Company directors and executives now need to not only ensure that disclosure boxes have been checked, but that credible disclosure is being enabled through the development of enduring compliance.  As a global leader on climate impacts and business integration, we have experience helping large and small organisations navigate the most difficult questions.  
 
In this article, we highlight the three important things companies will need to get right – first – to successfully embed climate risk and net zero strategies – and ultimately, disclose with credibility. 

1. Get your (internal) ducks in a row

This is the most underrated action that is often overlooked in developing enduring capability.  Ambiguous ownership can often result in inaction, or inaccurate action.  
 
Project teams should ensure internal and external value chain stakeholders are clearly identified, existing internal architecture, data, systems, and resources mapped, and budget identified.  Accountabilities are critical, especially where actions may span multiple senior executives. 
 
For example, clarity on ownership and co-ownership across Risk, Sustainability and Finance teams will accelerate outcomes. Ultimately, this will help provide the clarity needed to deliver seamlessly and to maximise value.  

2. Define materiality

At the heart of new sustainability disclosure standards is the concept of materiality. 
 
Companies can save significant cost and time by being focused on a clear definition of what is financially, strategically, and reputationally material. These definitions are often already defined within companies’ enterprise risk management frameworks and should be able to be communicated in framing external disclosures. 
 
A second concept critical to new international sustainability disclosure standards is ‘double materiality’.  Double materiality, put simply, is the assessment of sustainability impacts on a company, and the company’s impacts on the environment and society.  
 
New international disclosure standards are asking companies to identify and assess double materiality, specifically:  

  • Sustainability issues which might materially impact an organisation financially or strategically (‘financial materiality’)
  • Sustainability impacts an organisation might have externally (‘impact materiality’), which in turn could materially influence or impede its profitability or ability to operate. 

Materiality will be at the core of future sustainability regulation competitive compliance. 

3. Understand your gaps

Ensuring compliance with new sustainability disclosure standards requires more than just checking boxes on a disclosure checklist.  
 
This means a thorough understanding of the information to be disclosed and the capabilities to credibly meet these obligations. 
 
We help our clients get started through our Disclosure Credibility Assessment and capability maturity program. 
 
This includes talking with senior stakeholders, risk, strategy, finance, and product teams to identify the key internal documentation to gauge maturity of capabilities. We then map capabilities to compliance and identify areas where investment may be needed. 
 
This helps our clients keep up with evolving standards like double materiality, and ensure their business is in a solid position commercially. Done well, you won’t need to rebuild every time the goalposts shift. A “plan for a plan” will not survive.  
 
The companies that are best placed – including with appropriate funding and resourcing – have a clear target state, understand the climate- and non-climate business value, and can disclose with credibility and confidence through clearly defined materiality and mapping to disclosure standards. 

Find out more by downloading our latest research report or to discuss the points raised in this article, please reach out to a member of the team below. 

 

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