Navigating Climate-Related Reporting: A Call to Action

As regulatory bodies mandate climate-related disclosures, businesses face growing pressure to align with frameworks like TCFD and ISSB. Kathy Bardswick discusses how starting early, even incrementally, positions organizations to address risks, seize opportunities, and navigate evolving compliance requirements. SMEs can adapt using phased approaches, ensuring resilience in a climate-conscious and transparent global market.

One might gather that companies are scratching their heads trying to figure out how they will be expected to provide climate related reporting to their various stakeholders. As recently as this past Oct 9th, former Minister of Finance, Chrystia Freeland, announced the federal government’s intention to revise the Canada Business Corporations Act (CBCA) to require large companies to disclose climate related information. This comes on the heels of arguably too many recent consultations asking companies to provide perspective on disclosure recommendations. The International Sustainability Standards Board (ISSB) released its frameworks in 2023 largely based on work done previously by the Task Force on Climate related Financial Disclosures (TCFD).

The Canadian Sustainability Standards Board (CSSB) was formed to ensure ISSB standards were fit for purpose for Canada, committing to making only necessary changes. The Canadian Securities Administrators have been in consultation processes for the past 4 years to determine what, if any, mandatory disclosure requirements are needed to provide transparency to investors. The SEC is also in consultation processes having released a 500-page document recommending requirements. And finally, for organizations doing business outside of Canada, there are now various reporting requirements linked to climate; for example, the EU’s Corporate Sustainability Reporting Directive (CSRD) or the reporting requirements outlined in the Inflation Reduction Act (IRA) in the US.

So where is this all headed and how do companies comply effectively when the rules of engagement are not yet clear? And should an organization start now if it hasn’t yet dipped its toe in the water?

It is useful to go back to the fundamentals outlined early on in the work done by the TCFD. All subsequent frameworks have significant similarities in the approaches taken and share the fundamental objectives TCFD articulated when developing its framework:

To disclose the actual and potential impacts of climate-related risks and opportunities on the organization’s businesses, strategy and financial planning where such information is material.

When the SEC released its 500-page consultation, it was mapped to the 50+ page ISSB document released around the same time by two separate securities expert groups. In spite of the difference in length, there was a surprising amount of similarity in what was being ultimately sought. Yes, there were some differences but fewer than one would have expected. It is not yet clear where the SEC requirements will land given the challenges being thrown its way but there is little doubt that some mandatory climate-related reporting exists. The IRA has specific requirements as part of its funding mechanisms and a number of states either are or will be requiring organizations doing business in those geographies to provide climate-related disclosures.

“It is useful to go back to the fundamentals outlined early on in the work done by the TCFD. All subsequent frameworks have significant similarities in the approaches taken and share the fundamental objectives TCFD articulated when developing its framework”

-Kathy Bardswick

Similarly, as noted earlier, the CSSB committed to ensuring that it would follow the ISSB guidelines as closely as possible, only entertaining changes that were clearly required to respond to unique Canadian needs. Its work to date has remained true to that commitment.

An argument for waiting will often include the current challenges that exist with either poor or outright lack of data. There is no question that access to reliable and consistent data needs significant improvement. But successful organizations have historically and will continue to confidently address issues of uncertainty and lack of data recognizing that the environments within which they operate are becoming increasingly volatile. Waiting for certainty is just not in the cards, never has been, so the sooner climate-related risk and just as importantly opportunity is inculcated into an organization’s strategic focus, the better.

“Successful organizations have historically and will continue to confidently address issues of uncertainty and lack of data recognizing that the environments within which they operate are becoming increasingly volatile”

-Kathy Bardswick

Another argument for waiting sites the complexity and therefore expense associated with such efforts. Small and medium size organizations in particular just don’t have the resources to dedicate to disclosure requirements. There are serious and effective efforts underway to recognize the challenges SME’s face within these frameworks including considerations for phase -ins and degrees of detail. What is not going away is the reality that climate change is affecting global environments within which all organizations are doing business. Supply chains are increasingly being affected and investors are making capital allocation decisions that will provide the best transparency on both current and future impact. SME’s are not being served well by those who suggest they should wait. Start now and start small if needed.