Corporations have learned that it helps business to make promises around serious issues. Hold global temperature rise to 1.5°C. Pay workers a living wage. Avoid engaging in corrupt business practices abroad. Attract and retain a truly diverse workforce.

But how do we know if companies are actually pursuing these goals and fulfilling their promises? Only if they open their books. And that usually happens only if they are compelled to do so–usually by the US Securities and Exchange Commission (SEC).

The good news is that the current Chair of the SEC, Gary Gensler (nominated by President Biden in 2021), has steered the agency to a real turn toward fulfilling is mandate to reform and enhance corporate transparency.

In fact, the SEC plans to introduce a host of rules for companies; these will include guidelines on climate change, stock buybacks, human capital (labor), CEO pay, disclosures by mining, oil, and gas companies for payment to governments, and making amendments to the shareholder proposal process (which would make it easier for investors to question unethical business conduct).

The bad news is that since starting full steam ahead in 2021, the agency has slowed down the pace of reforms in the past few months. And now, skepticism abounds about the SEC’s ability to realize its transparency reform agenda.

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For more: what is ESG, and why is there a backlash?

Two years in, the SEC has made some progress, especially on climate

In March 2022, the SEC released a proposed climate rule; Oxfam supported the breadth and depth of the proposed rules, while asking for a few revisions:

• Require carbon emissions disclosures for companies’ full operations and supply chains.
• Increase disclosures for key industries like oil and gas and food.
• Ensure that corporate lobbying practices are not responsible for warming the planet.
• Ensure a just transition to clean energy that benefits everyone

In addition, on the heels of the climate rule, the SEC is setting the stage to partially reverse a rule (issued under the Trump administration) that artificially limited the ability of small, ordinary shareholders to file resolutions on important issues (such as racial equity and climate justice). When other company engagement strategies fail to produce the desired effect, many shareholders use this route to compel company actions on corporate accountability.

Oxfam often exercises its right as a shareholder to call attention to overlooked risks that corporations ignore (to the detriment of investors, workers, consumers, and other stakeholders).

Among our shareholder resolutions, we asked:

• Amazon to include an hourly worker on its board (in 2021 and 2022);
• Pfizer, Inc. and Moderna, Inc. to expand vaccine access by sharing COVID-19 technology with global manufacturers;
• and Kroger in 2020 to conduct human rights due diligence (HRDD).
  In 2021, Oxfam filed and then withdrew the same resolution at Kroger after the company committed to HRDD.

Fortunately, SEC staff approved these ESG proposals–despite the companies’ “no action” requests (intended to avoid letting them be put to a vote); this further underscores the importance of the agency’s long-term mindset and recognition that improving ESG performance benefits investors.

Most recently, Oxfam has brought forth three new tax transparency resolutions at Chevron, Exxon, and ConocoPhillips, to address these companies’ secretive tax practices; this is in line with the growing push from investors to get companies to disclose this information.

Still, the agency has a long way to go

While we appreciate the progress over the last two years, the SEC still has many items to check off its rulemaking list. Among them:

• Finalize strong climate disclosure rules.
• Finalize amendments that would make it easier for small investors to file shareholder resolutions.
• Amend an extractive sector payment disclosure regime with long overdue changes to align with global standards and make it more challenging for mining, oil, and gas companies to engage in corrupt business practices.
• Implement human capital disclosure rules that require companies to disclose information about workers in their business operations and supply chains
• Increase reporting of key financial information by companies in line with the leading standard to enhance tax transparency and best practice (as demonstrated by increasing voluntary corporate disclosures).
• Embrace stakeholder capitalism with new rules that mandate a proportion of corporate directors are hourly workers.
• Require enhanced disclosures on corporate board diversity.
• Mandate increased disclosure by private companies bringing them more into the spotlight over their activities and business conduct.
• Repeal the “Safe Harbor” rule, so the use of share buybacks is limited. (The rule currently sets no limits, which enables senior management to artificially boost company performance and inflate their pay).

At the end of the day: time is growing short, and the SEC must fast track its agenda

Too much time has lagged between the moment when some of these issues were identified for rulemaking, and the moment when they actually appear on the agency’s rulemaking docket.

On climate, the SEC issued guidance in 2010; 12 years later, a rule has been proposed. On human capital, investors have been urging the agency for years to develop robust rules-based disclosures. And on payments disclosures by resource extraction issuers (changes required as part of the Dodd-Frank Act, enacted in 2010), we are still awaiting rules to be proposed.

Growing backlash against ESG–by Republican legislators and Republican attorneys general–isn’t likely to make the SEC’s job easier. While Democrats retained control of the Senate, Republicans gained control of the House, which leaves us with a Congress divided.

Expect to see increased policy deadlock, oversight fights, and the high likelihood that Chair Gensler will be spending significant time on the Hill dragged into needless investigations (to defend the SEC’s corporate transparency agenda in the House). The agency needs the support of the public, investors, and ESG-aligned legislators to realize its corporate transparency agenda.

As the legislative window is closing, regulation is becoming the only game in town. The SEC has two years left to advance its agenda (before the next Presidential election might change the landscape altogether). The agency can’t waste any more time.