Report

To drive the system-wide change needed to achieve Net Zero and improve accountability for organizations setting climate targets, it is crucial that businesses are transparent about their exposure to climate risks and opportunities, as well as their plans to reduce emissions. Increasingly, this is becoming a mandatory requirement. For instance, in a bid to harmonize sustainability disclosures, the EU introduced the most extensive reporting mandate to date: the Corporate Sustainability Reporting Directive (CSRD). All organizations should take note. Although the regulation only directly applies to large European businesses, these companies will need to report their supply chain emissions; this means that any company supplying goods or services to large businesses operating in the EU will also need to provide emissions information to help build a full picture.

Climate change has significant impacts on the economy. It is therefore key that investors and regulators have the information they need to ensure their decision-making reflects this reality. As the sustainability reporting landscape becomes more streamlined, investors are increasingly able to compare companies’ disclosures, as well as the progress they are making against climate targets.

While sustainability reporting often covers a broad range of ESG (environmental, social and governance) topics, this section of the guidebook will focus on the climate-related aspects of sustainability reporting.

In this chapter, you will learn about why climate reporting is important, how to identify your company’s climate reporting requirements, and how to prepare the information required for compliant and useful climate reporting. If you have followed the guidance in the earlier chapters of this guidebook, your company will be in an excellent position to report on climate-related matters.

This chapter does not cover other aspects of sustainability reporting that your company may be required to complete, such as disclosing its impact on biodiversity or social inequality.

Why should my company report on climate-related matters?

Climate reporting is intended to help investors, regulators, and customers understand your business exposure to climate risks and opportunities and your strategy to address them. In turn, it will also enable you to better engage with these stakeholders on the need to mitigate key risks and capture key opportunities. A vital step in your company’s climate action journey is therefore the reporting of, at the very least, three types of information:

1. Your company’s financial exposure to climate-related risks and opportunities (physical and transition) and approach to managing them (governance, strategy, risk management, metrics and targets)

2. Your company’s annual GHG across Scope 1, 2 and 3

3. Your company’s emissions reduction targets, strategy for meeting these targets, and progress toward them

In addition to supporting your stakeholders’ decision-making, reporting on climate-related matters also brings many benefits to your business. Collecting and analyzing the information required for reporting will also help you answer key strategic questions such, as:

• Will my current business model still be relevant in a Net Zero world?

• How flexible and resilient is my company to current and future climate-related financial impacts?

• What needs to change in my business model to transition to a Net Zero future?

• How much time does my business have to respond to any emerging or still uncovered vulnerabilities in my value chain?

• What emissions is my business directly and indirectly responsible for?

• What targets do I need to meet to reduce my emissions and ensure my business can remain viable?

• What actions do I need to take to manage and mitigate climate-related risks, leverage climate related opportunities, and achieve my emissions reduction targets?

• What progress is my business making toward its emissions reduction targets?

Reporting is therefore not just a final step in your company’s climate action journey. The analysis and data required for reporting should be drawn from the information you routinely collect and use in developing your organizational climate strategy. It is therefore crucial to see the collection and use of reliable climate information as a thread that runs throughout your organization’s climate action planning and reporting process. It is an iterative process that will continually reveal new insights that should be used to adjust your climate strategy.

Follow these five steps to report your company’s climate exposure and progress toward Net Zero:

• Step 1: Identify the relevant reporting mechanisms for your business

Improving your company’s transparency on climate issues begins with understanding the climate reporting landscape and the different regulatory and investor disclosure requirements. In this step, you will learn how the climate reporting landscape has evolved, how to identify the relevant reporting mechanisms for your business, and the importance of understanding your audience’s requirements.

• Step 2: Gather the information you need

To drive the system-wide change needed to achieve Net Zero and improve accountability for organizations setting climate targets, it is crucial that businesses are transparent about their exposure to climate risks and opportunities, as well as their plans to reduce emissions. Climate change has significant impacts on the economy. It is therefore key that investors and regulators have the information they need to ensure their decision-making reflects this reality.

• Step 3: Report in line with key standards and regulations

Once you have gathered the required information, you can report in line with key standards and regulations, such as the International Sustainability Standards Board’s climate disclosure standard and the EU’s Corporate Sustainability Reporting Directive. In this section, you will learn about the requirements of these reporting mechanisms, as well as voluntary reporting mechanisms. You will also learn about the requirements of Net Zero transition plan disclosure.

• Step 4: Get assurance for your climate reporting

To confirm the accuracy of your climate reporting, you should seek independent external assurance. In this section you will learn what assurance is, the different levels of assurance your company can seek for its climate reporting, and the assurance requirements of key reporting mechanisms.