If you missed Persefoni and Workiva’s webinar, “The SEC’s Climate Proposal in Action: The Realities of Integrating SEC & Climate Reporting,” don’t worry; we have you covered with five key takeaways:
1. Investor-grade ESG reporting is now essential for businesses, yet many companies are just starting their processes.
When reporting your financial information to investors, shareholders, and auditors, there must be procedures and controls in place to ensure the accuracy of that information. Stakeholders' demands for transparency, the evolving regulatory landscape, and increased exposure to climate risk mean ESG data must now be reported with the same accuracy as financial data, especially for climate-related disclosures. A poll taken during the webinar gauging where participants’ companies are in their maturity curve for climate disclosures found that almost half (46%) were just starting to formulate their disclosures. 19% had set a public commitment to be net zero, and another 19% reported through CDP. Many companies are still very early in their climate reporting journey and will need guidance on assessing their climate-related risks and opportunities and ensuring their future climate reporting is investor-grade. The other 38% who have set carbon reduction goals and are already reporting will need to confirm the accuracy of their reporting with procedures and quality control.
2. Investor-grade climate reporting comes with many benefits.
Investor-grade climate reporting ensures organisations can comply with current, and likely future, climate disclosure regulations and gives businesses a clear view of their climate-related risks and opportunities. Accurate and consistent carbon data also gives companies a framework to assess how they can set climate targets, such as net zero, and accurately track their progress toward them. Investor-grade climate reports also ensure that the right governance is in place and the proper teams are involved in compiling, calculating, and reporting carbon data. As climate and wider ESG reporting come into sharper focus for stakeholders, investor-grade, rigourous ESG reporting conducted improves organisations’ transparency for those interested parties. That transparency will give stakeholders clear insights into how companies manage their emissions and climate risk ESG disclosure regulations may not be currently set in place, but they are sure to come, and companies must prepare.
3. ESG disclosure regulations may not be currently set in place, but they are sure to come, and companies must prepare.
The SEC’s Climate Disclosure Proposals are unlikely to come into play until early 2023, however, other jurisdictions, such as the EU and Japan, are forging ahead with implementing their climate disclosure rules. The EU’s Corporate Sustainability Reporting Directive (CSRD), for example, could cause a knock-on effect on US companies with subsidiaries in the EU. Companies outside of these jurisdictions likely have companies in their supply chains that are and, therefore, may require some kind of ESG report.
The SEC’s Proposals for Climate-related Disclosures look to be the first of many ESG reporting rule proposals from the SEC. Other current proposals focus on the ‘S’ or social part of ESG, including board diversity disclosures and a human capital management proposal. The board diversity proposal will require reports from all Nasdaq-listed companies. The human capital proposals will include the accurate reporting of hiring practices, workplace culture, employee well-being efforts, diversity, equity, and inclusion, among others. The global trend for increasingly extensive ESG reporting is clear, and companies should begin the process of accurately measuring and reporting their ESG data today, starting with climate. The best place to start climate reporting is with the guidance of the Greenhouse Gas Protocol and the Task Force of Climate-related Disclosure (TCFD), as most global climate disclosure mandates are built around these standards.
4. Cross-functional engagement is key for the governance of ESG disclosures.
Whether for regulatory compliance or in annual sustainability reports, reporting on climate and other ESG data can expose companies to potential legal and reputational liabilities. Engaging with a cross-functional group guided by ESG and sustainability teams will be essential to mitigate these risks. The legal team should be involved because of the litigation risks associated with compliance reporting. Finance departments should also be integrated into the climate and ESG disclosure process, as they can translate climate and ESG risks into financial risks. An internal auditing team should also be included to ensure compliance with any regulations and assurance of data accuracy. Other teams should also be included, depending on the structure of a business; logistics teams, marketing teams, investor relations, and others could all be included in a governance strategy to ensure reporting is transparent, consistent, comprehensive, and aligned across the whole organisation.
5. Workiva and Persefoni can offer accurate, trusted, transparent, and holistic investor-grade climate and ESG reporting.
The implications of investor-grade ESG reporting will mean that companies will have to get a grip on their climate and ESG data and start tracking it consistently and accurately. Climate data will help companies understand their climate risks and opportunities and enable them to build strategies. The best way to visualize, track, and manage this data is from a central repository. Enabling the cross-functional engagement needed to collect and aggregate data with the full auditability and transparency required for investor-grade reporting can only be achieved at scale through technology. Persefoni offers a single source of climate data, which can be consistently disclosed for investor, compliance, and other stakeholder reporting. With Workiva, you can integrate the full range of ESG reporting with the same rigour as financial reporting on one platform, including climate data from Persefoni, giving stakeholders and regulators the full spectrum of investor-grade ESG reporting.
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