To quote Bob Dylan, “the times they are a changing”.
As we prepare for the FY23 reporting season, there are many areas in the ESG and corporate reporting landscape that remain a little uncertain.
The final details of the ISSB (International Sustainability Standards Board) reporting framework are yet to be released, the recommendations for TNFD (Taskforce on Nature-Related Financial Disclosures) will not be finalised until September, the full extent of the ASIC and ACCC crackdown on greenwashing remains to be seen, changing requirements of SBTi are yet to be clearly demonstrated and we’re yet to see the full reach of the Federal Government’s new Safeguard Mechanism.
A lot is in flux. And what has this resulted in….? Corporate paralysis.
Many of our clients are telling us that this reporting season, they’re planning on taking a ‘wait and see’ approach. This is essentially how greenhushing (one of the 7 forms of greenwashing recently coined by Planet Tracker) is playing out in practice.
This is far from ideal. Not only does it undo years of hard work building internal momentum and engagement on ESG reporting, more importantly we simply don’t have time to waste.
So, in order to battle this paralysis, we’ve been encouraging our clients to progress several key initiatives over the coming 6-12 months that will help them move forward no matter how these elements play out. We call these non-regrettable actions – relatively low effort projects or initiatives that will not only lay the foundations of future reporting requirements but will also provide good strategic intel for future ESG actions.
There is a lot in flux in the ESG reporting space. But, even in a time of uncertainty there are plenty of things that corporate ESG practitioners can do to get the first move advantage and demonstrate true leadership in these emerging spaces.
Here are our top 5:
1. Get your sustainability, communications and legal teams in the same room to compare notes on greenwashing risk
This sounds obvious, but very few businesses are doing this proactively. The focus on greenwashing is creating an environment of fear that is holding organisations back from communicating about sustainability. To help your organisation navigate this and practically communicate it today, bring your sustainability, legal and marketing teams together to agree on your guardrails. Start by reviewing the ASIC guidance on greenwashing. Then, agree on a practical approach to getting internal approval on your sustainability communications. Review our principles for communicating with confidence here.
2. Undertake a climate risk assessment (if you haven’t done so yet) – First mandatory requirement for ISSB reporting
The ISSB, which seems to have won the race to deliver a single amalgamated international sustainability reporting framework, recently provided a bit more detail on how it will be rolled out as of June 2023. While several requirements such as mandatory Scope 3 reporting and comparative data have been pushed back to Year Two or Three, the one key requirement from Year One will be for organisations to have completed at least a high-level climate risk assessment. Broadly aligned with the requirements of TCFD, the Standard 2 Climate-Related Disclosures requires that organisations have assessed the physical and transitional risks and opportunities of climate change.
Importantly, they haven’t required the full risk assessment and mitigation plan in Year One, which means this can be a relatively quick win for any organisation wanting to get on board with ISSB early.
3. Prepare for TNFD by mapping your interfaces with nature at a site (asset) level.
While the final details of TNFD will not be released until September 2023, we do know that the first major step for TNFD will be to map how organisations are interfacing with nature. At its simplest level, this means understanding where your sites are located, the type of operation and outputs at each, which elements of natural capital sit within that local bio-region and the challenges and opportunities that might arise from that interface.
In order to do this in a streamlined and efficient way, we have developed a Nature Interface Mapping Tool for clients, which utilises GIS layers to map and prioritise sites based on various features to provide clients with a prioritised list of assets for future focus to both reduce risks and maximise opportunities for positive impact.
This process is relatively inexpensive, can be delivered in a short timeframe and will deliver some fantastic visuals that will not only help define the sites that should be of focus, but also provide a tool to engage your leadership on this issue.
4. Understand the impact of your supply chain on land management & deforestation to align with SBTi.
If you have submitted, or plan on submitting an emissions target aligned to the Science Based Target Initiative (SBTi) then you will need to be across FLAG. As of March 2023 organisations with any supply chain reliance on forest, land & agricultural (FLAG) products (specifically 11 key commodities and any other land related product) will be required include emissions from these sources into their inventory. The time and effort to do this could prove to be significant for those organisations highly reliant on land (such as food retailers or developers), but the first simple step to understand which parts of your supply chain are reliant on land and start collecting land emissions and deforestation related data from those suppliers (or at least start the conversation).
Which leads us to the final non-regrettable action…
5. Define the data asks of your supply chain for future emissions and nature reporting
For most organisations, the modern slavery act has ‘broken the back’ on ESG related data requests of key tier 1 & 2 suppliers. However, this is just the first of many more requests that will be made of them as we start exploring the emissions and nature impacts of supply chains. So, to avoid repeating the ‘burden of data requests’ on your suppliers, it is important that you capture everything you need in one go.
The best place to start is to map your ESG material issues by category and supplier so you ask relevant questions, collect meaningful data to inform decision making and reduce the amount of times you are asking your suppliers for data. This means prioritising suppliers based on high impact and high willingness to work together, defining what data you need, in what format, and how regularly.
Only then can you start the process of actually engaging your supply chain in a collaborative way that defines co-benefits and shared value for engagement.
No one likes delivering projects that might be altered or shelved once the final details of the requirements become clear. But, in an environment where time is of the essence, even in a time of uncertainty there are plenty of things that corporate ESG practitioners can do to get the first move advantage and demonstrate true leadership in these emerging spaces.
Stay tuned for our forthcoming guidance on these specific areas and more as they are finalised. If you have any queries, feel free to reach out to Max and the team here.