Creating Value in a Climate Emergency: Datamaran at Climate Week NYC
30 September 2019 - By Marjella Lecourt-Alma and Stathis Gould
There are times in your career when it really hits home that what you’re doing actually counts; that all the hard work, the networking, the strategizing and the traveling is really worthwhile. The moment that we arrived at Climate Week NYC – emerging from the bustle of Fifth Avenue into the International Federation of Accountants (IFAC) building for the event Creating Value in a Climate Emergency – definitely qualified as one of those.
It seems we’ve been talking about Climate Week almost as long as we’ve been talking about climate change itself. So from that point of view, it was great to actually be here. It’s the immediate sensation of rubbing shoulders with likeminded people from huge organizations across the world. People who understand what we do. That’s not to say that we were there to preach to the converted; at one of the world’s biggest sustainability gatherings, we have the platform and the profile to share key environmental issues with the rest of the world too.
Hosted at the International Federation of Accountants (IFAC) and co-organized with the Association of Chartered Certified Accountants (ACCA), Marjella was joined for the discussion by Jimmy Greer, Head of Sustainability at the ACCA; Patrick Temple-West, Journalist at the Financial Times; Kristen Sullivan, Partner at Deloitte; Chris Power, Senior Manager at Salesforce; and Rodney Irwin, Managing Director for the World Business Council for Sustainable Development's (WBCSD) Redefining Value and Education program. The objective: to discuss the part the accountancy industry can play in accelerating a just and prosperous low-carbon economy.
Accountancy can lead the way on disclosure
Rodney Irwin from WBCSD immediately captured the mood of the room with the assertion that: “The current level of disclosure is broken.” In assessing the reporting landscape today, and asking whether the reporting community treats the climate emergency in the same way as other issues, the answer was a resounding no. Plenty to work with, then.
Over the last year, we have seen an increase in regulation on non-financial reporting. July’s US congressional hearing on ESG issues, the first of its kind in the United States, was a case in point. But, as Irwin continued, more needs to be done. “We are still in the world of hoping that leadership and courage will make a change,” he added. “The voluntary community can only take it so far. The accounting profession needs to step up and make it mandatory.” Patrick Temple-West from the Financial Times concurred that “the accounting industry can move the standards in terms of disclosures.”
This was the perfect time to outline the value that platforms like Datamaran can bring to the process of monitoring and disclosure. The means exist to monitor not only environmental issues, but also companies’ attitudes towards them. In Marjella’s words: “With new technologies, we are now able to understand the body language of the companies: are they greenwashing? Are they consistent?”
Indeed, Datamaran was founded on the belief that processes and controls are lacking. A story can have a start and an ending, but it needs the middle to tie it all together. Often there is commitment at the top of an organization and reporting at the bottom, but what is missing is what happens in between. Commitment and reporting are nothing without practice. Organizations need to be clear on how they will operationalize ESG, how they will track the issues and ensure separate business units will work together. This is where commitments and outputs can be turned into real change.
Kristen Sullivan from Deloitte felt “there is a tremendous opportunity for the accounting profession to step up.” As part of this, we need to decide how value is measured and how it is being delivered. The purpose of disclosure is to meet the need for information, which is growing by the day as stakeholders, particularly investors, demand more detailed, meaningful and useful data. The reliance and need for ESG information is increasing. ESG considerations therefore need to be institutionalized into business and organizations, which represents a call to action to the profession.
Initiating board-level conversation
There’s currently a huge focus on ESG issues, and corporates are trying to understand how to communicate these issues to the powers that be. It’s with this in mind that Salesforce has signed a letter of commitment to the Task Force on Climate-Related Financial Disclosure (TCFD). Chris Power talked about Salesforce’s customer-centricity, through which they can clearly see that their “customers care about ESG.” The next challenge, as for many organizations, is translating that interest into a subject that the board want to talk about. For Salesforce, “the TCFD was the starting point to the board-level conversation.”
Indeed, Salesforce went from having very little on ESG in their 10k (annual cumulative financial statement required by the Securities and Exchange Commission) to having a whole section two years later – a clear indication of the value of voluntary initiatives in improving corporate disclosure practices.
The perennial challenge is in determining what is financially material. Where should stakeholders be looking for this information? Many companies don’t know where to place non-financial issues in an annual report. Just calling a report an integrated report does not make it so. Very rarely are a company’s various reports completely aligned.
There are ways of engaging the board and speaking in a language they understand. “Climate change” or “climate emergency,” for example, will immediately be perceived as a reporting issue or a problem. “Climate risk” immediately grabs the attention of board members and CEOs, as risks keep them up at night. “Climate action” is the practical part; the operationalization. Datamaran enables this process; it’s the facilitator that takes organizations from reporting to action. Our role is to be there to provide strategic insights on material issues to boards and management, often through the sustainability function, ensuring ESG is part of the risk management process.
Climate emergency: where risk meets opportunity
Rodney Irwin summed up the level of urgency surrounding ESG issues right now: “The journey needs to be a lot faster; we are moving too slow.” Companies need to start putting ESG issues into their core processes. After all, ESG is part of everything we do as human beings – whether relating to our impact on our environment or on other people – so why should it be viewed as a separate entity with its own set of rules? Marjella’s view was that companies should not silo ESG and sustainability, as it will not get the mainstream attention or the connection to strategy that it needs. Accountancy, it was agreed, can be central in changing that. Accountancy is all about understanding and envisioning value; why should that not apply to ESG?
The accountancy industry should be seeking ways of growing markets and using ESG as an opportunity. We’ve already seen, for example, that many organizations discuss climate change predominantly as a risk rather than an opportunity. We need to find ways of taking the integrated thinking and turning it into doing, focusing on the right processes. As Kristen Sullivan put it, “we need to move away from disclosure for disclosure’s sake.” There has to be a purpose to it. The data has to be a catalyst for meaningful action, otherwise it’s little more than decoration. Again, Datamaran can be the facilitator.
It was great to be part of Datamaran’s first event at this year’s Climate Week and there are already signs that those in attendance are determined to work together to address the climate emergency. Thanks to our co-organizers and our fellow speakers for a fascinating discussion.
TCFD: An update on corporate disclosure following the second status report
In June 2019, the TCFD released its second status report, indicating increased adoption of its recommendations.
To coincide with its release, we are updating our previous analysis into the extent to which this adoption has been reflected in supporters’ corporate disclosure.
The analysis shows that, whether they’re supporters or non-supporters of the TCFD, companies are now talking about climate change more than ever before. More in detail, climate change is predominantly discussed through a risk rather than an opportunity lense – with 54% of FinServ TCFD supporters referring to the topic in relation to risk and 20% in relation to opportunity in 2018.
To read the full report, please fill in the form on the right.