July 2022 – How can you best use disclosure to bolster your sustainability and net zero strategy and enhance efficiencies along the way? We have outlined five levers you should consider.
You’re not alone if climate disclosure sounds daunting: changing rules and regulation, complicated disclosure mechanisms, mandatory reporting. The good news is that proactive transparency can be an invaluable tool for your business, particularly for your net zero strategy. As regulatory pressure to disclose your climate performance mounts, it’s time to get ahead of the curve.
Across the globe, more companies are being required to make climate-related disclosures, and the conditions are increasingly challenging. The European Commission recently adopted a proposal for a new Corporate Sustainability Reporting Directive (CSRD) and nations such as New Zealand and the UK are introducing mandatory reporting requirements. As of March 2022, the Securities and Exchange Commission in the US proposed “that registrants [be required] to include certain climate-related disclosures in their registration statements and periodic reports, including information about climate-related risks that are reasonably likely to have a material impact on their business, results of operations, or financial condition”. Yet if your business anticipates these changes, you can turn disclosure into the railway track on which your “net zero train” can go the distance. You can make disclosure work for you.
Here’s how you can make disclosure work for your net zero strategy
Ambitious net zero roadmaps have to be quantifiable, verifiable and align with science if they are to make a real contribution to the economy, people and planet.
Disclosure is your friend here. It already provides a systematic framework for you to identify and tackle emerging risks, while discovering new opportunities for action. It enables your team to explore climate risks and opportunities more holistically.
Reporting that supports your net zero journey should also be aligned with authoritative international standards and impact calculation methodologies. One such globally recognised reporting framework is the CDP (formerly the “Carbon Disclosure Project”) – a global disclosure system that enables companies, cities, states and regions to measure and manage environmental impacts. Their questionnaires are comprehensive in nature, providing scores in three complementary areas: climate change, water and forests. This challenges your team to evaluate your business strategy and your future climate action against a range of possible, or perhaps growing, impacts.
Aligning with globally recognised disclosure frameworks is best practice
Key to setting a net zero target is assessing your direct and indirect climate impacts, i.e. defining your scope 1, 2 and 3 emissions baseline. The quantitative parts of the CDP reporting framework help you to understand where your material impacts lie, evaluate your options for climate action, and disclose your progress towards these.
Benchmark your targets and their alignment with net zero ambition
The SBTi’s Net Zero approach has become the gold standard for corporate climate targets. Taking part in an international disclosure exercise allows you to compare your ambitions to other players in the market and understand what best practice looks like.
Disclosure improves your ability to set a roadmap and achieve milestones
Companies can use disclosure to keep track of progress towards their targets in two simple steps:
- Set your climate roadmap, disclose it and have it professionally scrutinised: CDP asks for “climate transition plans” within the climate questionnaire1. In 2021, just one third of the reporting companies were developing a low-carbon transition plan (4,002 out of 13,100+). And just around 1% (135) of companies reported using the total 24 key indicators that CDP associates with a credible climate transition plan.
- After receiving your score, you should use the results to reflect on how you’re doing on your journey. The scoring card itself becomes an annual barometer of your sustainability performance. It allows you to compare your year-on-year progress across the board, while benchmarking yourself against your peers. This valuable information can also be used for other internal purposes, for instance by linking improvements to management-level bonuses.
Disclosure helps you communicate transparently and it strengthens your company’s license to operate
CDP reporting and disclosure allows for third-party scrutiny of your environmental impact and actions, be that in the sphere of climate change, water, or forests and biodiversity. That kind of proactive transparency engenders social legitimacy. Once your company has successfully improved its score, you can leverage this information for external engagement with customers, peers and investors. Companies not engaged in CDP reporting may attract less interest (and more questions) from investors.
To measure is to manage – get started today
To measure is to manage, and what is not measured can lead to baseless claims or unrecognised positive contributions. Disclosure can help protect your reputation, benchmark your progress against your peers, and put you on track for your journey to net zero.
Are you ready to make disclosure work for you?
