Amazon.com has asked the SEC for the go-ahead to exclude a shareholder proposal about its Scope 3 greenhouse gas (GHG) emissions from its 2023 AGM.
The resolution comes from co-lead filers Green Century Capital Management and Amalgamated Bank as the trustee of the LongView LargeCap 500 Index. Specifically, it asks that ‘Amazon 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.’
In a supporting statement, the proponents request that, at management’s discretion, the company:
- Adopt emissions reduction targets for all GHG Protocol-defined sources of Scope 3 emissions with the goal of limiting global temperature increases to 1.5°C
- Require its largest vendors by spending to set science-based targets.
They write that most of the climate risk posed by many companies lies within their value chain. ‘Amazon, one of the largest global retailers, discloses enormous and growing [GHG] emissions, which have increased nearly 40 percent between 2019 and 2021. Yet this reflects only a portion of its full climate impact,’ the proponents state.
For example, they say, Amazon discloses only emissions for Amazon-branded products, which comprise just 1 percent of its sales. Such disclosures differ from peer companies, they add.
‘By calculating its full value chain emissions and including them in its net-zero reduction strategies, Amazon can provide investors with assurance that management is adequately addressing concern about growing climate risks, including reputational risk,’ the proponents argue.
MICROMANAGEMENT ARGUMENT
In a letter to the SEC sent earlier this month, Amazon requests no-action relief for excluding the proposal from its proxy materials under Rule 14a-8(i)(7) on the grounds that it seeks to micromanage the company. Specifically, it says, the proposal seeks to eliminate management’s discretion by dictating the methodology and activities encompassed in Amazon’s Scope 3 reporting.
‘As applied to the company’s operations, the proposal addresses a complex, multi-faceted 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 [GHG Protocol initiative’s Scope 3 Reporting Standard and Corporate Accounting and Reporting Standard],’ Amazon writes.
For example, it says the Scope 3 Reporting Standard ‘clearly illustrates the ‘complex nature’ of and ‘tradeoffs’ involved in determining what activities and categories are included within a company’s Scope 3 GHG emissions inventory, and that such determinations are inherently tied to the company’s business goals and the evaluation of other considerations that are appropriately within the board and management’s discretion, as to which ‘shareholders, as a group, would not be in a position’ to make an informed judgment.’
Amazon’s 2022 AGM took place on May 25. A company spokesperson declined to comment beyond the Amazon filing.
UNDER THE MICROSCOPE
Scope 3 emissions have become an important element in discussions of climate change-related reporting in large part due to the complexity of measuring them, something companies are anxious about. At the same time, there is growing pressure from some investors and shareholder groups for full disclosure around emissions.
The SEC’s proposed landmark rulemaking on climate change would require companies to disclose information about their governance of climate-related risks and how any climate-related risks have had or are likely to have a material impact on their business.
As proposed, the changes would also require companies to disclose information about their own GHG emissions (Scope 1) and indirect emissions from buying electricity (Scope 2). Companies would have to disclose GHG emissions from upstream and downstream activities in their value chains (Scope 3) only if material or if the company has set a GHG emissions target or goal that includes Scope 3 emissions.
It remains unclear whether the SEC will narrow the rule proposal to omit the Scope 3 requirements. A coalition of groups including Ceres and the World Business Council for Sustainable Development wrote to SEC chair Gary Gensler late last year urging the commission to press forward with the rulemaking and arguing that Scope 3 disclosures should be required, though not for small reporting companies. The coalition also asked that the proposal be amended to strengthen the safe harbor for Scope 3 emissions.
Ben Maiden
Ben Maiden is the editor-at-large of Governance Intelligence, an IR Media publication, having joined the company in December 2016. He is based in New York. Ben was previously managing editor of Compliance Reporter, covering regulatory and compliance...
