Today is Earth Day. While whether or not we have control over climate change is still being debated, the fact that we are affected by how we treat Mother Earth is not.
When Chiptole listed climate change as a company risk in its annual 10K SEC filing, the language used served to downplay the risk. The “guacamole warning” stated that if weather events linked to global climate change continue, the availability of ingredients used in certain products would result in Chipotle taking them off the shelves.
This statements opens up a climate change disclosure risk for other companies, driven by shareholders who can demand why climate change might not be a material risk. While Chipotle addressed the risk, many other companies do not and avoid using the words “climate change” as a whole. This practice is made possible by the SEC, whose disclosure requirements don’t demand transparency.
Companies should recognize that while climate change may be a difficult concept to address, litigation isn’t. Failing to address this risk could leave them open to shareholder lawsuits. Companies should take appropriate action to prevent suits, starting with transparent disclosure.
Chipotle demonstrated both business and scientific sense to disclose the risk and addressed ways they could adapt.
Happy Earth Day! Do something good to make your “Mother Earth” happy.