Climate change is one of the most critical challenges of today, which is entwined with multiple affairs that deserve the attention of companies:
- Climate warming is linked to aboard range of sustainability issues: natural resources constraints, human rights, biodiversity and many more;
- Non-state actors including business have a crucial role to play in addressing climate change. A key part of this is around measuring, managing and communicating corporate sustainability (including climate change) performance;
- GRI standards enable organisations to look at climate change and other global sustainability challenges from a clear perspective and support them to make better decisions and ultimately contribute to sustainable development.
Businessand climate change have mutual impacts on each other. Business influences climate change with climate-related reporting today laying more emphasis on different business models’ carbon footprint while climate change does sway business models to some extent with the reporting promoted by Task Force on Climate-related financial disclosures (TCFD) focusing on financial implications of climate change on business models. Hence, what TCFD aims to achieve is to develop a framework that allows the voluntary, consistent climate-related financial risk disclosure to investors, lenders, insurers, and other stakeholders.
Source: Final Report – Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)
However, it is found that the implementations of TCFD recommendations into sustainability reporting still need improvement, despite the enormous support from a host of global entities:
Insufficient disclosure for investors
- 91% of sample companies have decided to implement the recommendations
- 67% will do so within three years
- Progress made, but implementation is not fast enough
More clarity on the potential financial impact of climate-related issues
- Users do not comprehend potential financial impacts to inform their financial decisions
The strategy is not resilient enough
- 3 out of 5 companies that say they use scenario analysis to assess the resilience of strategy do not reveal information on this topic
- Key reasons lie in competitive confidentiality issues
Multiple functions are needed for implementation
- Sustainability and corporate responsibility functions appear to be the primary driver
- Risk, finance and executive management need to be involved more proactively
Considering the common challenges companies may face in adopting TCFD recommendations, GRI standards provide disclosure requirements in line with the recommended disclosures of TCFD that reporting organisations can follow. Here list the specific standards that can be matched up with what TCFD recommends in climate-related financial disclosures around four thematic areas that represent core elements of how organisations operate:
Governance: Disclose the organisation governance around climate-related risks and opportunities
(A) Describe the board’s oversight of climate-related risks and opportunities
GRI 102-18 Governance structure
GRI 102-19 Delegating authority
GRI 102-20 Executive-level responsibility for economic, environmental, and social topics
GRI 102-26 Role of highest governance body in setting purpose, values and strategy
GRI 102-29 Identifying and managing economic, environmental, and social impacts
GRI 102-31 Review of economic, environmental, and social topics
GRI 102-32 Highest governance body’s role in sustainability reporting
(B) Describe management’s role in assessing and managing climate-related risks and opportunities
GRI 102-20 Executive-level responsibility for economic, environmental, and social topics
GRI 102-29 Identifying and managing economic, environmental, and social impacts
GRI 102-31 Review of economic, environmental, and social topics
GRI 102-32 Highest governance body’s role in sustainability reporting
GRI 103-2 The management approach and its components, used with GRI 201-2 Financial implications and other opportunities due to climate change, and GRI 305 Emissions
Strategy: Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning where such information is material
(A) Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term
GRI 102-14 Statement from senior decision-maker
GRI 102-15 Key impacts, risks, and opportunities
GRI 103 Management Approach, used with GRI 201: Economic Performance, with GRI 201-2 Financial implications and other risks and opportunities due to climate change
(B) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy, and financial planning
GRI 102-15 Key impacts, risks, and opportunities
GRI 103 Management Approach, used with GRI 201: Economic Performance, with GRI 201-2 Financial implications and other risks and opportunities due to climate change
(C) Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario
No similar disclosures in GRI Standards currently
Risk management: Disclose how the organisation identifies, assesses, and manages climate-related risks
(A) Describe the organisations processes for identifying and assessing climate-related risks
GRI 102-15 Key impacts, risks, and opportunities
GRI 102-29 Identifying and managing economic, environmental, and social impacts
GRI 102-30 Effectiveness of risk management processes
GRI 102-31 Review of economic, environmental, and social topics
GRI 103-2 Management Approach used with GRI 201: Economic Performance, with GRI 201-2 Financial implications and other opportunities due to climate change, and GRI 305 Emissions
(B) Describe the organisations processes for managing climate-related risks
GRI 102-15 Key impacts, risks, and opportunities
GRI 102-29 Identifying and managing economic, environmental, and social impacts
GRI 103-2 The management approach and its components
(C) Describe how processes for identifying, assessing, and managing climate-related risks are integrated into the organisation’s overall risk management
GRI 102-15 Key impacts, risks, and opportunities
GRI 103-2 Management Approach used with GRI 201: Economic Performance, with GRI 201-2 Financial implications and other opportunities due to climate change, and GRI 305 Emissions
Metrics and Targets: Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material
(A) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process
GRI 102-30 Effectiveness of risk management processes
GRI 103 Management Approach, when used with GRI 201 Economic Performance, Disclosure 201-2; GRI 302 Water and Effluents; GRI 305 Emissions; and GRI 306 Effluents and Waste
(B) Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas (GHG) emissions, and the related risks
GRI 103 Management Approach used with GRI 305 Emissions, GRI 201 Economic Performance, Disclosure 201-2 Financial Implications and other risks and opportunities due to climate change
(C) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets
GRI 102-15 Key impacts, risks, and opportunities
GRI 103 Management Approach, when applied with GRI 201 Economic Performance, Disclosure 201-2, GRI 302 Energy, GRI 303 Water and Effluents, GRI 305 Emissions, and GRI 306 Effluents and wastes
Reference:
[1] ‘How to report the TCFD recommendations using the GRI Standards’ – GRI Website
