Investors, customers, and employees are increasingly interested in evaluating firms’ environmental impact. This is good news. We are all better off when companies are accountable for their actions. Seizing on this trend, the SEC has a pending proposal to mandate disclosure of companies’ carbon emissions and Governor Newsom has committed to signing a bill that does the same in California. This is bad news. Mandatory disclosures will do more harm than good.
The mandates require companies to disclose their direct emissions (Scope 1 emissions), the emissions of others used to power their operations (Scope 2), and the emissions in their supply chain (Scope 3).
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