Measuring emissions

• Does the company measure its full carbon footprint across Scope 1, 2 and 3 using the GHG Protocol methodology?
• Is there a strategy to improve carbon reporting data and coverage where gaps currently exist?

Setting targets

• Has the company set science-based targets, both long-term and in the interim?
• What plans does the company have to meet these targets and measure progress against them?
• Does the company have a credible net zero transition plan?
• Is the company using a reputable industry standard to validate its net zero programme?
• Is the company ready to take part in a coalition activity that will bring more public visibility to its targets?
• How is the company performing on executing its plans and targets compared to others in the sector?

Reporting and disclosure

• Is the company meeting its statutory obligations in relation to the reporting and disclosure of climate risks and opportunities?
• If there is no statutory obligation, does the company understand which of the voluntary frameworks is best suited for this purpose, and is it using it?
• Has the company thought strategically about whether it will report and disclose climate information in the context of the wider sustainability agenda? What is the rationale for its decision?
• Is the company tracking future trends in climate disclosure – what is on the horizon?
   

Incoming regulation

The US Securities and Exchange Commission (SEC), the Canadian Securities Administrators (CSA) and Japan’s Financial Services Agency (FSA) are all preparing for similar mandatory approaches in line with the 2021 announcement from G7 finance ministers to mandate climate-related financial reporting based on TCFD recommendations.

The Swiss Federal Council has finalised regulations requiring mandatory climate disclosures from large companies as of 1 January 2024.

The Central Bank of Brazil (BCB) has announced plans to mandate climate reporting in the next couple of years. 
 

Understanding the organisation's carbon footprint and setting targets

• To set meaningful climate targets, and to provide insight into where action and resources should be focused on making reductions, it is important to understand the organisation’s baseline emissions by measuring across the whole value chain (read Chapter Zero’s scope explainer to understand scope 1, 2 and 3 emissions).
• The GHG Protocol provides a universally accepted approach for organisations to calculate their GHG emissions profile, also referred to as their carbon footprint.
• The setting of robust climate targets, and implementing a plan to track progress and meet them, are an essential part of a business’s decarbonisation strategy and climate-related disclosure.   
• Targets should align with the international scientific consensus, which states that to meet the goals of the Paris Climate Agreement, net-zero carbon dioxide (CO2) emissions must be reached by 2050, with 50% of emissions reductions needed by 2030.
• Companies should follow a recognised standard to support their net-zero programmes, in order to protect against reputational risk. A number of initiatives exist to support companies on the road to net zero.  
• Your company can set both near-term targets and long-term net zero targets adhering to the Science Based Target Initiative’s (SBTi’s) Net Zero Standard 
• The recently launched ISO Net Zero Guidelines underpin this framework, by providing a foundation for achieving net zero GHG emissions for organisations at every level. The UN report 'Integrity Matters: Net zero commitments by non-state entities’ also provides relevant recommendations for companies.
• Going forward, there is likely to be an increased focus on credible transition plans to support net-zero targets, showing in detail how the targets will be met. Developing a robust and measurable climate action plan which tracks progress against the company’s targets and is aligned with capital allocation plans, is crucial for all companies.
• Net-zero targets should be public and disclosed. The company may want to join a coalition of climate leaders setting net-zero targets, like the Race to Zero, for peer-to-peer support. Some coalitions, like the 1.5°C Business Playbook, involve pledging to reduce emissions across the entire value chain of the company.
• At a solution-based level, RE100, EV100 and EP100 provide a platform for businesses to set and achieve ambitious commitments in relation to zero carbon electricity grids, electric vehicles and energy efficiency that will help deliver against a net-zero goal.
• For further information on the range of methodologies to support companies in setting climate targets visit our Navigating the Climate Disclosure Landscape interactive tool.

Understanding the organisation’s disclosure and reporting requirements

• The disclosure and reporting requirements for your company will depend on the jurisdiction(s) it operates in. Several countries now mandate climate-related reporting and disclosures, and while many encourage voluntary disclosure, there is an increasing trend towards making this compulsory. See the information above for the jurisdictions mandating reporting and disclosure.
• Global harmonisation of sustainability disclosure standards is underway. In November 2021, the IFRS Foundation launched the International Sustainability Standards Board (ISSB) to develop a global baseline of sustainability disclosure standards to meet investor needs, building on existing frameworks like the Task Force on Climate-Related Financial Disclosures (TCFD) and Sustainability Accounting Standards Board (SASB) Standards.
• The ISSB’s inaugural standards, IFRS S1 – on general requirements for the disclosure of sustainability-related information, and IFRS S2 – on climate-related disclosures, were launched on 26 June 2023.  Together they are intended to form a global baseline of sustainability-related disclosures, ensuring that companies provide sustainability-related information alongside financial statements in the same reporting package.
• Other well recognised voluntary reporting initiatives are working with the ISSB to make sure that the landscape is as streamlined as possible. The Global Reporting Initiative, for example, which promotes a broad, cross-stakeholder ‘impact’ angle for corporate reporting, has an ongoing MoU with the ISSB.
• In general, climate disclosures should be considered within a broader sustainability or ESG context – creating long-term sustainable value, while driving positive outcomes for business, the economy, society and the planet. This is reflected in the broad majority of the reporting frameworks available to companies, and also the tools used by investors to assess company performance. For example, the World Benchmarking Alliance ranks and benchmarks 2,000 of the world’s most influential companies on their contributions to the Sustainable Development Goals.
• Looking ahead, board directors should note the upcoming launch of the Taskforce on Nature-related Financial Disclosures (TNFD), a risk management and disclosure framework for organisations to report and act on evolving nature-related risks.
• The climate disclosure landscape is also seeing a shift towards transition plans, that show in detail how companies propose to meet Net Zero targets. The ISSB is preparing guidance on transition plan disclosures, and in the UK, the Transition Plan Taskforce will build on that baseline.
• For further information on the range of methodologies to support companies in setting climate targets visit our Navigating the Climate Disclosure Landscape interactive tool.