April 12, 2022
Dear Secretary Countryman,
Regarding S7-10-22, I want to express my full support of this proposed amendment. The need for large companies to begin to display how their business is contributing to environmental climate change and of course greenhouse gas emissions I believe is long overdue. With greenhouse gases and pollution ever increasing in todays world, it is becoming more and more important for these companies to express their practices of what theyre choosing to do to eliminate the production of emissions. According to a Climate.gov Annual Greenhouse Gas Index chart, GHG emissions have been steadily increasing each year. Since 1750, it took the earth over 200 years to increase the AGGI from 0 to 1, but it only took 30 years after that to increase it from 1 to 1.5 which was a 50% increase. In 1990, the AGGI was 1.0 and in 2020 it hit 1.47 which is a 47% increase (Climate.gov).
Many of the big 4 firms have been realizing the importance of ESG reporting, for example KPMG released an article, The risks boards face when crafting ESG-related incentive plans, in which they discuss how important it is for businesses with so many stakeholders and investors to begin to dedicate valuable resources to ESG reporting, A 2021 study by Meridian Compensation Partners found that 58 percent of SP 500 companies incorporate ESG metrics in annual incentive plans, and 5 percent include ESG metrics in long-term incentive plans (advisory.kpmg.us 2021). I believe the standardization of ESG reporting is vital with these companies because, with the 58 percent that currently incorporate their ESG metrics, they are likely to only display their best efforts of how they contribute to ESG in order to attract new shareholders and satisfy their current ones. Firms like Ernst and Young also see how ESG can be incredibly beneficial if proper attention is paid. For example, in an article regarding sustainability strategies, Orlan Boston states, by focusing on benefits-sustainable and circular product cycles, innovative and equitable employment models, sourcing transparency, investment in innovation-companies in vanguard are discovering new sources of competitive advantage (ey.com/sustainability). However, there will likely be many adjustments in both company sustainability reporting and also the assurance field when auditing these companies. Auditors will have to learn completely new techniques for auditing ESG practices which would require firmwide training. This SEC proposal would be costly for these companies, but it is an important step in the right direction.
KPMG Advisory Services
Sustainability strategies create competitive advantage EY - US