The countdown to net zero just got a whole lot faster.

As a species, scientists are not generally prone to hyperbole or emotive language. 

At least, not in their professional lives.

Which is why the recently released Synthesis Report from the Intergovernmental Panel on Climate Change ( IPCC ) caused such a media stir.

To say this was the point when climate scientists finally stopped being diplomatic on the state of the world and its atmosphere would be a significant understatement.

Given the country is already exposed to the extremes of climate change, Australia’s Climate Council probably summed it up best when it described the report as ‘our last best hope’ of restricting global warming to the critical 1.5-degree limit needed to maintain life as we know it.

Existential stuff.

But it was also a timely warning to those of us in the corporate world who are tasked with guiding our organisations towards net zero emissions.

Or, at the very least, reporting on their progress.

In short, the days of governments and society tolerating companies that are loose in reporting their environmental credentials - or worse, actively ‘greenwashing’ them - are officially over.

And I say ‘officially’ in its literal sense.

Businesses in the U.S. and the European Union are bracing for mandatory climate reporting rules that will require publicly traded corporations to fully disclose their greenhouse gas emissions. 

Indeed, the U.S. Securities and Exchange Commission will likely release its final set of rules in April of this year.

According to the Wall Street Journal, this could see the larger listed companies compelled to disclose emissions and other climate related data as early as January 2025.

Meanwhile, down in Australia, incoming Treasurer, Jim Chalmers published a paper in December 2022 foreshadowing mandatory climate disclosures, which included (but wasn’t limited to) the need for businesses to come clean on their plans to achieve net zero emissions. 

So, what’s the current state of play?

Right now, one in five companies globally report emissions in line with the FSB Task Force on Climate-related Financial Disclosures (TCFD) framework, which requires organisations to not only explain how they are managing climate risks, but also clearly define their path to reducing emissions.

Likewise, the Investor Group on Climate Change (IGCC) and the International Sustainability Standards Board (ISSB) expect their members to be unambiguous in reporting their climate risk profile, detailing their mitigation plans, and committing to net zero targets. 

And getting it wrong is becoming a commercial risk too big to ignore.

Once a term used by cynics to dismiss just about any corporate environmental initiative, ‘greenwashing’ has adopted a much more serious definition in the last few years.

These days, it’s an accusation levelled at any company that gets its emissions facts and figures wrong or makes a misleading disclosure – even inadvertently.

What’s more, it can have very real legal consequences.

Since 2006, there’s been a three-fold increase in legal filings relating to climate change cases. Mostly in the U.S., but instances are on the rise in Australia too, where claims made by fossil fuels companies have attracted close attention from the Australian Securities and Investments Commission ( ASIC ).

So, with everything else businesses have to juggle over a financial year, how do you avoid dropping the corporate sustainability reporting ball?

Sarah Barker , Minter Ellison Partner, and Head of Climate & Sustainability Risk Governance has done a great job of breaking it down to four key areas where businesses are commonly exposed.

[1] Greenhouse gas emissions reduction targets 

Your emissions reductions targets (and the pathway to achieving them) can be characterised as stating both present genuine intention and in relation to ‘future matters’, being deemed to be misleading if they’re not based on reasonable grounds. To manage your risk, you should consider your obligations and liability exposure in three steps. 

1. Setting and approving your targets 
2. Communicating those targets to the market via approved statements
3. Implementing your targets and overseeing their execution

[2] ‘Truth to label’

Where amorphous claims like ‘sustainable’, ‘green’ or ‘100% recycled’ were once broadly defensible, companies and financial institutions alike are now being held to tighter account by both regulators and the public. The bottom line? ‘Absolute’ environmental claims are dangerous and best avoided. 

[3] Enterprise branding

Consumer protection regulators and environmental activists are on the lookout for (and calling out) greenwashing in ad campaigns. As with labelling, it’s best to avoid sweeping environmental claims, or indeed anything that needs a disclaimer. 

[4] Annual report narrative and financial statements 

Across the board, financial statements must provide a true and fair view of an organisation’s financial position and performance. As for narrative disclosures regarding the TCFD, stress testing and scenario planning on a forward-looking basis are essential for robust risk management and business planning. Further, financial statements with regards to the Australian Accounting Standards Board (AASB), the Auditing and Assurance Standards Board guidance (AuASB) and the ISSB are on the horizon.

So, being able to respond to your carbon inventory is a vital component of your ability to successfully manage the climate transition risks.  

Access to high fidelity carbon inventories, the ability to manage diverse sources, the reliability and timeliness of data, robust predictive modelling and enough reliable data to train those models whilst ensuring it is compliant with numerous and changing carbon accounting standards is key to carbon inventory response planning.

Particularly if you’re to avoid under (or over) investment and effectively manage your climate transitions risks.

With all that in mind, a sound strategy for managing those risks rests on three foundations.  

[1] Evaluating a set of emissions.

To develop your targets and strategy for reaching them, you need to understand your current baseline emission performance, then identify opportunities for improvement. Basically, knowing where you are now, and where you want to go.

[2] Planning a reduction strategy.

This is about setting mid to long term net zero pathways which incorporate an aspirational target, and a boundary or scope for that target. It answers two key questions: what are our reduction opportunities and how do we reach them?

[3] Evaluating the reduction opportunity.

It’s essential to be clear and realistic about the achievability, quality, and impact of your measures. 

At Kinesis, we’ve embedded almost twenty years of IP and experience in public policy, ESG strategy, benchmarking and modelling techniques into our technology platform making your data better than just “good enough”, providing you a richer picture of the first, second and third order effects of your organisation.  

By connecting different streams of information in new ways, our platform enables organisations to develop fresh perspectives on what’s possible today and tomorrow, which in turn empowers you to convert your strategy into meaningful action that delivers practical, quantifiable human outcomes. 

After all, net zero is just a number if your pursuit of it doesn’t measurably improve people’s lives, communities, organisations and cities as a whole.

And this is how we should think about net-zero, not just getting to net-zero, but getting there together.

Over to you. Where is your organisation in it’s net-zero journey? How is it managing climate transition risks? Is your organisation taking green washing more seriously? 

Let me know your thoughts in the comments below.

#esg #netzero #climatetech #corporatesustainability