Meet Neil, an EHS manager who has learned his organisation must report their Task Force on Climate-related Financial Disclosures (TCFD) disclosures a week ago. It’s been quite a challenge to understand this foreign concept, but he’s slowly learning more about the framework. He has spent hours on the internet, researching what the TCFD is, its purpose, and more.
Now, it’s time to take a closer look at the TCFD recommendations to learn exactly what they entail and how this will impact the business. With this information in his trusty toolbox, Neil will be more prepared to build a successful TCFD report.
Keep reading to gain greater insight into the TCFD recommendations, including:
- What are the 11 TCFD recommendations
- What this means for your organisation
- 3 tips to help you get started
What are the 11 TCFD recommendations
The 11 TCFD recommendations fall under four general elements, as seen below:
|Metrics and Targets
|Risks and opportunities
|Risk ID and assessment processes
|Impact of risks and opportunities on organisation
|Risk management processes
|Scope 1, 2, and 3 GHG emissions
|Resilience of strategy
|Integration into overall risk management
Governance, Strategy, Risk Management, Metrics and Targets were chosen by the Task Force because they portray the four main areas needed for an organisation to function. The 11 recommendations found within these four elements were also created to help provide guidance on how organisations should be approaching climate-related risks and opportunities when it comes to their business. Let’s take an even closer at exactly what these 11 recommendations entail:
- Board oversight: Disclose the board's oversight and role when it comes to climate-related risks and opportunities
- Management's role: Showcase what management's role is when it comes to identifying and managing climate-related risks and opportunities
- Climate-related risks and opportunities: Explain what the climate-related risks and opportunities uncovered by the organisation are over the short, medium and long term.
- Impact of climate-related risks and opportunities on organisation: Highlight what the impact of these climate-related risks are on the business including its strategy and financial planning.
- Resilience of strategy: Prove the resilience of the organisation’s strategy when it comes to tackling these climate-related risks and opportunities.
3. Risk Management:
- Risk ID and assessment processes: Describe the process the organisation uses for identifying and evaluating climate-related risks.
- Risk management processes: Explain how the organisation will manage these identified risks.
- Integration into overall risk management: Delineate the integration between processes used to identify, evaluate and manage climate-related risks and the business’s processes for overall risk management.
4. Metrics and Targets:
- Climate-related metrics: Share the metrics the organisation has used to evaluate climate-related risks and opportunities.
- Scope 1, 2, 3 GHG emissions: Reveal the business’s scope 1, 2, and 3 GHG emissions.
- Climate-related targets: Describe the targets the organisation has used to manage the climate-related risks and opportunities and show how they have performed against the aforementioned targets.
There’s a lot to digest when it comes to TCFD recommendations, but the goal is to help you get more clarity on how your organisation is impacting the environment. With this insight you can build a stronger sustainability strategy, making your business more resilient to unexpected occurrences.
What this means for your organisation
What does the TCFD framework mean for your business? This standardised method of reporting means that not only will leaders in your organisation gain greater insight into climate-related data, but third parties will as well.
The above recommendations provide your leaders with the opportunity to get granular data on how your organisation has affected the environment, in addition to the potential climate-related risks that may affect your business. This allows you to make more sustainable choices that will make your business more resilient. For instance, let’s say you discover one of your suppliers is in an area with high hurricane activity. You can now use this information to find alternative suppliers who are not facing this risk, saving your business from potential monetary loss and delays.
TCFD reporting also means investors and other key stakeholders will be able to see how your organisation ranks against others in the market when it comes to climate-related risks and opportunities. This will help them make better decisions regarding where they will invest their money going forward. Think of the TCFD as your competitive advantage when it comes to others, allowing you to showcase your sustainability strategy and positive impact on the environment.
3 tips to help you get started
There’s no doubt your TCFD disclosures can set you apart from the competition, so here are a few tips to help you write a successful report.
1. Decide who is responsible
First, you must decide who is responsible for gathering this information and building the report. This certainly should not fall on one person or team’s responsibility, as the information comes from many different areas of your organisation.
We recommend that a combination of the sustainability team and finance team, including your CFO, are involved in this process. The sustainability team will have the expertise and knowledge needed when it comes to identifying climate-related risks and opportunities as well as setting accurate metrics and targets, while the Finance team will be able to carry out the calculations needed for your GHG emissions, as well as provide greater clarity into the organisation’s financial capabilities and records. These two teams working together can paint an accurate picture of your organisation’s climate-related risks and opportunities.
2. Know where to find your data
Now that you know who will be involved in TCFD reporting, you must know where to find the relevant data. Let’s take your Scope 1, 2, and 3 GHG emissions as an example. Your sustainability team will be able to locate this information as they have the relevant expertise.
Scope 1 emissions include those which your organisation is directly responsible for, including fuel and natural gas. This can be collected from meters on site. Scope 2 emissions include indirect emissions like heating and cooling, as well as electricity. These values can be collected from their respective invoices or bills. Your Scope 3 emissions are all other indirect emissions including employee commuting, business travel, investments, franchises, and much more.
Pro tip: If you do not have methods in place to collect this type of information, set these processes up so you can collect all the necessary data.
3. Be honest
Last but certainly not least, be honest. Transparency is key with these reports, so show your work and how you have come to the decisions and calculations you’ve made. Don’t try to estimate or use inaccurate data like industry benchmarks when it comes to divulging your data, as this would not show an accurate picture of your specific organisation.
An honest approach will help make your disclosure process easier, as it reveals exactly where your company is in its sustainability journey. Third-party members will appreciate your transparency, helping them make necessary decisions needed for their best interest.
Your next step...
With all this information, it can be easy to feel overwhelmed or stressed - but don’t worry! Just keep one foot in front of the other and take the next step. Curious to know what it is?
Download our guide, GHG Reporting: How to Keep Your Investors and the Environment Happy, to learn more about your Scope 1, 2, and 3 emissions and exactly how to calculate these values to fulfil this TCFD recommendation.