Sunday Read: ESG Requirements Empower Whistleblowers

National Whistleblower Center
5 min readApr 4, 2022

This overview of whistleblowers’ role in combating climate violations was sent as part of NWC’s Sunday Reading series that aims to educate supporters about specific whistleblower legislative or policy initiatives. For more information like this, please join our mailing list.

On March 21st, the Securities and Exchange Commission (SEC) proposed rule changes that would require public companies to make more detailed reports of climate-related risks. This groundbreaking proposal would mean that companies would have to be more open about their impact on the climate as well as how climate-related events, such as wildfires, flooding, and droughts might affect investors.

Disclosures of all types are important, allowing potential investors to make informed decisions with accurate and up-to-date information. However, these revisions would provide clearer guidance on how to report on climate-related issues and would further support climate whistleblowers who would otherwise be unsure about reporting.

In this Sunday Reading, we review core issues related to climate whistleblowing and the benefits of the SEC’s proposed rules.

Whistleblowers Need Clarity on Rules to Effectively Report About Emissions

If adopted, the SEC rules would impose new reporting requirements on public companies relating to their climate impact as well as their efforts to address climate-related risks.

For one, the rules would mandate the disclosure of both direct and indirect sources of emissions. Referred to as “scopes”, there are three levels of emissions classified by the Environmental Protection Agency (EPA). The distinctions in emission types and the currently lax reporting standards have made it easy for companies to misrepresent the volume of emissions they are responsible for. Being able to ‘cherry-pick’ emissions to share with the public leads to inaccurate representations of the environmental damage that some companies are causing and enabling.

Whistleblowers who attempt to report this inaccurate representation often feel frustrated that they have nowhere to go with this important information. By making emissions disclosures mandatory, whistleblowers would be able to report companies who make false or misleading disclosures, and, importantly, they would receive the full incentives and protections of the SEC whistleblower program, including anti-retaliation protections, anonymity protections, and financial rewards for tips that lead to successful enforcement actions.

In addition to emissions reporting, the SEC rules would also require companies to disclose climate related risks that have had or are likely to have a “material” impact on their business operations and financial statements. Companies would also be required to disclose the steps they are taking to address and mitigate climate-related risks. These new requirements will hopefully incentivize companies to take meaningful steps to lessen their impact on the environment. Moreover, whistleblowers could help detect instances where companies attempt to mislead the public about climate-related risks.

SEC Makes ESG Reports a Priority

Complementing these rules, the SEC also released its annual examination priorities report on March 30th, outlining the issues and risks that the Commission finds to be most impactful to investors and the health of U.S. markets. This year’s focus areas included Environmental, Social, and Governance (ESG) investing, highlighting the importance of climate disclosures regarding today’s economy. The SEC stated that it would continue to focus on ensuring the accuracy of ESG-related disclosures as well as minimizing misleading representations of ESG considerations from companies that benefit from advertising low ESG-related risks. This dedication is very beneficial to the whistleblower community, as further guidelines and restrictions placed on organizations will lead to more information being available to the public. With more available knowledge, whistleblowers can source concrete support for their claims and better serve the public. The SEC also prioritized ESG-related enforcement in 2021.

FDIC Joins in Rulemaking, Proposing Principles

Also on March 30th, the Federal Deposit Insurance Corporation (FDIC) released draft principles regarding climate-related risks to large financial institutions, defined as having over $100 billion in consolidated assets. The principles are designed not only to reduce risks to financial institutions but also to low-income communities (as they are disproportionately affected by climate-related financial risks) and the average consumer. Recognizing that climate events pose both physical and financial risks, the FDIC is requesting comments as to how to best help institutions effectively manage and report these risks.

If these guidelines are implemented, whistleblowers would benefit from public reports being more accurate in reflecting their risk-management strategies. A whistleblower with information regarding gross fraud, waste, or illegal activity would be able to take advantage of the FDIC’s Office of Inspector General whistleblower program, where contractors and employees of financial institutions receive protection under the Whistleblower Protection Act. These whistleblowers would be able to analyze the difference between insider information and public reports knowing that they would have federal protection and recourse for potential retaliation if they came forward.

These rules would also increase transparency for investors and the general public. There are many instances where the public would like to know more about the products we buy, the services we use, and the companies we invest in. For example, under current federal securities laws, companies are not required to report any emissions emanating from the products they sell, nor the consequences of the end-of-life disposal of these products. This means that both the immediate and long-term effects of a company’s actions are, inappropriately, not under scrutiny. This applies to products in several industries of great public interest, such as cleaning supplies, batteries for electric cars, and personal electronics.

Under the proposed rules, whistleblowers would have more clarity about when to report wasteful and illegal activity, as well as securities law violations related to climate violations and misrepresentations. This would significantly increase whistleblower security and deter fraudulent reporting.

Supporting Whistleblowers

When the SEC previously called for public comments on the matter in March 2021, NWC argued in support of strong guidelines to encourage more whistleblowers to come forward. Reinforcing the importance of the Dodd-Frank Act’s whistleblower program, a 2010 reform act that expanded protections for whistleblowers, NWC reminded the SEC that whistleblowers provide vital information, that they should be incentivized to speak out, and that they need to be protected by the SEC.

Urging the SEC to outline more clearly what constitutes an environmental commitment violation, NWC has consistently assisted climate change whistleblowers through its Climate Change Campaign. Critical to the exposure of contradictory information, whistleblowers need to feel that they will be protected when they risk their careers to report misconduct. It is in the best interest of both the SEC and the public to have strong whistleblower protections, as this would lead to both more equitable markets and reduced climate violations.

NWC is pleased the SEC is taking action on such a critical issue, and we will be actively involved in the rulemaking process look out for more on this, and NWC’s comments on the Commission’s proposed rules.

Please share this article and donate now so that NWC can continue supporting and advocating for climate whistleblowers. Thank you.

This story was researched and drafted by NWC Intern, Shawn Robbins, a Sophomore double major in Economics and Sociology at University of California, Irvine.



National Whistleblower Center

National Whistleblower Center is the leading nonprofit working with whistleblowers around the world to fight corruption and protect people and the environment.