A Closer Look at TCFD Recommendations

A Closer Look at TCFD Recommendations

Written by Dina Adlouni

Published March 1, 2024

Meet Neil, an EHS manager who has learned his organization 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 organization 
  • 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: 

Governance Strategy  Risk Management Metrics and Targets
Board oversight Risks and opportunities Risk ID and assessment processes Climate-related metrics
Management's role Impact of risks and opportunities on organization Risk management processes Scope 1, 2, and 3 GHG emissions
  Resilience of strategy Integration into overall risk management Climate-related targets

 

Governance, Strategy, Risk Management, Metrics and Targets were chosen by the Task Force because they portray the four main areas needed for an organization to function. The 11 recommendations found within these four elements were also created to help provide guidance on how organizations 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:
 
  1. Governance: 
    1. Board oversight: Disclose the board's oversight and role when it comes to climate-related risks and opportunities 
    2. Management's role: Showcase what management's role is when it comes to identifying and managing climate-related risks and opportunities 

2. Strategy: 

      1. Climate-related risks and opportunities: Explain what the climate-related risks and opportunities uncovered by the organization are over the short, medium and long term. 
      2. Impact of climate-related risks and opportunities on organization: Highlight what the impact of these climate-related risks are on the business including its strategy and financial planning.  
      3. Resilience of strategy: Prove the resilience of the organization’s strategy when it comes to tackling these climate-related risks and opportunities.
         People working on a wooden table pointing to a graph

3. Risk Management:

      1. Risk ID and assessment processes: Describe the process the organization uses for identifying and evaluating climate-related risks. 
      2. Risk management processes: Explain how the organization will manage these identified risks. 
      3. 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:

      1. Climate-related metrics: Share the metrics the organization has used to evaluate climate-related risks and opportunities. 
      2. Scope 1, 2, 3 GHG emissions: Reveal the business’s scope 1, 2, and 3 GHG emissions.  
      3. Climate-related targets: Describe the targets the organization has used to manage the climate-related risks and opportunities and show how they have performed against the aforementioned targets. 

Download a copy of the free GHG Reporting Guide

 

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 organization 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 organization

What does the TCFD framework mean for your business? This standardized method of reporting means that not only will leaders in your organization 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 organization 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 organization 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 organization.  

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 organization’s financial capabilities and records. These two teams working together can paint an accurate picture of your organization’s climate-related risks and opportunities.  

People sitting around a table and working together

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 organization 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 organization.  

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.  


Download a copy of the free GHG Reporting Guide


Author Dina Adlouni

Dina is a Content Marketing Manager at EcoOnline. She has been a content writer for eight years and has been writing about health and safety for the past three years. 

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