TCFD Reporting – curse or blessing?

6 Jul 2021 by Mike Tisdall

Climate change TCFD

As if there isn’t already enough change pressure on annual reporting, now TCFD reporting has become another element to factor in. While not mandatory until reporting on the 2022 year, many organisations are starting now.

Seems this is the year for climate change focus. It’s the topic du jour, accelerated by the Climate Change Commission’s June sobering recommendations.

It’s well accepted globally that TCFD is a sound framework. But just as we were getting used to the idea of Integrated Reporting, along comes this to confuse us further. But should it? Climate affecting activities should already be part of your holistic sustainability strategy anyway, so TCFD helpfully gives some commonality and comparable structure and substance to that.

There’s already a broad range of approaches emerging as to how companies are responding in their annual reports. So let’s have a look at some of the options we are seeing.

The simple solution

This may be straightforward, but it’s by no means the ideal solution: just produce a standalone TCFD Report, and structure it literally as answering each of the eleven areas of disclosure within the four thematic areas of governance, strategy, risk management and metrics/targets.

Why not ideal? It repeats material that is no doubt partly in the sustainability or ESG section of your report already. And it separates it from the rest of your story. But it may be the best way to get you on the bus.

Just add a section to your existing report structure

Similar to the standalone report downsides, inserting a TCFD section would likely entail a lot of repetition. But worse, it’s just a siloed tack-on and doesn’t convey a cohesive story. Worse still, if you take the literal approach of answering the eleven disclosure questions, you risk overwhelming your story with compliance stuff.

Add a cross-reference table

This option behoves you to deal with the eleven areas as part of your ESG/Sustainability narrative, and then merely list the TCFD questions in a table and provide page cross-references.

Get smarter

If you’re already well down the track on integrated reporting, that framework plays nicely with TCFD and can help you avoid repetition. They speak the same language and have the same spirit and intent. They both have a future focus, seek to address systemic risk, look for interdependencies and impact on value creation over time. So TCFD content can become the climate component of your sustainability messaging and slot seamlessly into your integrated report.

When we look at the issues that commonly rise to the top right quartile in virtually every materiality matrix that we pick up, we strike climate or energy and talent/people as two key ‘issues’ virtually every single time. So TCFD is a tool which has arrived to help us get to grips one of these most material of issues, rather than merely another compliance burden. Perhaps we should embrace it with gratitude.

There are high levels of alignment between the TCFD and Integrated frameworks, and even GRI coalesces well. So integrating your TCFD data with your reporting story not only provides a clearer and more effectively cohesive narrative, it also eliminates repetition and rescues you from yet another addition to your burgeoning page count.

A global group consisting of the Climate Disclosure Standards Board (CDSB), the Global Reporting Initiative (GRI), the International Integrated Reporting Council (IIRC) and the Sustainability Accounting Standards Board (SASB) – an alphabet soup if ever there was one – got together and nutted out the technical TCFD mapping between all their frameworks so that you don’t have to.

Want more? This is what they came up with.

It’s early days. New Zealand is the first country in the world to mandate TCFD reporting. Like all things new, companies will try various methods and solutions, and over the next few years we’ll all learn from each other and a pattern will emerge of what best practice looks like.