Amazon, Meta, Google Fund Emissions Reporting Embraced by SEC

Amazon.com Inc. blocked an investor from seeking more greenhouse gas emissions disclosures at the company’s upcoming annual meeting, saying its reporting meets industry-backed standards.

Left unsaid: it helps finance the initiative behind those voluntary guidelines, the Greenhouse Gas Protocol.

The GHG Protocol—which also counts Google parent Alphabet Inc. and Meta Platforms Inc. among its 10 current funders—has been playing an outsized role not just in corporate deflections against enhanced climate disclosures but also in the Securities and Exchange Commission’s corporate emissions reporting plans.

Amazon declined to comment on its funding for the protocol. The company’s decision to toss the shareholder proposal comes as the SEC is working to finalize climate reporting rules this year that build on the GHG Protocol and the industry initiative is considering updates to its standards. Accountants and environmental advocates have pushed for bolstered indirect emissions reporting and strengthened disclosures under the GHG Protocol, though they’ve still encouraged the SEC to leverage the standards in its rulemaking.

“It’s not like there’s some perfect, better way to disclose emissions out there that the Greenhouse Gas Protocol just got wrong,” said Madison Condon, a Boston University School of Law associate professor, who studies climate risk.

She added: “The SEC has the task of standardizing this number such that it can be used in a multiplicity of ways, but also not be deceptive.”

‘Leading’ Standard

The SEC’s climate disclosure proposal draws heavily on the GHG Protocol that put out its first standards in 2001 to help companies measure and manage their emissions. The GHG Protocol is “a leading accounting and reporting standard for greenhouse gas emissions,” the agency’s proposal said, referencing the protocol more than 90 times.

Like the GHG Protocol, the SEC proposal gives companies flexibility with reporting Scope 3 emissions—those coming from supply chains and other indirect sources. Both let companies choose which types of Scope 3 emissions to disclose—or not report at all.

Amazon and other companies have pushed the SEC for leeway with Scope 3 reporting, saying it’s harder and more costly to calculate than Scope 1 and 2 emissions, which come from their direct operations and power usage. But sustainable investing group Ceres and other environmentalists have called for strong Scope 3 reporting requirements for all companies, saying the greenhouse gases generally make up the majority of a company’s emissions.

The SEC proposal would only require big companies to report on Scope 3. The companies, however, could avoid the disclosures if the emissions aren’t part of their climate goals or if they determine the information won’t help a reasonable investor under the agency’s materiality standard.

Scope 3 reporting is optional under the GHG Protocol’s revised Corporate Accounting and Reporting Standard from 2004, though required under its 2011 Corporate Value Chain (Scope 3) Accounting and Reporting Standard. Companies using the voluntary GHG Protocol guidelines can follow either standard on Scope 3 reporting. The 2011 standard identifies several Scope 3 sources companies can disclose if they deem relevant, including business travel, investments and the use or processing of their sold products.

The World Resources Institute and World Business Council for Sustainable Development, which partnered to create the GHG Protocol, have called on the SEC to require Scope 3 emissions. (Bloomberg Law is an affiliate of Bloomberg LP, which is a member of WBCSD.)

“The SEC rule has a specific purpose, which is disclosure on climate-related financial risks,” said David Rich, Greenhouse Gas Protocol deputy director at WRI. “If Scope 3 were not included in that, there would be a lot of omissions of very significant information that investors would need to make decisions about financial risk.”

Amazon’s Stance

Amazon also has urged the SEC to require Scope 3 disclosures, with caveats.

Amazon asked the SEC last year to issue rules that give companies more protections from legal liability for Scope 3 reporting than the agency’s proposal does. The SEC also should permit companies to only make Scope 3 disclosures about activities they influence or indirectly control, like business travel, Amazon told the agency.

Amazon raised similar issues when an environmental investment firm tried to get the company to include a vote on an emissions disclosure proposal at its May 24 annual meeting. The resolution from Green Century Capital Management Inc. would have pushed Amazon to “measure and disclose scope 3 GHG emissions from its full value chain inclusive of its physical stores and e-commerce operations and all products that it sells directly and those sold by third party vendors,” according to the proposal.

The shareholder proposal contradicts the GHG Protocol, a lawyer representing Amazon said in a letter to the SEC, asking for the agency’s support to block the resolution. The letter quotes the GHG Protocol’s 2004 Corporate Accounting and Reporting Standard, which says “accounting for scope 3 emissions need not involve a full-blown GHG life cycle analysis of all products and operation.”

“The Proposal addresses a complex, multifaceted issue by imposing a prescriptive standard that differs from both the approach the Company believes is best suited to the nature of the Company’s operations when measuring GHG emissions and the standards set forth in the Reporting Standards” of the GHG Protocol, Ronald Mueller, a Gibson, Dunn & Crutcher LLP partner representing Amazon, said in the letter.

The SEC last month ultimately agreed with Amazon that the proposal was seeking to micromanage the company, which is grounds for excluding a resolution from a proxy ballot for a company’s annual meeting under agency rules.

‘What They Need’

Google and Meta also are pushing the SEC to ensure strong safeguards from legal liability for Scope 3 disclosures while they’re helping finance the GHG Protocol.

The Bezos Earth Fund from Amazon founder Jeff Bezos is a GHG Protocol funder, too. His environmental group gave the GHG Protocol $9.25 million to update and clarify its standards, according to a March announcement.

It’s unclear how much money Amazon, Google and Meta have given to the GHG Protocol or their possible role in shaping standards. The GHG Protocol didn’t list the companies on a webpage about its funders until after Bloomberg Law sought the names of the initiative’s current financial backers earlier this month.

In addition to Amazon, representatives of the Google parent Alphabet, Meta and the Bezos Earth Fund didn’t respond to requests for comment. GHG Protocol’s Rich declined to disclose companies’ financial contributions and said it’s still undecided what parts particular organizations may play in crafting updates.

But the GHG Protocol didn’t name Amazon, Google, Meta and the Bezos Earth Fund as financial backers of either its revised 2004 corporate standard or 2011 Scope 3 standard. BP PLC, Ford Motor Co. and the Environmental Protection Agency were among the funders of the 2004 standard, while PepsiCo Inc., the Walmart Foundation and UPS Foundation were among the financial backers of the later Scope 3 guidelines, according to the GHG Protocol’s website.

Big Four accounting firms Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers, as well as Ceres, earlier this year called for clearer standards under the GHG Protocol. Deloitte, for example, raised concerns in March about companies inconsistently applying Scope 3 reporting guidelines under the GHG Protocol. But the Big Four and Ceres also told the SEC the GHG Protocol can serve as a guide.

Even if the GHG Protocol needs some updates, there’s nothing inherently wrong with it for companies, said Andy Garraway, a senior climate policy analyst at climate analytics firm Risilience.

“It’s giving them what they need to be able to actually accurately account for their emissions and to estimate their emissions where they’re less certain,” Garraway said.

The GHG Protocol will remain relevant for companies for the foreseeable future, with the prospect of litigation looming over the SEC’s climate rules, said Shivaram Rajgopal, a Columbia University accounting professor.

The SEC is facing legal threats from business interests and Republican state attorneys general looking to thwart corporate climate disclosure requirements. The Sierra Club and Earthjustice also are strongly considering suing the SEC if the agency weakens or ditches its Scope 3 plans.

The agency is expected to finalize its climate rules this fall after its most recent regulatory agenda suggested an April 2023 completion date. But the GHG Protocol still will be more important than the SEC rules, Rajgopal said.

“Whatever comes out will get litigated the next minute,” Rajgopal said. “Then, it’ll take a while, and then, who knows what happens in the election.”

—With assistance from Amanda Iacone.