Integrated Reporting and climate-related disclosures: using integrated thinking to plan for the future

Climate change is not a new concept. In fact, it has been nearly thirty years since the Intergovernmental Panel on Climate Change published its first report (1990) with predictions of a 20cm rise in global mean sea levels by 2030 and a one degree celsius temperature increase by 2025[1].

Despite this, and the many subsequent years of research and climate science reports that have followed, there is still much uncertainty regarding the timing, magnitude and to a lesser extent the nature of impacts from climate change on organisations. The Task Force on Climate-related Financial Disclosures (TCFD)[2] now asks organisations to assess and report on their material climate change risks and opportunities – but this is easier said than done.

It may then seem daunting for organisations, who have historically only reported on events that have occurred, or are deemed reasonably certain, to take a forward looking lens and attempt to assess the impact of climate related risks on their business. However, there are many organisations in both the private and public sectors who are successfully taking steps to anticipate and mitigate these risks, and capture the flow of opportunities that arise.

“The Chinese use two brush strokes to write the word ‘crisis.’ One brush stroke stands for danger; the other for opportunity. In a crisis, be aware of the danger–but recognize the opportunity.”
― John F. Kennedy

As put forward by the G20’s Financial Stability Board: Taskforce for Climate-Related Financial Disclosure recommendations, scenario analysis is a prudential and effective tool to predict and stress-test strategy in times of uncertainty. However, understanding where to stress test and which environmental, social or other forces may impact your business model is very challenging and will not be as effective if the organisation is not clear on its strategy and the interdependencies it has with the environment in which it operates.

This is where integrated thinking is of most benefit. Integrated thinking, the pivotal tool as organisations who are embarking on the Integrated Reporting journey knows, promotes the whole organisation to broaden its consideration, to understand the value creation journey, and to take in the forces that will impact this value-creation over the long-term, and climate change is certainly something that requires an integrated thinking approach.

The TCFD asks companies to consider the impacts of climate change on its governance, strategy, risk management and metrics and targets. Climate change by its very nature is complex and requires strategic long term thinking and taking an integrated thinking approach as you consider climate change will assist you to understand the impacts and develop your strategic responses. Once an entity is able to conceptualise this journey, it can more readily and accurately overlay the market trends, and environmental impacts occurring as a result of climate change, and visualise clearly the road-blocks and gateways that will have the most significant impact on the organisation.

In this light it is clear that adopting the TCFD recommendations and preparing an Integrated Report is not just a compliance or reporting exercise to satisfy investors. The benefits of integrating your sustainability and risk management practices to a whole-of-organisation level are evident, in a world where the only certainty is uncertainty.

“The Only Thing I Know For Sure Is That I Know Nothing At All, For Sure” ― Socrates

[1]Climate Change: The IPCC 1990 and 1992 Assessments

[1]https://www.fsb-tcfd.org/


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