As highlighted in the Sustainability and business — the call to action; build back better report, we started on a programme of thought leadership to explore accountancy and sustainability. This is part of a series of briefs exploring the topic of sustainability, business and the finance professional’s key role. These briefs will help organisations consider the sustainability issues, how to integrate them into their long-term decision-making, and how to incorporate these issues into internal and external reporting.
This paper is designed as a summary of a specific standard or framework. It is written from the management accounting perspective. As a finance professional, you are likely to encounter one or many of the sustainability frameworks and standards. It is a crowded and fragmented landscape, with slightly different terms, inconsistent language and various measures between the numerous methodologies. Adding to the confusion is whether adoption is voluntary or mandatory, and that some organisations work with combinations of standards and frameworks at the same time. Finally, the approaches to reporting also differ. They range from annual reports, integrated reports, sections on an organisation’s website aimed at a specific audience or a stand-alone sustainability report.
Fortunately, there are several initiatives underway to address this fragmented accounting and reporting landscape. They build a coherent global approach to corporate reporting that encompasses financial and non-financial reporting.1
A framework or a set of standards? The difference
A framework is a set of principles-based guidance for how information can be structured and prepared, and which broad topics should be covered. A set of standards are specific, replicable and detailed requirements for what should be reported for each topic. They are rules-based requirements.
Background
The Financial Stability Board (FSB) created the Task Force on Climate-related Financial Disclosures (TCFD) in 2015. This came after the G20 finance ministers and central bank governors requested that the FSB consider the risks inherent in climate change. In 2017, the TCFD released climate-related financial disclosure recommendations to address the need for reliable corporate disclosure of climate-related information. The TCFD has also published implementation guidance for its recommendations, along with annual status reports, supporting guidance on scenario analysis and risk management, and other materials.
In October 2021, the TCFD launched a new report, Guidance on Metrics, Targets, and Transition Plans (October 2021), along with an update of the implementation guidance Annex: Implementing the Recommendations of the Task Force on Climate-related Financial Disclosures (2021).2
Key changes to the implementation guidance for all sectors include:
The disclosure of Scope 1 and Scope 2 GHG emissions to be made independent of an assessment of materiality. The disclosure of Scope 3 emissions remains subject to materiality, although organisations are encouraged to disclose such emissions.
Disclosures about actual impacts and potential impacts, as well as strategic plans for transitioning to a low-carbon economy, have been more explicitly addressed.
A new appendix on cross-industry climate related metric categorises, encompassing the Guidance on Metrics, has been added to provide additional information and rationale for inclusion.
