AAFA wants SEC to delay climate disclosure rules

WASHINGTON DC – The American Apparel & Footwear Association (AAFA) has asked the US Securities and Exchange Commission (SEC) to delay new rules requiring listed companies to provide climate-related information to investors. The AAF has asked the government agency for an extra one to three years before fashion brands have to report their Scope 1 and 2 emissions. On top of that, it wants another 18 month for Scope 3 emissions, although the letter appears to suggest that AAFA is not sure whether members will ever be able to provide this information.

In March, the US Securities and Exchange Commission proposed new rules that would require listed companies to publicly disclose climate-related information. This would include details about climate-related risks that are “reasonably likely to have a material impact on their business, results of operations, or financial condition…”

In a letter to the SEC, the AAFA claimed its members are “committed to Environmental, Social, and Governance (ESG) goals,” and “working pre-competitively to achieve the highest ethical and responsible standards across our global supply chain and production practices.”

“We continue to transform our industry from the inside out to ensure we are meeting our climate targets and sustainability and governance goals in a responsible and productive manner,” the letter said.

On the subject of disclosing emissions, the letter states: “While we recognise the challenges and barriers to accurately measuring Scope 3 emissions, they are too important to ignore. We expect that including Scope 3 emissions in required SEC disclosures will lead to improvements and harmonization in data collection and accounting methodologies that can reduce these challenges and barriers over time and further support our shared goal.

“However, in regards to timing of the disclosures and given the heavy reliance on third party data for calculation of greenhouse gas emissions, we are requesting that disclosure for Scopes 1 and 2 emissions are given an additional 1-3 years to comply, given that the majority of companies in our industry will need to staff up in order to have the needed expertise in this space, develop and implement new systems, and in many cases obtain outside assistance (which is likely to be in higher demand were the proposal to take effect) to ensure reliability and comparability of the information.

“Additionally, Scope 3 data is calculated using available emissions factors, but clear and universally adopted methodologies don’t exist for every category. The lack of consistent calculation methodologies means that scope 3 data between peer companies would not be consistent, reliable, or comparable. Furthermore, the nature of companies’ scope 3 emissions means that we would be asking our suppliers for the emissions from their tier 1 and tier 2 suppliers. At a certain point the data is no longer reliable and, if required, would not be useful for investors.”

We’re not entirely sure what the AAFA is saying here. Is it asking for scope 3 – supplier emissions – to be completely discounted? If so, this is a retrograde step given that scope 3 is the most carbon intensive part of the fashion value chain.