The rise of stakeholder capitalism creates the incentive, if not the need, for companies to develop and report on decarbonization strategies with an actual path toward their net-zero, or most importantly, their real-zero, targets.
Such paths toward decarbonization involve strategic planning, application of technological innovations and commitment to continuous improvement and re-evaluation of where a corporation stands, where it wants to go and what innovation can get it there.
Without an ESG strategy with teeth, there cannot be a measurable improvement in a corporation’s financial performance. Just because a company has an ESG strategy, its financial performance will not markedly improve unless its ESG strategy has actionable plans and relies on verifiable data. The teeth come in the form of actionable plans and commitments for a corporation to reinvent itself into a low-carbon company with increased marketability.
CDP’s alignment with the Task Force on Climate-related Financial Disclosures (TCFD) and other voluntary disclosure frameworks (GRI, CDSB and SASB, and the forthcoming ISSB) underscores the fact that reporting frameworks and standards can be used together to produce meaningful and decision-useful climate-related disclosures. For report preparers, this alignment is great news as it illustrates that CDP responders have already gathered material climate-related information and data points that can be repurposed between the different frameworks and types of disclosures (i.e. annual financial reports, sustainability reports and the proposed SEC filing).
Perhaps more significantly, this alignment provides a roadmap for an ESG strategy with teeth. At the forefront of a climate-related disclosure are four core elements: Governance, Strategy, Risk Management, and Metrics and Targets, broadly articulated into the TCFD 11 recommended disclosures. While the TCFD is not scored, CDP is, and as such, encourages companies to progress on their climate-related governance and strategy.
Many companies that KERAMIDA works with recognize that all information requested by CDP’s climate questionnaire may be used as content for ESG and/or mainstream reporting if climate change-related issues have been identified as material by the company. Companies responding to CDP and actively taking steps to attain “Leadership” status and points through integrated and strategic climate initiatives are better positioned to incorporate the TCFD into their climate strategy as well as into any current or future climate reporting requirements.
In fact, such companies most likely have developed their governance, strategy, risk management and metrics and targets climate protection platforms. For example, companies seeking to make CDP’s A List will likely have evolved from reporting a greenhouse gas (GHG) inventory into developing a climate transition plan that demonstrates executive-level oversight and management of emissions, reduction strategies and goals and targets supportive of corporate growth and strategy. The proposed U.S. Securities and Exchange Commission (SEC) climate rule asks not only for a GHG emissions inventory, but also for oversight and management of emissions and climate-related risks.
Momentum behind climate-related disclosures is strong – in the last year, various jurisdictions in North America, Central America, Europe, Asia and Australia have all passed or have proposed climate-related disclosure rules. What may have been best practice this year may become mandated in the near future. As disclosure becomes the norm and the TCFD and CDP become mainstream, so will the expectations around them – namely a mature climate strategy. KERAMIDA encourages our clients to engage with the TCFD framework and CDP disclosure as tools to guide and improve ESG performance – rather than a compliance exercise.
KERAMIDA has leveraged decades of excellence in the Environmental, Health and Safety services sector and the talent of our team of analysts, designers, scientists and engineers to become a CDP USA Gold Education and Training Partner. Our strategic, whole-systems approach to sustainability involving deep knowledge of compliance, best practices and management systems is the technical foundation from which our educators provide high quality professional development and training services. We equip individuals and companies with the ability to drive outcomes toward process efficiency, continual improvement, risk reduction and value creation through sustainability/ ESG strategies.