Three things climate reporting will never do

Australian businesses are about to face the most significant change in corporate reporting in decades. Corporate Australia is fixated on the incoming mandatory climate disclosures and how to be compliant. Corporate reporting is designed to increase transparency and accountability, but the act of reporting alone will not make your business any more resilient to climate change. There are some things mandatory disclosures just will not achieve.

Here’s three things reporting will never do:

1. Actually manage the risks that could be about to hit your business, hard.

Reporting alone will never reduce your emissions. Reporting will never remove risks throughout your supply chain. Reporting will not reduce your reliance on nature. What reporting does is help businesses understand their current state of play and provide an opportunity to analyse internal commitments against progress and external expectations to understand the sufficiency of action.

2. Manage data

The standards require you to have access to data, but do not provide you with the ways and wherefores for managing it. Having good quality data is key. You must have good systems and governance to manage appropriately. Consider investing in a technology platform to help you manage and use data effectively. Good data hygiene makes reporting and validation more transparent and accurate.

3. Build capability

Too many (read: most) companies in Australia are inadequately resourced when it comes to sustainability, both in terms of head count and the knowledge that exists in those heads. The days of sustainability being done off the side of someone’s desk is over. Companies need people to manage the increased workload in mandatory disclosures, but also need resourcing to deliver actions, so you have something to report. Consider honestly what resourcing you need (whether inhouse or outsourced) to both undertake the work and to develop adequate disclosures.

But mandatory reporting does achieve some important outcomes. Here’s three things reporting does do:

1. Compel board and executive level engagement on sustainability

How much engagement, however, will depend on the board. The more informed the board and executive are, the easier it will be for a company to remain compliant, manage risks and identify business opportunities. Leaders will need to challenge their business in the right way and support complex decision-making; they must upskill and continue to learn to do this.

2. Provide external stakeholders with information

Companies are likely to happily share some of the required information with stakeholders. Other information, well, perhaps less so. For example, the standards require companies to disclose whether the board have received training or have capability in this area. Disclosing that they have not and/or do not is a compliant answer, but do you really want to be highlighting limitations so publicly? How might this affect your business reputation and relationships over time?

3. Provide your business with a robust framework to understand the work that needs to be undertaken and how to prioritise action over time

Standards are a good place to understand basic requirements and to provide a structure for your approach. In taking this approach, you can better understand system-level risk, how it applies to your business and how you can use it to unearth opportunities to stabilise and grow your business across the short and longer terms. But standards frameworks will not tell you what your company specifically needs to do to achieve progress. Getting disclosure right means getting the actions that inform those disclosures right too.

So what’s the takeaway?

Mandatory disclosures present a significant uplift in focus for a particular business area, carrying the potential to deliver commercial benefits. Reporting is also time-intensive and painstaking. Managing this onerous responsibility while deriving commercial benefits is only possible when you understand what reporting will and will not do. Make disclosures work for you.

Image credit: iStock.com/VectorMine