SEC Court Challenge Sidetracks Emissions Reporting Requirements

The U.S. Securities and Exchange Commission (SEC) announcement last month that they will be pausing implementation of their new climate disclosure rules while they defend them against legal challenges is further evidence of how difficult it is for companies to perform full cradle-to-grave emissions analysis and how motivated some might be to resist. Focusing just on the products containing semiconductors, this challenge highlights the extreme complexity of their manufacture, as well as the extensive supply chain they require.

This will likely be seen as a setback for parties keen to see adoption of sustainability standards in a variety of industries. Doubly so when it was only a month ago that the SEC announced they were dropping the requirement for Scope 3 emissions from their proposed corporate climate risk rules. The SEC will certainly have its day in court, but the broader issue is understanding the complexity of the reporting requirements they plan to implement and helping companies understand how they can become part of the solution.

Tracking supply-chain semiconductor emissions and accurately reporting carbon footprint calculations can be complex. It’s a challenge we are familiar with at TechInsights, where hope to create an opportunity by providing sustainability tools with data and unparalleled detail on cradle-to-gate semiconductor emissions, including upcoming analysis to address the full cradle-to-gate lifecycle.

Governing corporate climate risk fairly and transparently is a complex challenge domestically, let alone worldwide. In the U.S., the SEC adopted rules to “enhance and standardize” climate-related disclosures by public companies and in public offerings. This included the requirement for large accelerated filers (LAFs) and accelerated filers (AFs) that are not exempt to disclose Scope 1 and 2 emissions. While this is the most rigorous ruling to date, a notable absence is the requirement for Scope 3 emissions. Nevertheless, this ruling has seen substantial opposition with a U.S. appeals court temporarily halting the ruling in what is likely to be just the beginning of legal battles ahead. It’s also just one piece of the puzzle. The SEC’s reporting requirements weren’t to take effect until 2026. Meanwhile, many companies are preparing to comply with similar rules in other jurisdictions, such as California and the European Union, which recently moved ahead with their own disclosure requirements.

As with any difficult endeavour, there is also substantial value and opportunity. Forbes recently pointed out there is currently around $3 trillion worth of federal financial incentives available from initiatives including the Inflation Reduction Act, Infrastructure Act, and CHIPS and Science Act. TechInsights is planning to help companies capture some of those incentives with carbon footprint calculations on emissions across the semiconductor value chain. These sustainability tools will help companies measure and accurately report their semiconductor emission and sustainability goals.

Different Scopes and the Associated Challenges

The different scopes of greenhouse gas emissions (GHG) can be broadly broken down into direct and indirect impacts.

• Scope 1 covers a company’s direct GHG emissions. This may include fuel combustion in either a building or a vehicle. This includes electricity use, water consumption, and data on toxic chemicals used in the entire process flow of IC manufacturing.

Indirect emissions are covered by Scope 2 and 3.

• Scope 2 covers the use of acquired energy. While this is generated by another company at a different location, it is as a direct result of the purchasing organization’s energy requirements.
• Scope 3 becomes much broader. These emissions represent those a company does not directly produce. They are generated throughout the supply chain, including factors such as shipping and transportation (of both raw materials and finished products), product use, end-of-life solutions for expired products, and even stretching as far as investments and leased assets.

Scope 3 emissions represent the most significant and complicated challenge for organizations to calculate and report. Additionally, they are the largest contribution to overall carbon emissions. Being so diverse in what they represent, to control and track these involves engaging with multiple stakeholders (vendors, customers, partners, and transportation entities) throughout the value chain. For this reason, it makes calculating emissions difficult, with double counting a real possibility. For example, one company’s Scope 1 or 2 emissions will be another’s Scope 3.

TechInsights Solving for the Semiconductor Value Chain

When it comes to Scope 1 and 2 emissions, TechInsights offers solutions covering the manufacture of semiconductor products. The TechInsights Semiconductor Manufacturing Carbon Model offers data on not just GHG emissions but also electricity use, water consumption, and monitoring of toxic chemicals in the entire process flow of IC manufacturing. The most cutting-edge logic ICs will have several hundred individual process steps. The Apple A17 Pro processor found within the iPhone 15 Pro and Pro Max models is an example. This processor uses TSMC’s 3nm process with our recently published process flow analysis detailing over 800 individual processing steps.

The carbon footprint calculations and data we produce are useful across the industry, offering foundries and integrated device manufacturers (IDMs) the opportunity to track and compare their emissions, capital equipment, and fabless companies to make wise and sustainable choices in selecting their partners and product manufacturers to responsibly source their components. Our IC and product search allows comparison of emissions in finished products. Using insight from our own detailed technical analysis coupled with data from trusted sources such as Ecoinvent and the International Energy Agency (IEA) the results are unparalleled.

TechInsights’ Sustainability team is working to expand our Scope 1 and 2 data to analog ICs, semiconductor packaging, and even batteries. When it comes to tackling Scope 3 emissions, we are working on new offerings to track power consumption in the use phase of products, including comparing wide bandgap (WBG) power semiconductor devices to conventional silicon in the supply of energy, all the way through to power consumption in NAND flash memory arrays.

Tracking Scope 3 emissions is notoriously tough for companies, but even a half effort could provide meaningful benefits. An article by PwC suggests that 80% of supply chain emissions typically come from 20% of a company’s purchases. Focusing on these largest contributions and using accurate sustainability tools to provide carbon footprint calculations could reduce the burden created by future SEC reporting requirements.