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How to get the ball rolling on TCFD

By Ben Mayer
6th June 2022

We are witnessing a huge global shift in corporate climate disclosure policy.

As of 6th April UK businesses are now required by law to include climate risks and opportunities in their regulatory reporting, aligned with the Task Force for Climate Related Financial Disclosures (TCFD). 

CEOs and Board members need to understand that TCFD is not simply a disclosure framework or box-ticking exercise to compile the minimum information required for the Annual Report. This is an opportunity to use climate scenario analysis to fine tune, pivot or even reset business strategy for economic success in the context of climate change and the transition to net zero.

What are the TCFD recommendations?

The Taskforce was established by the Financial Stability Board after the global financial crisis with an objective to promote international financial stability and better understand the impact of the global climate on business and the financial system.

The purpose of the TCFD recommendations is to improve financial disclosure on climate-related risk and opportunities so investors can make better-informed decisions on where to deploy their capital as we transition to a low-carbon economy.

The recommendations framework consists of four pillars; governance, strategy, risk management and metrics & targets. 

 

What factors are key to success in your first year of adoption and reporting?

Through our work with clients we’ve observed some common pain points when tackling climate risk disclosure. Here are our top tips to ease your transition to mandated reporting.

 

1. Executive Sponsorship

This is the top tip we can give you: bring senior leadership on board from the outset and keep them at the heart of your programme. 

Beyond this executive sponsor to embed TCFD effectively you will need a diverse group of stakeholders who are sufficiently senior and experienced in the risks across your business’s value chain. Companies who have engaged several senior stakeholders can build consensus of the key risks and opportunities, and their relative weightings, together and mitigate the risk of the outputs being disputed and deliberated over when it comes time to include in an annual report. 

Start with the end in mind and which stakeholders need to be engaged when. Again, having senior executive sponsorship will help command the right level of participation. We recommend involving them in signing off the programme plan, or proposal methodology if you’re seeking external support. 

 

2. Core programme governance 

It is crucial to prioritise setting up an internal programme governance infrastructure for continuity as your organisation progresses through the different phases of TCFD and reporting. 

To respond to increased auditor scrutiny it’s important to have the right system for documenting key decisions made, inputs, assumptions and changes over time. Auditors may ask how, where and why decisions were made, especially around time horizons, scenario selection and models used. Shifts in organisational structure and employee turnover could mean a different team is delivering different stages of the project so having a central system to make this information available will help turnaround auditor questions efficiently. 

 

3. Realistic reporting timelines

We all know that annual reporting can be strenuous, there’s many different stakeholders having to digest and scrutinise lots of information –  and with TCFD disclosure a lot of this information will be brand new. Factor the need to engage and educate senior executives into your timeframes as well as extra time for additional questions from auditors and the time needed to respond.

There’s no rushing TCFD, getting into a position to disclose qualitative scenario analysis typically takes up to 9 months. If your company is captured by legislation, which will cover your next full financial year, you need to get going now. 

 

In summary

  • Bring senior leadership on board from the outset and keep them at the heart of your programme
  • Have the right processes and systems in place to record decisions. 
  • Define how TCFD will impact current annual reporting timelines and start as soon as you can

 

We are here to help

Our team is helping large, complex organisations like Britvic, Vodafone, Senior Plc and DLA Piper embed TCFD disclosures into their wider strategy, planning and reporting. Our programmes are designed to suit companies wherever they are on their journey, let us take you one step closer to climate resilience. *contact us page*

 

 Further resources for sustainability, risk and compliance professionals