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New proposals for climate-related disclosure standards by ISSB – This is what you need to know
International investors increasingly demand information on environmental, social and governmental (ESG) matters. Transparency around sustainability and climate-related affairs gains relevance today more than ever. According to the IFRS (International Financial Reporting Standards) Foundation, the current regulations do not ensure that climate-relevant information is disclosed to a reasonable extent, but still encourages an inconsistent and selective application of voluntary standards.
In November 2021 at COP26 in Glasgow, the formation of the International Sustainability Standards Board (ISSB) was announced. The ISSB is an independent private-sector body that operates under the oversight of the IFRS Foundation. Its aim is to develop a globally applicable and comprehensive set of sustainability disclosure standards that works for major economies as well as for emerging markets.
Therefore, the ISSB has proposed two new standards, in order to create further consistency, comparability and reliability across climate disclosure. The standards require companies to reveal relevant information about its significant sustainability-related risks and opportunities, necessary for investors to assess a company’s enterprise value. The G7 welcomes the establishment of the International Sustainability Standards Board and calls on all relevant stakeholders to participate in the ongoing consultation on the proposed standards. In order to create a practical, flexible and proportionate disclosure baseline, that is ultimately suitable for small- and medium-size enterprises, the G7 invites other reporting initiatives to cooperate in the process of elaborating the baseline.
Two ISSB proposals for sustainable-related disclosure
Based on the work of existing investor-focused reporting initiatives – including the Climate Disclosure Standards Board, the Task Force on Climate Related Financial Disclosures (TCFD) and the World Economic Forum´s Stakeholder Capitalism Metrics – the ISSB is working towards the incorporation of the global baseline into legal requirements, with the aim to become the global standards-setter for sustainability disclosure for the financial markets.
Both of the new standards are mainly built upon the recommendations of TCFD. While one of the proposals sets out general sustainability-related disclosure requirements, the other specifies on climate-related disclosure. Learn more about the climate-related disclosure requirements in the following.
What is the goal of the ISSB Climate-related Disclosure Standards?
The objective of „IFRS S2 Climate-related Disclosures“ is to require a company to disclose information about its exposure to significant climate-related risks and opportunities. This enables investors to access relevant information in order to make climate-compatible and sustainable financial decisions. The goal is to assess the effects of significant climate-related risks and opportunities and to understand how a company’s use of resources and activities support managing its risks as well as to evaluate the options to adapt planning, business model and operations to significant climate-related risks and opportunities. Companies are required to disclose information along the dimensions Governance, Strategy, Risk Management and Metrics & Targets. Find more detailed information on the disclosure regulations along those dimensions in the following section.
- Governance body (e.g. board, committee, etc.) with oversight of climate-related risks and opportunities
- Skills and strategies that ensure that climate-related risks and opportunities are being tackled
- Information on the extent to which climate-related opportunities and risks are being considered in the company’s decisions on major transactions and risk management policies
- Effects of climate-related risks on business model, strategy and cash flows
- Climate resilience and flexibility (in terms of transitioning) of strategy and business model
3. RISK MANAGEMENT
- Identification and assessment of climate-related risks and opportunities (Data sources and covered scopes of operations)
- Prioritization of climate-related risks relative to other types of risks within the company
- Processes in comparison to prior reporting periods
4. METRICS & TARGETS
- Information relevant to the cross-industry metric categories, in order to create transparency around the assessment strategy of its performance
- Progress towards the targets it has set (e.g. mitigation or adaptation to climate-related risks or maximizing climate-related opportunities)
How do companies prepare for the ISSB requirements?
Since enterprises will be required to disclose climate-related information along these four dimensions, they will face the challenge to collect climate-relevant data and analyze their climate performance. How do companies prepare for that?
Today, many companies are already using data-driven software tools, which helps them to analyze their climate performance holistically. The Climate Performance Assessment offers a fast and structured data analysis aligned with internationally recognized standards. It enables companies to holistically analyze their climate performance along the four dimensions Governance, Strategy, Metrics & Targets and Transparency. The Climate Performance Assessment is fit to meet the ISSB’s climate-related disclosure requirements as it covers the key disclosure information.
You want to know more? Download our new Whitepaper to find more details on the upcoming ISSB standards and how to prepare for them here.
Climate Report THE CLIMATE CHOICE – Our Climate Performance 2021
In 2021, many companies seized the opportunity of climate transformation, set climate goals and tackled them with concrete decarbonization measures. THE CLIMATE CHOICE supports companies in becoming a CLIMATE Champion, reducing emissions along the entire supply chain and thus improving their climate performance.
Transparent reporting plays a major role in this and is a crucial part of corporate responsibility. It is important to us, even as a startup, to reflect critically our own climate performance and to continuously throve to improve it.
SUSTAINABILITY GOALS AND MISSION
The mission of THE CLIMATE CHOICE is to make climate transformation accessible to every company in a simple and straightforward way. Through our platform, we aim to enable companies to reduce around 50% of supply chain emissions by 2030. Additionally, we also focus on contributing to the 1.5 °C target through our own corporate activities. All our corporate and business actions underline this goal in order to transform the economy and create a regenerative future.
OUR CLIMATE PERFORMANCE ALONG 5 DIMENSIONS – A STATUS QUO ANALYSIS
Along the 5 dimensions of our CLIMATE Readiness Check– our industry-independent climate rating, we have analyzed our climate performance for 2021. A comprehensive analysis goes beyond simply measuring the carbon footprint and includes the intensity and speed with which climate targets are implemented through concrete measures and effective climate management. This enables us to track our corporate action and identify tangible strengths and potentials, which we can use in the future as a basis for climate-relevant decisions.
1. Climate Impact Model
With our CLIMATE Readiness Check along with the CLIMATE Data Platform, we support companies in analyzing their own climate performance as well as the climate impact of their suppliers. Up to 90% of a company’s emissions occur within the supply chain through purchased products or services. Hence, we help strengthen collaboration between companies and suppliers and make procurement practices climate-compatible. To promote cross-disciplinary exchange, we organize regular online CHOICE events in which experts speak on relevant topics related to supply chain decarbonization and use our CLIMATE magazine as a medium for knowledge transfer. The annual CLIMATE Transformation Summit, which has already been organized twice since 2020, provides a stage for a wide range of debates and knowledge exchanges. We organize the Summit to strengthen cross-industry collaboration and enable knowledge sharing. In this way, our business model contributes directly to the UN Sustainable Development Goals 13 “Climate Action” and 17 “Partnerships to achieve the Goals”. Moreover, as a company we are part of B.A.U.M. e.V., a network for sustainable business, and the “Leaders for Climate Action” initiative. This helps us to keep on critically examining our own business model and to multiply the impact of our own measures through cooperative exchange.
2. Climate Leadership
A company’s climate management is relevant in order to achieve climate targets and to act in accordance with the requirements set by government bodies and meet customer expectations . We benefit from clear responsibilities- Lara Obst as Chief Climate Officer and Theresa Wenning as Climate Performance Analyst. They are specifically responsible for identifying and managing climate-related issues. This enables us to analyze and transparently disclose climate-related opportunities and risks, particularly with regards to financial and strategic impacts.
3. Climate Performance
The Climate Impact dimension focuses on key indicators and targets for corporate climate transformation in order to analyze the impact of business activities on the environment and society. The most important key figure here is the company’s carbon footprint, i.e. the calculated CO2 emissions balance.
Our CO2 emissions for 2021 total 4.05 metric tons. Last year, our emissions were 7.7 tons. The difference is explained partly by the use of a different software tool and partly by the use of average values last year. Our Corporate Carbon Footprint is currently still being validated by our external partner myclimate. This includes emissions from Scope 1-3, i.e. not only the emissions from our own corporate activities, but also those generated along the entire supply chain.
4. Climate Transparency
Through regular exchange with our Advisory Board and networks (B.A.U.M. e.v. and BNW), we involve external stakeholders in setting climate-related strategies, policies and performance improvements, thus creating effective stakeholder management. In weekly demo meetings, we also ensure internal communication of climate-related topics within the team. We are currently working with the entire team to develop a Code of Conduct that covers responsible behavior with regards to human and labor rights, as well as guidelines for adherence to sustainable actions within the company.
5. Climate Actions
We use 100% carbon neutral web hosting and cloud services for our platform. In addition, our software is hosted according to the highest security standards on a 100% wind-powered data center in Germany and is DSGVO and BDSG compliant, and ISO/IEC 27001 certified. We also use GLS, a sustainable banking provider that finances sustainable businesses and supports projects such as setting up of wind turbines and organic farming, among others. By using refurbished hardware, all employees contribute to lower emissions in their daily work. In addition, together with MOBIKO, the company supports low-carbon mobility through flexible mobility budgets for employees.
Even during the fully online CLIMATE Transformation Summit in June 2021, which connected around 600 participants with climate experts and solution providers, emissions were significantly lesser as compared to an offline event. Together with our partner Fokus Zukunft GmbH & Co. KG, we calculated 4t of CO2 emissions, which included the use of Zoom, YouTube broadcast, Slack and Gather-Town as well as the travel of two team members by train. Through a gold standard wind power project in Turkey, we offset twice the emissions created.
THE CLIMATE TRANSFORMATION IN 2022
Implementing climate goals together – that’s the motto for the coming year 2022. Our learnings from the CLIMATE Readiness Check will help us to drive forward the climate transformation within our own company and to focus in the coming year on measures that have not been taken care of so far. We have recognized that it is not sufficient to simply offer a climate-friendly product or service. Every company must start internally, make the entire corporate DNA climate-friendly and prioritize sustainability as a core area of corporate management. The most important trend for this in the coming year will be supply chain decarbonization – climate relevant procurement decisions are what matter! Let’s make this happen in 2022 and seize the opportunities of climate transformation by working together through cross-industry cooperation to develop concrete measures and implement climate targets along the entire supply chain.
Do you also want to get a better overview of your company’s climate-related opportunities and risks? Then contact us and request information on the CLIMATE Readiness Check.