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Foryears,companieshavebeenfeeling
pressurefrominvestors,employees,
customersandotherstakeholdersto
rampuptheirenvironmental,socialand
governance(ESG)engagement.InKPMG’s
2022 CEOOutlooksurvey,morethan70%
ofCEOsreportedthattheywerebeing
heldpersonallyresponsibleformakingthe
changesthatwillbeneededintheyears
tocomebyreducingemissions,sourcing
renewableenergyandadoptingpolicies
thatmakecompaniesbettercorporate
citizens.
Inrecentweeks,theproposalbytheUS
SecuritiesandExchangeCommission
(SEC)forclimate-relateddisclosures
hasgarnereda lotofattentionfrom
thebusinesscommunity.Detailsof
theproposalwillcontinuetobepored
overasbusinessleadersassesshowto
operationalisea climatestrategythat
wouldmeetnewrequirements.
TheSEC’sproposalwouldrequirepublic
companiestoreportboththeirgreenhouse
gas(GHG)emissionsandtheimpact
ofclimateriskonfinancialstatements.
Thiswillmakeaccurate,climate-related
financialdisclosuresa baselineexpectation
forcompanies,undoubtedlydemanding
deeperESGengagementfrombusinesses
torapidlyadvancetheirclimatedisclosure
strategiesandtransitionplans.
Produced by EI Studios, the custom division of Economist Impact
CEOsseethisasfarmorethana reporting
andcomplianceexercise.It presents
businessleaderswitha uniqueopportunity
toinvest,engageandshowtheirinvestors,
employees,customersandother
stakeholdershowtheyareresponding to
theirdemandsbyreducingtheircarbon
footprintandaccountingforclimate risks.
Thecompaniesthatdothiseffectively will
gainanESGadvantagebybuilding trust
amongtheirstakeholders.Boardsshouldlookattheir
decarbonisationstrategiesnow.Aligning
withtheTaskForceonClimate-related
FinancialDisclosures(TCFD)framework,
uponwhichtheSEC’sproposalwas largely
modelled,is a goodfirststep.In2020 just
one-fifthofthetop 100 companies were
reportingclimatedisclosuresinline with
theTCFD.Manyboardsandleadershave,however,
beenpreparingandinvestingforthis
momentbybecomingmuchmore
knowledgeableaboutclimatechange.
C-suiteconfidenceontheissueappears to
behigh:74%ofcorporateleaders in a 2021
globalKPMGsurveysaidtheybelieve they
havetheclimateknowledgethatis needed
tomeetnewrequirements.Businessleaderswillalsoneeda strong
technologyandgovernanceapproach.Companies must evaluate their current
operations and their ability to track Scope
1 and 2 emissions (and material Scope 3
emissions), and any gaps in their climate
data. From there, they will need to identify
the people, processes and technology
necessary to create and execute a climate
risk strategy and transition plan. As this
roadmap takes shape, it will be essential for
companies to take an integrated approach,
embedding ESG into all of their operations.Companies will also need to develop a
strong data strategy that recognises that
carbon footprint data are not as easily
accessible as fi nancial data in an enterprise
resource planning (ERP) system. Climate
data can come from multiple sources, and
sometimes require complex calculations.
No one can be expected to get this exactly
right the fi rst time, which is why companies
will need to be nimble and prepared to
refi ne their work.In the end, with more transparency, strong
governance and a new imperative to get
things done, businesses that lean in and
eff ectively embed ESG into all of their
operations will be able to leverage this
watershed moment into a strong ESG
narrative that will set them apart from
competitors and build trust with their most
valuable stakeholders.ESG Is Everyone’s
Business
It’s all hands on deck for increasing ESG engagement, says
Rob Fisher, KPMG’s US ESG lead