The climate is right for environmental disclosure

As major contributors to climate change, the world’s corporations have a fundamental role to play, with disclosure being a key part of the change, according to CDP’s global director of corporations and supply chains Dexter Galvin.

The climate is right for environmental disclosure

Climate change is here. From extreme weather events, to rising sea levels – its effects are already being felt across the globe. Two years into the Decade of Action, further system-wide action is urgently needed if we are to halve global emissions, eliminate deforestation and tackle the water crisis by 2030. As major contributors to climate change, the world’s corporations have a fundamental role to play.

Environmental disclosure is the bedrock of corporate action for two main reasons: it informs improved decision making and climate target setting, and enables accountability. Companies cannot manage what they do not measure, and the disclosure process enables them to better identify which areas need most attention and where the most effective actions can be taken. The transparency afforded by disclosure provides the crucial base for accountability, allowing stakeholders to see whether companies’ climate commitments are consistent with their actions.

Furthermore, there are tangible business benefits to be gained from disclosure. Commonly, climate disclosure leads to cost savings, uncovering business risks and opportunities and reputational benefits. Concern over environmental issues has grown dramatically in recent years among the public and the business world – with increasing expectation for companies to be transparent about managing their environmental impact, or risk reputational repercussions.

Governments are also recognizing the benefits of climate disclosure, with mandatory disclosure legislation gaining momentum across the globe. The recent proposal from the US Securities and Exchange Committee (SEC) on mandatory climate disclosure for US-registered and foreign private issuer companies is the latest in a global trend, following similar announcements from countries and jurisdictions including the EU, India, Japan and the UK.

As disclosure is already a business norm, mandatory disclosure regulation should not come as a surprise to companies. Disclosing through standardized, TCFD-aligned platforms such as CDP’s will enable companies to look around corners and stay ahead of the curve, embrace further regulation and inspire climate action.

Although more than 13,000 companies have woken up to the importance of climate disclosure, data shows that disclosure and action on nature risks is still falling far behind. Last year, 3,380 companies disclosed through CDP on water security, and 865 on forests. This neglect of nature risks is a grave oversight.

The IPCC have warned that a broader approach to climate change is essential – one that includes the role of restoring and protecting nature in mitigating emissions and adapting to climate change. Restoring our natural resources, including forests and water sources such as rivers, lakes and aquifers, is fundamental to tackling the climate crisis. Forests and water landscapes, such as wetlands, play an essential role in limiting the impacts of climate change through absorbing carbon emissions, supporting biodiversity, preventing pollution and soil erosion and regulating fresh water supplies. Our crises in nature and climate are two sides of the same coin.

The importance of expanding corporate climate action to include nature has been emphasized by other leading climate organizations. The Science-based Targets Initiative (SBTi) are launching guidance on nature-based solutions and climate target setting later this year, and the Taskforce on Nature-related Financial Disclosures (TNFD) has recently released the first beta-version of their management and disclosure framework for organizations to report and act on nature-related risks.

Including nature in climate corporate environmental strategies also has clear business benefits. For companies, the potential financial impacts of forest risks are reported to be around eight times higher than the cost of addressing them. Similarly, the potential financial impacts of inaction on water risks are over five times greater than the costs of addressing them.

The Dasgupta report found that nature is essential for almost every aspect of our economy. Protecting our natural resources will help protect people’s livelihoods from the impacts of climate change. Companies striving to be recognized as environmental leaders must broaden their approach and include nature risks in their disclosures.

In addition to measuring and managing nature risks, companies must also look beyond their own operations and cascade ambition and action down their supply chains. As Scope 3 emissions are, on average, 11.4 higher than operational emissions, reducing supply chain emissions is a critical part of corporate climate action.

Two decades after pioneering environmental disclosure, CDP’s standardized, TCFD-aligned platform remains the gold standard in enabling companies and their supply chains to collect the data vital to inform decision making of today and tomorrow, and disclose crucial information on forest, water security, and climate risks.

It is only through disclosure and the process of measuring, evaluating and tracking climate action that we can hope to take meaningful action to avoid the most catastrophic consequences of climate change. As the latest IPCC report warns, it’s “now or never”.

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