What is TCFD and why does it matter?
Temperatures are increasing, sea levels are rising, extreme weather events are becoming more frequent and intense, this is happening on a global scale and will continue to grow over the course of our lifetimes, and beyond. Climate change presents the most immediate and significant threat to our planet and economy.
Large corporations collectively contribute to a huge proportion of Green House Gas (GHG) emissions, which are accelerating global warming and the resultant negative impacts of a changing climate. As such, companies have a responsibility to be transparent about their impact and their approach to imbed climate change into their decision-making processes. Whilst the conversation on climate change is principally focused on its distressing detrimental effects, and rightly so, it also presents one of the greatest opportunities for businesses to demonstrate long-term vision and capitalise on the shifting economic, political and market landscape. Approached comprehensively, this offers a win-win scenario for businesses. And this is where the Task Force on Climate-related Financial Disclosures (TCFD) comes in.
Why should businesses integrate TCFD into their internal processes?
The TCFD is a guidance framework created by the Financial Stability Board (FSB) in 2015, and published in 2017, with the purpose of helping companies to understand and disclose specific information on the climate-related risks and opportunities to their business. This guidance provides 11 reporting recommendations which seek to improve how climate-related risks and opportunities are assessed and measured by the business, how they’re integrated into the existing governance structures, and how they are considered in, and drive, the overall business strategy.
But rather than burdening businesses with additional reporting requirements, the TCFD disclosure recommendations were created to complement existing corporate reporting frameworks and facilitate a more comprehensive reporting process. TCFD reporting for large companies became mandatory in the UK in April this year (2022), with plans to extend this to all UK businesses across the economy by 2025. Although not mandatory up until now, forward-looking businesses have been voluntarily aligning with TCFD, demonstrating best practice in their sectors and capitalising on the benefits.
So, we all recognise the importance of addressing climate change on a global scale, but why should businesses integrate TCFD into their internal processes? The negative impacts of climate change are wide ranging and can, and are, having a severe impact on business performance. The main risks for businesses resulting from climate change manifest in two broad categories: physical risks (tangible impacts of a changing climate and weather patterns on assets and operations) and transition risks (intangible impacts associated with the move toward a low-carbon economy).
The silver lining is that many of these risks also present opportunities for businesses. Investigating the impacts of climate change at even the most basic level can help identify new areas of revenue and prevent high costs arising from climate change, and where the opportunities for future value creation lie. TCFD reporting can serve to future proof a business through risk prevention, boosted stakeholder confidence, competitive advantage, and increased company valuation.
At Simply Sustainable we have worked with businesses from across the economy, both domestic and international operations, to align their reporting to the TCFD recommendations and ensure year-on-year improvement on their journey to full disclosure. If you are looking to begin your TCFD journey or take your reporting to the next level please contact us through the details below.
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