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14 June 2018 • Articles

The CEO Magazine

The cost of climate change


Directors ESG

No-one can deny that the seasons are changing, but the impact climate change has on business also needs to be acknowledged and factored into the C-suite's decision-making. The Taskforce on Climate-related Financial Disclosures has galvanised debate on how businesses should measure and disclose their risks.

The TCFD is now widely accepted as a leading framework CEOs can use to report the potential positive and negative financial impacts their activities may cause to the environment.

While the taskforce is a step in the right direction, according to ratings agency MSCI ESG Research, only 60 per cent of companies report Scope 2 greenhouse gas emissions, which are indirect emossions from the generation of the electricity purchased and consumed by an organisation. So there's still a long way to go.

Michael Chandler, Governance Director of corporate governance consultancy Morrow Sodali, says the CEO needs to be involved in the stakeholder engagement process the company conducts when assessing the materiality of environmental risks and opportunities.

"Where most CEOs go wrong is by looking at how other companies report these risks, which is not a very good strategy. In the first instance, they need to do a thorough assessment of the company's individual risks, which requires considerable input from shareholders and key stakeholders such as customers, suppliers and environmental groups," Chandler commented.

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