A proposed greenhouse gas emissions disclosure rule dominated discussions at a panel of sustainability policy leaders held at the Graduate School of Business (GSB) on Wednesday. The panelists speculated barriers and opportunities for businesses’ and start-ups’ net-zero goals as part of the fourth annual Climate, Business & Innovation Conference, which was hosted by the GSB Energy Club in CEMEX auditorium.
The conference, which showcased up-and-coming Stanford climate start-ups and technological interventions, also addressed regulatory and policy frameworks to accommodate and incentivize private sector companies to achieve net-zero emissions commitments.
The panel speakers said that the proposed emissions disclosure rule, which tightens disclosure requirements for public companies, is a necessary step to develop truly environmentally impactful solutions for the private sector.
The rule from the Securities and Exchange Commission (SEC) would require companies to disclose three types of emissions. The first category, labeled Scope 1, includes greenhouse gas emissions that the company produces directly, such as the combustion of fuels. The second type, Scope 2, includes the emissions associated with sources of electricity or energy that the company consumes. Scope 3 encompasses all the emissions associated throughout a company’s value chain, including emissions from the suppliers all the way to market.
Susan Mac Cormac, lawyer and co-chair of the Energy and Cleantech group at the law firm Morrison & Foerster, said that pressuring companies to disclose more information will create a trickle-down effect that could impact Stanford entrepreneurs, among others.
Part of the potential impact, Mac Cormac said, is because the rule would require bigger public companies to declare their emissions, and, as part of this tracking, companies will have to aggregate emissions from their supply chains. This can potentially transform the way greenhouse gas emissions are tracked, allowing for better regulation and abatement, according to Mac Cormac.
Danny Cullenward, policy director at a nonprofit research organization called CarbonPlan, which focuses on the transparency and scientific integrity of climate solutions, said that the increased transparency through the SEC’s proposed rule would generate more information for researchers, policymakers and members of the private sector to use in their decision making.
Mac Cormac also mentioned Article Nine of the European Union’s Sustainable Finance Disclosure Regulation (SFDR) as representing the potential next step forward in sustainable finance. The article provides a commitment framework for companies to opt-in and track their investments to ensure that all the products and services they invest in do no significant harm to the sustainable investment objective, Mac Cormac said. For example, sustainable firms should not invest in a cloud-computing company’s products if this money will be used to find new fossil-fuel sources.
Cullenward said he believes that the increasing standards and regulations will benefit private firms, allowing successful ones to stand out from the pack.
Nike Chief Sustainability Officer Noel Kinder, who spoke on the event’s corporate commitments panel, echoed Cullenward’s perspective. He said he believes that the SEC’s disclosure rule would provide an opportunity for brands to showcase their efforts in decarbonizing their supply chains, especially larger firms that invested significant effort in tracking their emissions. The rest of the panel agreed, however, that there are concerns that small- to medium-sized companies are not yet aware of the urgency and impact of emissions disclosure.
While the SEC’s proposed rule would provide a transparent environment conducive to meaningful supply-chain transitions, former U.S. Deputy Chief Technology Officer and co-author of Speed & Scale Ryan Panchadsaram said that the way emissions are accounted for today can be misleading and amorphous.
Because Scope 3 emissions include numerous categories, from business travels to downstream emissions, the broad range of sources can undermine the integrity of greenhouse gas emissions data. Despite the criticism and hopes for the SEC’s disclosure rule to pass, Cullenward said he is not optimistic, as he views the current state of democracy as unlikely to push for more policy changes under the current Supreme Court.
During the keynotes, the MAP Energy founder and Stanford adjunct professor in civil and environmental engineering Jane Woodward discussed her turn to early-stage climate ventures following a long career in oil and gas investment. Woodward said that climate solutions exist within the collaborative effort between technology, policy and finance structures, enhanced by an improved understanding of consumer behavior to develop demand for more sustainable alternatives. This framework of collaboration between the private and public sectors remained a theme throughout the conference.
While Woodward said she recognizes that innovations should aim for a gigaton-scale reduction in greenhouse gases in the increasingly narrower timeframe before irreversible climate damage, she acknowledged that not every solution will reach that scale. Instead, Woodward said that megaton-scale innovations acquired by other companies are also a meaningful and more viable solution. Woodward added that we are living in the “renaissance of single-purpose assets,” where properties like oil wells, which once served only as a means to extract resources from the earth, are being reconsidered as underground greenhouse gas storage sites or alternatively as gravity wells, a form of long-term energy storage.
Political practicality was another main point of the discussions. Panchadsaram called for policies to recognize the green premium — the added cost of choosing to use more environmentally sustainable product — and subsidize them accordingly to make these products a competitive alternative to their fossil fuel–based counterparts. Conceptually, this is the same as imposing a carbon tax, but this route is more feasible because it does not require a regulation that can be difficult to pass, he said.
On an individual level, Panchadsaram added, everyone has a role in making climate the top voting issue to create political incentives for elected officials to prioritize climate.
This article has been updated to paraphrase quotes from several speakers on the panel.