“Leadership must come from the private sector, business community and NGOs, not only from the officials. We need a comprehensive and coherent framework supported by political will that enables market forces to move businesses from the traditional to the green economy.” Mohammed Omran, Chair of The Egyptian Stock Exchange.
As Mohammed Omran’s call for a new order suggests, private companies, investors and NGOs all have a role to play in leading the transition to a low-carbon economy. There are over 400 provisions (standards, requirements, guidance and other reporting initiatives) to report climate information. But with so many different influences, the quality of the disclosed information can be inconsistent.
Initiatives such as the FSB’s Task Force for Climate-related Financial Disclosures (TCFD) which will launch its Phase II report on December 14th has the opportunity to bring the challenges and opportunities surrounding climate change into the spotlight. It also has the authority to bring consistency into the reporting space and raise awareness about the importance of this issue to a wider audience.
The newly ratified Paris Agreement signalled the start of governments around the world stepping up their efforts to tackling climate change. However, their commitments offer a varying degree of specificity to address the aggregate climate burden budget. As recognized by Mark Carney in his “Breaking the Tragedy of the Horizon” speech, the Paris Agreement objectives are still not enough to reach the target of a below 2°C world.
Sustainability reporting has progressed with significant achievements improving the overall quality of corporate reporting and the integration of sustainability metrics and disclosure into standard business practices, but there are well recognized shortfalls with the current reporting model.
The new horizon for sustainability reporting must be in its integration into the mainstream reporting system. All members of the sustainability community have an important part to play in this drive towards successful implementation, and embedding the Paris Agreement and the impending TCFD recommendations are key.
The NGO community has the responsibility to provide a mechanism for the delivery and structure for climate-related financial information and guidance for companies on how to report it in their mainstream filings. Initiatives such as the Corporate Reporting Dialogue (CRD), an NGO coalition set up to align frameworks, standards and requirements by targeting a reduction in reporting burden, addressing the call for coherence and consistency in reporting.
However, NGO’s have the opportunity to go further, beyond a reactive and top down governance process. They can educate and support companies in a shift to a sustainable business model, taking in to account the companies’ influence and effect on customers, employees, communities and the environment. CDP has seen share values rise 6% for companies achieving our A List for disclosure, highlighting that sustainability reporting identifies areas of risk and opportunities for growth.
NGO’s also offer a more holistic approach to encouraging sustainable disclosure, independent of politics. In line with the definition of sustainability, there is no end goal but a new horizon to strive for. CDP wholly supports the Paris Agreement and will be adopting the TCFD’s recommendations in our Reimagining Disclosure project. We have the infrastructure in place to track companies against the TCFD while also providing support and structure for their responses to facilitate comparability between companies that might not be easy to digest from company reports.
The foundations for sustainability reporting are in place and can act as a springboard to develop the objectives of reporting and technical solutions, common language and metrics and the characterization of resources and standardizing criteria that corporate reports should comply with. As a result, sustainability data will become increasingly vital, actionable information that can be used by companies, investors, shareholders and broader stakeholders to realize their sustainable development vision and goals.
But NGO’s are more than just the facilitator. We need to look ahead, encouraging organizations to strive for further advances on the road to a below 2°C world. CDP has an important role to play now and in the future as the markets’ institutional memory in the drive for better, more effective disclosure.
For further information please contact:
Tom Coleman, Task Force Engagement Officer at CDP, [email protected]