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11 December 2023 / Quick Take
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Copy LinkThe trend toward increasing climate disclosure regulation should lead to greater consistency in the information provided by companies, but the opposite is happening. That is because of the inconsistency among the disclosure regimes that have been issued by the EU, the state of California, and the International Financial Reporting Standards (IFRS), as well as the draft rule pending at the SEC.
With thousands of US firms subject to overlapping and diverging disclosure regimes, companies should set their disclosure sights higher than mere regulatory compliance. Simply meeting regulatory requirements is likely to fall short of companies’ need to provide a coherent narrative of how they are operating in an environmentally responsible manner that is tied to their business strategy.
As a start, companies can be more consistent in the topics they cover. For example, in 2022, 94% of S&P 500 companies disclosed that they had a climate policy, and 89% disclosed their total GHG emissions, but a smaller percentage (80%) disclosed their climate risks. Disclosing a climate policy, without also disclosing the underlying risks, means some companies are leaving out an important part of their climate story.
To go beyond compliance, companies should proactively identify climate-related concerns relevant to their operations and integrate them into their business strategy. Simultaneously, companies should foster collaborations with industry peers, other industries, and both upstream suppliers and downstream customers to help them align their efforts with broader climate objectives. This more “organic” approach is likely to lead to more meaningful and durable progress toward climate objectives while also responding effectively to market pressure.
For more statistics on environmental and other ESG disclosures, please visit our Live Dashboards on ESG Advantage, powered by ESGAUGE.
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