If you run a private company, you may have looked at the latest SEC climate news and assumed it doesn’t have much to do with you. After all, the SEC’s 2024 climate disclosure rules were written for public companies. Those rules are currently stayed, and the SEC has now proposed rescinding them entirely, but has not yet finalized the rescission.
So if you are privately held, can you stop worrying about climate reporting?
Not necessarily.
The SEC rule is only one reason companies have been collecting climate and emissions information. Your customers may still ask for it. Your lender may have reporting requirements. A state law may apply to you directly. And if you supply a public company, that customer may continue asking you for information it uses in its own reporting.
The better question is not whether climate reporting is going away; it is who still expects information from your company and why.
Was my private company ever subject to the SEC rule?
The 2024 SEC rules applied to companies that file registration statements and periodic reports with the SEC. The rules would have required certain climate-related disclosures, including information about climate risks, greenhouse gas emissions in some cases, and certain effects of severe weather on the financial statements.
You may not have been directly affected by the rules, but private companies could still feel the effects.
Think about a manufacturer that sells components to several large public companies. Its customers may ask for emissions information because they use supplier data in their own reporting or sustainability programs. Or consider a private equity-backed business. The SEC climate rule may not apply to the portfolio company, but the sponsor may still request climate information for its own investor reporting.
That distinction matters now. If you started collecting information because somebody else asked for it, the SEC’s proposal does not necessarily make that request disappear.
Your first step should be to identify who is asking you for climate information today.
If the SEC rule goes away, what could still require us to report?
For many private companies, contracts are the first place to look. You may have agreed to provide emissions data or other sustainability information in a customer agreement, financing arrangement, supplier program, or investor reporting package.
For example, suppose your largest customer requires you to submit Scope 1 and Scope 2 emissions every year as part of its supplier program. The SEC can rescind its climate rules, but that does not change what you agreed to provide your customer.
The same goes for lenders. If a credit agreement requires certain sustainability metrics or reporting, the SEC’s decision does not automatically change those terms.
In other words, the SEC proposal is only one part of the analysis. Before making changes, review the agreements that matter and confirm what information you are still required to provide.
Could state rules still apply?
State rules could still apply and this is one of the bigger reasons private companies shouldn’t treat the SEC proposal as the end of the issue.
California is the clearest example. Its greenhouse gas reporting law reaches certain U.S. companies doing business in the state, including private companies, with more than $1 billion in annual revenue. It also has a separate climate-related financial risk law aimed at companies with more than $500 million in annual revenue. Please note that both California laws have also been challenged in court. For now, enforcement of the $500 million climate-risk reporting law is paused, while the $1 billion emissions reporting law is still moving forward.
However, California isn’t necessarily the only state moving in this direction. Similar proposals have surfaced in other states, although they have not all become law yet.
Even if your company is nowhere near a $500 million or $1 billion revenue threshold, state reporting rules may still affect you indirectly. A large customer that has to report its own emissions may ask suppliers for more data. That can bring smaller private companies into the reporting process even when the law doesn’t apply to them directly.
So before scaling back all climate-related reporting, check whether a state rule may apply to your company directly or whether other customers or business partners still need information because of their own reporting obligations.
What if nobody is legally requiring the information?
Even if no one is legally requiring the information, the question becomes whether someone important to the business still expects it.
That could be a major customer deciding which suppliers to use. It could be a lender evaluating risk. It could be a private equity sponsor responding to limited partners. It could also be a potential buyer doing due diligence.
The information they want may be much narrower than what the SEC rules would have required. A customer might only want annual emissions numbers. A lender may care more about whether a facility is exposed to flooding or wildfire. An investor may want to understand whether rising insurance and energy costs are putting pressure on margins.
That is an important distinction. You don’t necessarily need to keep producing a broad climate report simply because you built the capability to do so. But you also shouldn’t stop collecting a useful metric if several of your largest customers ask for it every year.
Talk to the people who actually receive these requests. Sales, finance, legal and investor relations may each be seeing a different part of the picture.
We already spent the money getting ready. Was that work wasted?
A lot of companies spent time identifying data owners, figuring out where emissions information comes from, documenting calculation methods and improving review procedures. Some of that work may no longer be needed if it was built solely for an SEC requirement that is ultimately rescinded. But some of it may still solve a real business problem.
Suppose you spent $200,000 building a process to collect emissions information from your facilities. If your lender, two large customers, and California all need parts of that information, dismantling the process may save very little. It could even cost more if you have to rebuild it later.
The opposite can also be true. If you hired a consultant for a narrow SEC compliance project and nobody else uses the work, continuing the engagement may no longer make sense.
Instead of asking whether to keep the entire climate program, look at it piece by piece. Ask what each process produces, who uses the information and what happens if you stop collecting it.
Companies sometimes hear “voluntary” and interpret it as “informal.” Those are not the same thing.
If you tell a customer that your emissions fell 20%, publish a reduction target on your website or include sustainability metrics in a lender presentation, you should be able to support what you said. That means knowing where the number came from, how it was calculated, and who reviewed it.
You don’t need to turn every sustainability metric into an SEC-style reporting project, but important external claims deserve a reasonable review process.
For example, if your website says you plan to reduce emissions 40% by 2030, somebody should be able to explain the starting point, what is included in the calculation, and how current performance compares with the target.
Finance can play a useful role here because this is familiar territory. The question is similar to any other externally reported business metric: do we know where this number came from, and are we comfortable standing behind it?
What should we do now?
For most private companies, this does not call for a major new compliance project. It calls for an inventory.
Start with three questions:
- Who currently asks us for climate or emissions information? Look at customers, lenders, owners, regulators, and business partners.
- Why are we producing each report or metric? Separate legal requirements from contractual commitments and information you provide voluntarily.
- Which parts of our current process still have a purpose? Keep what supports a real requirement or business need. Reconsider work that exists only because of the stayed SEC rules.
Then document the decisions you make. If you decide to stop an outside engagement, reduce data collection, or continue a reporting process, keep a short record of why.
Your CPA can help with the financial side of that review. That may include identifying which reporting processes rely on accounting data, evaluating controls over metrics provided to lenders or customers, and reviewing the cost of maintaining reporting systems.
The SEC’s proposal may remove one piece of the climate reporting landscape. For private companies, though, that was never the whole landscape. Before you shut anything down, find out who still needs the information.
If you would like help reviewing your current financial controls or related business requirements, contact our office. We can help you sort through what still serves a purpose and what may be scaled back.
This article is provided for general informational purposes only and is not intended as legal advice. Laws, regulations, contractual obligations, and reporting requirements can vary based on your specific facts and circumstances and may change over time. You should consult qualified legal counsel regarding the application of any legal or regulatory requirements to your business.
