emissions into Scopes 1, 2, and 3.
Scope 1 refers to direct emissions from company owned or controlled sources, such as fuel combustion or natural gas usage. Scope 2 includes indirect emissions associated with purchased electricity, steam, or heat, a major category for electric power entities and manufacturing organizations. Scope 3 emissions represent value chain activities, often the largest and most difficult to quantify.
The SEC proposes that Large Accelerated Filers and Accelerated Filers report Scope 1 and 2 data. Scope 3 becomes required only when material or when a company has public emissions reduction targets that include value chain emissions. A phased implementation schedule gives companies time to adapt as assurance obligations increase.
How the SEC Expects Companies to Calculate GHG Emissions
To support consistent and credible reporting, the SEC is aligned with established methodologies such as the GHG protocol, the greenhouse gas protocol, and other industry recognized standards. Companies must gather operational data, from energy consumption to process related co₂ emissions and convert it using recognized emissions factors.
Effective GHG accounting requires reliable data inputs, clear system boundaries, and documentation that supports auditability. Many reporting teams use a centralized reporting tool to consolidate information from multiple business units. Common challenges include incomplete supplier data, inconsistencies in emissions factors, and gaps in historical baselines. Strong internal controls, review procedures, and transparent methodologies are essential for accurate GHG reporting.
Required Disclosure Elements for SEC GHG Emissions Reporting
Companies must include emissions disclosures in SEC filings, including annual reports. Required items generally include:
Total greenhouse gas emissions for Scope 1 and Scope 2
Material Scope 3 data (when required)
Methodologies and calculation boundaries
Key assumptions and any limitations
Narrative discussion on how emissions trends affect strategy and financial planning
The greenhouse gas reporting program emphasizes comparability and clarity, ensuring stakeholders can evaluate emissions data consistently. Inline XBRL tagging is expected to enhance accessibility and transparency in climate disclosures.
Best Practices for GHG Reporting Compliance
To prepare for mandatory reporting, companies should establish cross functional governance involving sustainability, finance, legal, and operations. Strong data controls and clear documentation processes reduce filing risk and strengthen reporting accuracy. Best practices include:
Using a centralized reporting system for emissions tracking
Conducting mock reporting cycles to identify data gaps
Standardizing methodologies and emissions factors
Improving supplier engagement to strengthen Scope 3 data
Preparing early for external assurance requirements
Common challenges include fragmented data, inconsistent estimation methods, and limited internal expertise. Early planning and proactive governance help organizations address these challenges effectively while improving long-term reporting quality.
Many companies address data fragmentation and quality issues by strengthening internal systems and adopting centralized platforms. DFIN’s guidance on ESG data management offers additional best practices for building reliable emissions datasets.
The Future of SEC Climate and GHG Reporting
The SEC’s emphasis on emissions reporting reflects a global movement toward climate transparency. Organizations with strong emissions processes will be better positioned for future regulatory changes, investor expectations, and evolving sustainability standards.
Reliable GHG disclosures enhance corporate resilience, strengthen ESG performance, and support investor trust. As climate regulation continues to evolve, companies that prioritize high-quality emissions reporting today will be better equipped to meet tomorrow’s standards and expectations.
DFIN remains committed to helping organizations streamline climate disclosures, strengthen control over sustainability data, and deliver investor ready reporting that meets SEC expectations. Our technology, expertise, and end-to-end ESG reporting solutions enable companies to manage reporting with confidence as regulatory requirements continue to expand.
