Leaning Closer To Disclosure

Spring is almost upon us, so are potential Climate Disclosure rules as major regions move closer to realized regulation around climate disclosure. Let's make one thing clear climate change is not waiting for climate disclosures to get settled - climate weather events, rising temperatures, and rising water levels are continuing at an unrelenting pace.

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In the first quarter of 2024 we saw the US SEC adopt rules to enhance and standardize climate-related disclosures by public companies and in public offerings. However, there's a growing consensus that these new regulations, though a step forward, have been significantly watered down from their original ambition. This dilution is largely attributed to intense lobbying efforts and legal challenges, with the most notable compromise being the exclusion of Scope 3 emissions – those emissions related to a company's supply chain. Despite this, firms with operations or supply chains in regions like California or Europe, where Scope 3 reporting remains mandatory, will still need to disclose these emissions. This discrepancy risks producing incomplete emissions data, potentially obscuring the full environmental impact of a company's operations and opening doors to potential greenwashing.

If you are curious you can access the full set of adopted rules below:

US SEC - The Enhancement and Standardization of Climate-Related Disclosures for Investors

“This rule is a floor, not a ceiling, for companies to report how their business is adapting to a global economy that is transitioning away from fossil fuels,” said Maria Lettini, CEO of the U.S. Sustainable Investment Forum?

Quickly to follow was the release of the Canadian Climate Disclosures Draft for feedback and consultation. There is notable points in the drafts including:

1. Both CSDS 1 and 2 would become effective for the reporting period starting January 1, 2025. This means companies should/would be starting to report out in 2027. There are some differences for CSDS 1 and 2, and we will see what the final reporting timelines look like this fall.
2. Transition relief for disclosure of Scope 3 emissions for companies to ensure that companies have the time to properly prepare and measure Scope 3 emissions alongside their financial disclosures for a 2 year period over the 1 year proposed by ISSB.
3. Intentional and meaningful engagement with Indigenous Peoples which was laid out in the statement of intent including the statement below, Indigenous-only roundtables, and a co-development process of the strategic plan with Indigenous Peoples' participation. “The rights of First Nation, Métis and Inuit Peoples are inherent and specific in Canada. In collaboration with Indigenous Peoples, the CSSB will explore how best to address these rights in the context of CSDSs. All interested and affected parties are impacted when Indigenous Peoples’ rights are not respected. Therefore, the Board will consider this in the development of its multi-year strategic plan.” This is the first time an Indigenous lens has so significantly been included and highlighted in a sustainability setting body. Thank you for highlighting this very important point Raylene Whitford

The disclosures can be found in full below:

CSDS 1 - General Requirements for Disclosure of Sustainability-related Financial Information

CSDS 2 - Climate-related Disclosures

Of course this all follows suit from Europe where CSRD disclosure regulations were finalized in 2023, and will see major reporting from approximately 50,000 entities over the next two years. We have seen a lot of climate related legislation in Europe and should be looking to the region to learn from their experience, and ultimately how it could (and will) affect companies of all sizes and Canadian companies.

The CSRD disclosures can be found in full below:

CSRD - Corporate Sustainability Reporting

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Ultimately disclosure reporting will need to go beyond just a check box exercise as disclosure at this scale will require companies to reevaluate and align strategy, governance, operations, and data collection with its disclosure focus or rather with its requirement to commit to ESG. No matter where you are there are very consistent areas of focus for disclosures around the world including major areas such as:

• Governance;
• Business Strategy;
• Climate-related risks and opportunities;
• Business model and value chain;
• Strategy and decision-making;
• Financial position, financial performance and cash flows;
• Climate resilience;
• and Climate-related metrics and targets.

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So why does this matter to every business?

Disclosure regulation, spanning from the US to Canada and Europe, doesn't exclusively affect large public corporations and financial institutions. There is a significant trickle down effect, touching private enterprises across the board. Whether your business is entwined through supply chains or financial affiliations with regulated entities, the principles of ESG (Environmental, Social, and Governance) are likely to become increasingly pertinent to your operations. As investors, consumers, multinational corporations, and regulatory bodies heighten their focus on ESG matters, these considerations will play a more critical role in strategic and operational decision-making.

The current trajectory of regulatory evolution suggests that it's only a matter of time before ESG disclosures become a universal mandate, potentially encompassing every incorporated entity. In anticipation of this evolving landscape, it's prudent for businesses of all sizes to begin integrating ESG considerations into their core strategies. A proactive approach not only positions companies to navigate future regulatory requirements smoothly but also aligns them with the growing expectations of their stakeholders.

We believe businesses should start by running an internal assessment of their current ESG impacts and disclosures, irrespective of their current regulatory obligations. This foundational step will not only prepare them for potential future regulations but also highlight areas for improvement that could enhance their attractiveness to investors, partners, and customers in an increasingly ESG-focused world. If you are stuck where to start the ESG Centre for Excellence has a myriad of resources and courses.

The Weather

How the world is becoming uninsurable because of climate change - Financial Times

Wild Weather Ahead - After Hottest Year on Record - CNET

UN weather agency issues 'red alert' on climate change after record heat, ice-melt increases in 2023 - Toronto Star

Europe is not ready for the new climate extremes - AP News

The environmental toll of the Gaza-Isreal War - The Guardian

What We are Reading

IBM Study - Beyond the Check Box

Higher Ground - Alison Taylor

Accelerating Corporate Climate Finance through Carbon Markets - We Mean Business Coalition

The Paradox of Growing as a Values- Driven Company - HBR

Lululemon relying on fossil fuel-linked PR firm as it faces greenwashing allegations - Narwhal

Havas Agencies Could Be Stripped of B Corp Certification Due to Shell Account Win - Ad Week

Sage words from Bill McKibben

Google commits $35 Million to Carbon Removal Credits over the next 12 Months - ESG Today

Fury after Exxon chief says public to blame for climate failures - The Guardian

TikTok’s anti-overconsumption movement is a wake-up call for brands - Vogue

Ikea Ingka groups talks about its circularity measures - Sustainability Mag

Unilever threatens to quit trade associations that block climate policy - Green Biz

UN General Assembly Adopts Resolution on AI

Listen Up

We are launching something special in May to highlight the journeys of changemakers across our ecosystems, celebrating their success but also highlighting the challenges and roadblocks they all encounter in bringing their visions to scale. Do you know a changemaker in the world of business that needs to be highlighted? Tag them below!