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Since the SEC adopted final climate disclosure rules, one of the most consequential interpretive issues raised to date relates to Scope 3 emissions — even though the proposed requirement to disclose Scope 3 emissions was omitted in the final rules and the release explicitly states that “the disclosure of Scope 3 emissions in Commission filings will remain voluntary.”

The issue is this: Item 1504 of Regulation S-K requires a company with one or more targets or goals that materially affected or are reasonably likely to materially affect its business, results of operations, or financial condition to report any (no materiality qualifier) progress made toward meeting those disclosed targets and goals. Well, what if a company has set and is required to disclose a science-based, net zero, Scope 3-specific or other target that covers Scope 3 emissions (especially if a majority of the company’s emissions are Scope 3)? How does it disclose progress without disclosing Scope 3 emissions? And could it be misleading to omit them, particularly if other indicators of progress are inconsistent with a company’s progress on Scope 3?

There are a few footnotes in the release that are worth noting. Footnote 947 cites comment letters suggesting that Scope 3 should be required if it’s implicated by targets and goals or transition plans, and footnote 356 (on an unrelated topic) reminds companies of their obligations under Rule 408 and Rule 12b-20 — not to make materially misleading statements or omissions and “to provide such additional information as is necessary to keep their disclosures from being misleading.”

On the other hand, footnote 2494 may be read to suggest that the rule’s requirements related to targets, goals and transition plans are not intended to trigger emissions disclosure that is not otherwise required by Item 1505:

All registrants subject to the final rules, including SRCs and EGCs, are not required to disclose GHG emissions metrics other than as required by Item 1505, including where GHG emissions are included as part of a transition plan, target or goal.

There’s no clarity or consensus on this yet. Some law firm alerts point to language in the release and anticipate that the rule will not be interpreted to require Scope 3 disclosures. Others note that targets and goals that cover Scope 3 come with a risk that the SEC Staff may take the position that emissions disclosures will be required.

– Meredith Ervine