Expert analysis on ESG regulation, capital markets, and corporate governance.
The Securities and Exchange Commission (SEC) has fundamentally altered the corporate reporting landscape. Climate risk is no longer solely a sustainability concern; it is a financial reporting obligation. This guide outlines what Audit Committees and Boards must know to oversee the transition from voluntary CSR reporting to mandatory, investor-grade disclosure.
Unlike European regulations (CSRD) which focus on “Double Materiality,” the SEC rule is strictly grounded in Financial Materiality. Boards must ensure management is identifying climate risks—both physical (e.g., extreme weather affecting assets) and transitional (e.g., carbon pricing)—that have a material impact on the company’s consolidated financial statements.
For Large Accelerated Filers (LAFs), the rule mandates not just disclosure of Scope 1 and 2 emissions, but Limited Assurance followed by Reasonable Assurance.
A critical, often overlooked component is the requirement to disclose severe weather event impacts in the footnotes of the financial statements if they exceed 1% of a line item. This requires tight integration between the sustainability team and the Controller’s office.
Compliance is not just about data collection; it is about governance. Boards must treat climate data with the same rigor as financial data, ensuring internal controls (ICSR) are documented, tested, and audit-ready.
For decades, sustainability teams have relied on spreadsheets to calculate carbon footprints. While flexible, spreadsheets lack the audit trails, access controls, and data lineage required for modern regulatory compliance. In an era of mandatory assurance, a broken formula or a manual data entry error is no longer a minor mistake—it is a material weakness.
A System of Record (SoR) for ESG acts as the “single source of truth.” It automates the ingestion of utility data, production volumes, and spend data, applying validated emissions factors automatically.
We advise clients to move “from disconnected spreadsheets to connected intelligence.” Whether implementing Workiva, Persefoni, or Microsoft Cloud for Sustainability, the goal is the same: treat non-financial data as a strategic asset.
For most sectors, over 80% of emissions lie in the supply chain (Scope 3). Historically, companies have calculated this using “spend-based” methods (e.g., we spent $1M on steel, therefore our emissions are X). This is a trap: if you spend more to buy “green” steel, your emissions calculation ironically goes up because the spend increased.
To show genuine decarbonization, companies must move to hybrid or activity-based models. This requires collecting actual emissions data from suppliers.
Companies that master Scope 3 data don’t just reduce risk; they build resilient supply chains. By identifying carbon hotspots, you often identify energy inefficiencies and cost-saving opportunities deep in your value chain.
Traditional reporting focused on how the world impacts the company (Financial Materiality). Double Materiality, popularized by the EU’s CSRD (Corporate Sustainability Reporting Directive), asks two questions:
While the SEC focuses on the first half (Financial), global investors and customers operate on the Double Materiality standard. If you have significant operations in Europe or sell to global majors, you will be asked to report on your impacts (biodiversity, human rights, community impact).
A robust Double Materiality assessment involves stakeholder engagement—interviewing investors, employees, customers, and NGOs—to map issues on a matrix. This matrix becomes your strategic roadmap, defining which ESG topics require Board oversight and which are operational management issues.
Your Partner for Scope 1–3 Emissions Reporting & Climate Compliance in Illinois.
Illinois’ HB 3673 — the Climate Corporate Accountability Act — introduces one of the most comprehensive corporate emissions reporting requirements in the United States. Companies with over $1 billion in annual revenue doing business in Illinois must:
Applicability review, gap analysis of data/systems, maturity scoring, and a compliance roadmap to ensure full readiness before deadlines.
RSustain develops audit‑ready carbon inventories aligned with the Greenhouse Gas Protocol, covering direct emissions, purchased energy, and all 15 categories of Scope 3 (Value Chain).
We provide the policies, tools, and structure needed for reliable annual reporting, including templates, data quality controls, and systems integration (Workiva, Persefoni, etc.).
HB 3673 mandates third‑party verification. We manage pre‑assurance internal reviews, evidence file preparation, and verification body liaison to reduce audit risk.
We support large enterprises across Manufacturing, Retail, Logistics, Data Centers, Utilities, and Healthcare. If your organization operates in Illinois and exceeds $1B revenue, HB 3673 applies to you.