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How EY can help
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Supporting organizations with physical and transition risks associated with climate change, and assisting them with market and regulatory changes.
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ISSB preparedness
For the first time, this year’s research looked at companies’ readiness for meeting the requirements for IFRS S2 Climate-related Disclosures. These findings stood out:
- In relation to governance, companies are adopting the increased ISSB disclosure requirement and disclosing which skills and competencies are required at board level to oversee climate-related strategies.
- Looking at strategy, companies are moving toward additional disclosure around scenarios that include detailed analysis and its inputs. In addition, companies have started to include value chain emission reduction targets within their overall reduction targets.
- From a metrics and targets perspective, companies are moving toward disclosing their Scope 3 emissions for the most material categories.
Leading companies are typically looking at how climate could impact their business strategy, rather than using reporting frameworks solely for disclosure. Climate issues are becoming core to top-line business strategy, and companies that have understood the links between climate risk and their business growth strategy are well positioned to address the new requirements of IFRS S2. Examples of pacesetter companies that are using climate disclosures to drive strategy can be found in the full report (pdf).
Transition planning
While greater engagement with sustainability disclosures is still needed, companies are now faced with a stark challenge: to design and implement an effective transition plan that takes into account real-world scenarios and commits real resource to the effort.
Yet the Barometer shows that only 53% of the surveyed companies are providing disclosure against some kind of transition plan. This figure should be significantly higher since a well-structured transition strategy helps companies to stay in line with, or ahead of relevant, policy goals for the organization.