Climate impact is a business issue

Climate change reporting is set to be one of the biggest challenges to confront finance directors

Annual reports and accounts are a logical place for firms to report on their contribution towards combating climate change. The question for financial directors is what climate change reporting will look like and how onerous it will be to achieve.

In a discussion paper, Improving Climate Change Reporting, accountancy body ACCA has suggested that companies look at climate change across a range of measures. At the top level, corporates should formulate and articulate a policy explaining the general principles and framework they will work to.

Next, they should address the challenge of reporting product impacts. Those whose products give rise to significant carbon emissions need to report and allocate responsibility for them more clearly.

In particular, the report suggests communicating climate change as a key business issue, explaining its impact on the organisation. The discussion paper challenges business to set and communicate targets that are “credible and in line with peer company efforts”. Performance metrics must be considered, for example, manufacturers should use an emissions-per-product figure as a comparative metric.

Finally, the work in this area needs verification. Two standards already exist on climate change assurance, but as the importance of climate change disclosures increases, a reasonable level of assurance will be needed for both data and printed information. Firms will have to factor this into budgeting and planning processes, and stakeholders will need to be educated on the nature of the assurance being given.

The financial markets should be able to assess risks to long-term shareholder value and so allocate resources in ways that mitigate the threats of global climate change.

It seems inevitable that financial directors ­ whether they like it or not ­ will be expected to play a major part in this work and will, therefore, once again be in the vanguard of fundamental changes in reporting corporate performance.

Peter Williams is a chartered accountant and freelance journalist.