Climate Disclosure Requirements and Carbon Reporting

Happy Thursday!

We’re excited to kick off our newsletter this week with a discussion on what’s going on in the industry. In conversation this week we’ll dive into some of the new regulatory requirements being passed by the SEC that will affect public companies, including those in the fashion industry that will be demanding more accountability from these businesses.

We want to dive deeper into what that entails, particularly with carbon emissions reporting that plays a key role in mandatory climate reporting. We’ll also share an update on the latest and greatest of companies in the sustainable fashion space.

We’re also excited to announce we’ll be featuring brand spotlights in our newsletter to highlight the many great sustainable fashion brands partnering with Trace!

 Thanks for reading!

Headlines

In March 2024, the U.S. Securities and Exchange Commission (SEC) adopted a new rule requiring public companies to disclose climate-related information in their registration statements and periodic reports which includes information on greenhouse gas emissions and plans for managing climate risk. Although the rule is not yet in effect, this is a huge step in accountability for public companies. Here's a breakdown of the key points:

The Ruling

1. The ruling was finalized on March 6th, 2024 and titled "The Enhancement and Standardization of Climate-Related Disclosures for Investors.

2. The aim is to provide investors with consistent, comparable, and reliable details about the financial impacts of climate change on a company's operations and how they manage those risks.

3. Disclosures may include: Greenhouse gas (GHG) emissions, climate-related risks and opportunities impacting the business, and how the board oversees climate-related matters.

4. On March 15, 2024, the courts imposed a temporary stay on the new rules pending judicial review. This means the rules are not currently in effect.

Uncertainties

The court challenge could potentially alter or overturn the ruling.The final implementation timeline and specific details of disclosure requirements may change depending on the court's decision.

What does this mean for the fashion industry?

Many large fashion brands that operate in the US will have to trace their impact across their supply chain such as their carbon footprint. It still remains to be seen what level of reporting will be required when it comes to Scope 3 emissions.

To read more about this ruling, visit the SEC site here.

Analysis of the Week

Some of the major changes to reporting for companies will involve how they report their carbon emissions. Let’s take a look at what reporting on carbon emissions entails.

Carbon accounting is the process of quantifying the number of greenhouse gasses (GHGs) produced directly and indirectly from a business or organization’s activities within a set of boundaries. There are three types of emissions that are classified as follows:

A high-quality carbon footprint represents the total of a company’s greenhouse gas emissions, including Scopes 1-3, and serves as the basis for the company’s emissions reduction goals and progress. Regulatory frameworks in the US, EU, and elsewhere require many companies to disclose their carbon footprint annually.

For many fashion companies, reporting on Scope 3 emissions will be a challenge due to much of the supply chain being outsourced to factories in other countries, not to mention the limited oversight many brands have over their suppliers. However, this reporting will be crucial to hold companies accountable for their impact.

Brand Spotlight

Learn about one of the sustainable brands on Trace’s marketplace!

Check out today’s featured brand: Seeds & Stories

Seeds & Stories seeks to empower rural women through regenerative fashion.

In 2018, the founder, Margarida came across the town of Bigodi in Uganda and learned about the traditional basket weaving practices of the local women artisans. Over the next few years, she learned about the economic and social issues within the community that affected the women, and worked with local community leaders on identifying ways to help the local women and community as a whole develop their economy and find income sources outside of tourism that worked in harmony with nature.

Seeds and Stories is currently focused on developing quality hand-made products that support the livelihoods of women artisans in Bigodi, as well as new training programs that provide skills and environmental knowledge to the broader community.

Seeds & Stories artisans use local raw materials such as palm leaf, millet straws, papyrus, and banana fiber that have regenerative properties in local ecosystems, namely increasing soil fertility and enhancing biodiversity.

Their long-term objectives are to provide sustainable livelihoods for local women, create greater food security, advance gender equality, and promote environmental regeneration.

Innovation in Fashion

SuperCircle, is a full-service technology and reverse logistics platform powering circularity for the world's best retail brands.

Archive, is a platform that has built a flexible operating system for resale, enabling brand partners to launch any resale model within a few months - with little to no development resources required.

Living Ink, is a biomaterials company on a mission to use sustainable algae technologies to replace petroleum-derived products (such as black-pigmented materials) and launch carbon-negative products.

Refibred, is empowering the fashion industry to achieve true circularity by ensuring the efficient and accurate sorting of textiles for recycling applications.

Eon, is a platform designed to enable brands to turn physical products into interactive and intelligent assets easy to digest for consumers, providing transparency in their purchases.