About the author: Katie Mehnert is founder and CEO of ALLY Energy and serves on the National Petroleum Council.

As the Securities and Exchange Commission approaches a vote this Wednesday on new climate disclosure requirements, much of the conversation seems to be dominated by the idea that there are two warring sides: those committed to environmental action versus free market absolutists in the business community. But my work in the energy sector shows me there’s a lot of support for environmental action among companies and investors—and a lot that can be done regardless of how the SEC ultimately proceeds.

First, the big picture. Nearly two years ago, the regulatory agency proposed new rules requiring corporations to collect and report new data on their environmental impact. Since then, a number of companies and trade groups have urged the SEC to drop some of its more-ambitious proposals, particularly a plan for U.S.-listed companies to disclose so-called Scope 3 emissions. 

Scope 1 and 2 emissions come from a company’s operations and its power usage. Scope 3 emissions are more indirect but no less important. Those emissions are produced throughout the company’s supply chain. Scope 3 emissions make up a huge portion of companies’ impact on the planet. Supply chain emissions alone are an estimated 11.4 times greater than operational emissions. Few companies measure these. 

Where investors stand

Surveys indicate that most shareholders support having access to information about a company’s climate impact. Three quarters of investors surveyed by PwC last year said “sustainability is important to their investment decisions,” with 57% reporting they “back greater clarity and consistency” in reporting. In late 2022, an analysis by climate-focused nonprofit Ceres of approximately 300 letters sent to the SEC about its proposed overhaul found that the vast majority mentioned a Scope 3 rule, and 97% supported the move.

Still, investors fled from sustainable funds in 2023. It’s unclear how much of this has to do with specific feelings about environmental concerns, and how much is purely practical. These funds “underperformed their conventional peers,” Morningstar noted. The New York Times reports that the sector has been hit by both “greenwashing” concerns and “red-state” boycotts, which can affect performance. (I have spoken out against states claiming to support a free market while trying to ban companies that choose to take certain environmental steps.)

For the SEC, passing any of the proposed regulations is a monumental challenge. “Landing this plane is very difficult,” Tom Kim, former chief counsel of the SEC division leading this rulemaking, said in a recent webcast for my company. With five commissioners, the SEC has to come up with something that all three Democrats will support, since the two Republicans are unlikely to vote for any. The new rules also have to stand up to legal challenges in court. 

But businesses, and their shareholders, would benefit from a national standard. States creating their own wildly different rules can wreak havoc on business. “I think we should all welcome having a strong federal scheme” to “hopefully preempt all these state schemes,” said Kim, who is now a partner at Gibson, Dunn & Crutcher.

Daniella Foster, board chair of the U.S. chapter of U.N. Global Compact—the largest corporate sustainability initiative—told me the idea of the SEC scaling back these rules leaves her with mixed feelings. As a senior vice president at Bayer, she knows that spending less time on reporting “will allow us to focus more on the impact we want to have. On the other hand, what gets measured, gets managed.”