The GHG emissions are categorized into three scopes. Scope 1 is the registrant’s direct GHG emissions. Scope 2 is its indirect GHG emissions from purchased electricity and other forms of energy. Scope 3 is indirect emissions from upstream and downstream activities in a registrant’s value chain.
“Scope 3 requires these companies to estimate the carbon output of the use of their product by the consumer, which means they’re going to have to go out into the field and talk to consumers,” Will Hild, executive director of Consumers’ Research, America’s oldest consumer protection organization, said in an interview with NTD’s “Fresh Look America” program on July 12.
“Let’s say you bought an internal combustion engine lawnmower. The lawn mower company will need to know how many times you mow your lawn. They’re going to have to go out and ask people that and research that. And so you could see how this starts to lay the groundwork for scoring actual individual people’s activities,” said Hild.
According to the Environmental Protection Agency’s GHG inventory guidance, Scope 3 has 15 categories such as “purchased goods and services,” “use of sold products,” “upstream and downstream transportation and distribution,” “employee commuting,” and more.
“I do think it’s a rather frightening development, especially to come out of that Securities Exchange Commission, which shouldn’t be involved in any of this, to be laying the groundwork for something like that, and for having companies try and track that,” said Hild.
For example, a car company might add a tracker to the car to know the monthly mileage, said Hild.
“It’s not that outlandish to think that in order to keep themselves safe from securities plaintiffs attorneys, they’re going to engage in almost levels of surveillance around the way that products are used,” said Hild. “So they can say with some level of certainty that their estimations of CO2 Scope 3 output are accurate.”
Hild said Consumers’ Research opposes the rule because it would hurt individual investors and consumers.
“It’s bad for actual retail investors, people consuming investment products, funds, brokerage services, and seeking a return in the stock,” said Hild.
“This is a massive expense. It’s being added to the annual reporting requirements of publicly traded companies,” said Hild, noting the expense would reduce the returns of these companies, especially small-cap companies.
Hild said many companies looking to go public might be scared away because of the cost and go to a venture capitalist or a hedge fund for funding. That’s another harm to individual investors because they would lose opportunities.