Unlocking transparency with Onyen

Amidst the growing concern over climate change, companies find themselves navigating treacherous waters of reputation and finance.

The lack of comprehensive climate-related information following the Task Force on Climate-related Financial Disclosures (TCFD) recommendations can result in reputational and financial risks for companies. This may include decreased investor confidence, higher borrowing costs, and increased regulatory scrutiny. In order to mitigate these risks, companies need to develop accurate and comprehensive TCFD reports. However, several challenges can hinder this process.

Lack of data: Companies may not have the necessary information to produce accurate TCFD disclosures, leading to incomplete or unreliable reports. This can negatively impact stakeholder trust and damage the company's reputation.

Complexity of TCFD recommendations: The TCFD recommendations are extensive, covering various topics, including governance, risk management, and scenario analysis. Companies may struggle to understand and implement these recommendations, especially if they lack specialized sustainability or climate teams.

Integration with existing reporting frameworks: TCFD reporting requires integration with other existing reporting frameworks, which can add complexity to the reporting process and make it difficult for companies to align their disclosures with multiple frameworks.

Limited stakeholder engagement: TCFD reporting requires effective engagement with a wide range of stakeholders, including investors, customers, and employees. Companies may struggle to engage these stakeholders effectively and obtain the necessary feedback and input to produce comprehensive disclosures.

Lack of internal capacity: Producing a TCFD report requires dedicated resources and expertise, including sustainability and climate knowledge, data analysis, and report writing skills. Companies may struggle to find the necessary resources and build the internal capacity to produce a high-quality report, leading to potential financial and reputational consequences.

Possible solutions

Currently, companies are hiring external experts on TCFD reporting to conduct workshops on the identification of climate-related risks and opportunities. These exercises are generally costly and rely on the internal skill sets of company workers, and their ability to identify climate-related risks and opportunities. In addition, this methodology does not provide the in-house capacity required to continue to update TCFD reporting in the long run.

A better solution requires investing in data collection and analysis tools and processes that can help companies overcome these challenges. By collecting and analyzing sustainability and climate data, companies can identify climate-related risks and opportunities and produce accurate and comprehensive TCFD disclosures. This can include both internal and external data sources, such as carbon emissions data, energy usage data, and supply chain data.

If employed, technological solutions to TCFD reporting should:

Provide disclosure on how your company is addressing climate-related risks and opportunities in your operations, supply chain, and products or services. This includes disclosures on the board's oversight of climate-related risks and opportunities. As well as the company's climate-related risk strategy and management.

The identification of physical risks (such as extreme weather events) and transition risks (such as regulatory changes and shifts in market demand) that may affect your business.

Provide scenarios for how the company's business model may be affected by climate-related risks and opportunities, including a 2°C or lower scenario. (This is the only element missing for full TCFD disclosure reporting from the platform).

The goals and targets for your company's transition to a low-carbon economy and identify the measures you will use to track progress towards these goals.

Onyen ESG Scorecard

The Onyen platform provides companies with the ability to produce the data required for TCFD disclosures through its step-by-step approach to questions required for TCFD disclosure as follows:

Governance: The Onyen ESG Scorecard evaluates a company's governance practices, including board composition and oversight of ESG risks, which can be relevant for TCFD disclosures related to risk management and governance.

Strategy: The Onyen ESG Scorecard prompts companies to disclose the actual and potential impacts of climate-related risks and opportunities on their businesses, strategy, and financial planning.

Risk management: Companies should disclose how they identify, assess, and manage climate-related risks.

Climate risks and opportunities: The Onyen ESG Scorecard includes information on a company's carbon footprint, emissions reduction targets, and renewable energy investments, among other factors, which can provide insight into the company's climate risks and opportunities.

Supply chain management: The Onyen ESG Scorecard assesses a company's management of ESG risks in its supply chain, including human rights and environmental risks, which can be relevant for TCFD disclosures related to supply chain risks.

Water management: The Onyen ESG Scorecard evaluates a company's management of water-related risks, including water usage and water pollution, which can be relevant for TCFD disclosures related to physical risks associated with climate change.

Metrics and targets: The Onyen ESG Scorecard help companies decide how they should disclose the metrics and targets used to assess and manage climate-related risks and opportunities.

Output requirements: XBRL (machine readable) or iXBRL (human and machine readable) is already done with Onyen and therefore the data can be transmitted to regulatory bodies and other stakeholders that require this data in this format.

With the Onyen ESG reporting system, companies are no longer at the mercy of complex TCFD disclosure requirements. This powerful software platform provides the ability to navigate the intricate landscape of environmental, social, and governance factors, ultimately empowering companies to produce the data needed for TCFD disclosures with ease. By leveraging its step-by-step approach to address the critical questions posed by the TCFD framework, businesses can now confidently embrace transparency, bolster investor confidence, attract sustainable financing options, and stay ahead of the ever-evolving regulatory landscape.

Author Bio

Laurie M. Clark is an entrepreneur, author and speaker who has founded and sold three companies, and is founder/principle of three financial and regulatory technology companies: a financial advisor credentialing system; an AI-driven AML and terrorist finance entity-checking system; and a real-time ESG reporting system with predictive modelling to manage risks and outcomes. She advises on capital raises for private and public companies, and is a two-time Top 100 Most Powerful Women in Canada.