Leveraging Women-Owned Businesses Can Maximize Meeting New SEC Climate Rules

Women-owned small businesses may be the secret weapon in the supply chain, especially in light of the Securities and Exchange Commission’s new climate risk disclosure rules.

The SEC’s new climate disclosure rules, expected to be released in their final form any day now, will affect almost every business decision publicly-traded companies make. But these companies could leverage women-owned small businesses to gain a range of benefits, and maximize compliance with those new rules, according to Kristina Wyatt, who oversaw the team developing these SEC rules as Senior Counsel for Climate and ESG to the Director of Corporate Finance.

These new climate rules will require detailed disclosure about the financial impact of climate change on their business – from where they get their electricity and energy from, to the carbon emissions of their operations, down through their supply chains and beyond. Importantly, that data will need to be verified in their audited financial statements.

The financial impact of climate change is on vivid, heart-wrenching display in the massive devastation of homes, businesses, and communities from Hurricanes Ian and Fiona. Hurricane Ian alone is estimated to have caused about $67 billion in damage.

Investors need “good, reliable information” on climate impacts, but it’s not that easy to get

The days of reporting only selective climate-related information in their voluntary corporate responsibility or sustainability reports are over, and they will need data from their small suppliers too.

“The goal is to get good, reliable information in the hands of investors, hopefully at the least cost to companies as possible. So that's where having platforms and tools to make reporting easier is critical,” as Kristina Wyatt explained on my Electric Ladies Podcast recently.

One of the big hurdles with these new reporting requirements is managing supply chain reporting. There’s a whole industry now of climate-related accounting and management platforms to do so, including Salesforce, Donnelly Financial Solutions, and Wyatt’s current company, Persefoni, where she is Senior Vice President of Global Regulatory Climate Disclosure and Deputy General Counsel.

Having women-owned small businesses in your supply chain can be a benefit in climate reporting

The SEC rules include a process that allows for disclosing more and more detailed reporting over time, Wyatt said, adding that “eventually smaller companies will be asked to report their greenhouse gas emissions” at least. But these small businesses “are not going to have the wherewithal, the means to engage in difficult, sophisticated reporting,” Wyatt said.

It’s important not to see these new reporting requirements as a disincentive to use these small businesses, especially women-owned businesses (as well as minority- , veteran-, or disabled-owned businesses). On the contrary, Wyatt said, partnering with women-owned businesses in particular provide a lot of important benefits, including that subcontracting with them can help win government and other contracts.

“There are so many opportunities to create wealth, to create greater equity and to drive value through innovation and finding these multiple benefits…by making it easier for women owned businesses, for minority owned businesses, to innovate and prosper while we're addressing the climate crisis,” Wyatt explained.

Women leaders tend to be more detail-oriented, more accountable, better communicators, more values-oriented and more innovative, so women-owned business suppliers may actually improve the quality of the data corporates collect – and their business decision making.

Corporates and data management firms should make it easy for small businesses

Because the data collection infrastructure can be onerous for a small business, Wyatt said corporates should help them. She specifically suggested that “SaaS companies that are facilitating reporting, it would be a good public service (for them) to offer a free version of that SaaS platform for exactly this purpose, to facilitate reporting by smaller companies in your supply chain.”

She added, “it's just something that the companies who are facilitating the reporting need to step up and make it easy for all companies to report. It shouldn't be that difficult for the smaller companies to report, and the bigger companies ought to have that data going really down into their supply chains.” She implied that her company will be offering an option soon.

Wyatt insists that companies should make it easy to collect the data they need from small businesses, so they can reap the reliability and innovation benefits of collaborating with women-owned ones.