Building a comprehensive climate strategy is one of the most important actions a company can take to manage its climate-related financial risks and opportunities. While the best climate strategies are unique to an organization, all companies should follow these seven important steps when approaching climate management for the first time.
1. Identify climate-related risks and opportunities
Company leaders should be educated on material climate-related risks and opportunities. Investors also want to know that leadership considers climate risk factors. After all, climate risk is financial risk.
Understand what climate risks consist of under the Task Force on Climate-related Financial Disclosures (TCFD), the world’s premier climate reporting framework. This guide details all organizations’ possible financial risks and opportunities related to climate change. Analyze competitor climate risk disclosures and conduct a climate risk assessment by interviewing internal and external stakeholders on what they consider to be material climate-related risks. Conduct climate scenario analysis planning to strategize how your company would adapt to plausible future climate scenarios.
Remember that a changing climate and transitioning economy do not only present risk. Smart-thinking companies will look for climate-related opportunities in the form of demand for new kinds of products and services, energy efficiency gains, resilient supply chains, and more. While identifying and mitigating risk is essential, failing to capitalize on opportunities could have adverse impacts on companies.
2. Get buy-in from above
Good governance is the critical ingredient to corporate climate success. Without top-down support from management and the board, your climate plans are unlikely to get the resources, financing, and support they need to get off the ground.
Your investors are also looking for evidence of robust climate governance, which is one of the core pillars of both the TCFD and the International Sustainability Standards Board’s (ISSB) new climate disclosure standard. The latter is intended to become the global baseline for corporate climate reporting.
Make sure you can demonstrate that your leadership teams are keyed into the relevant climate risk factors and opportunities. They should also have knowledge on the current climate risk management processes in place, any assigned climate responsibilities, and accountability mechanisms for managing climate risk.
Centralize climate management with Manifest Climate
With all your climate data in one place, Manifest ensures institutional continuity and keeps your entire organization on the same page. Manifest’s Resources feature allows employees from any team to gain the skills required to identify climate risks, stay ahead of climate trends, and manage the climate transformation.
3. Benchmark against peers and leaders
Competitor benchmarking is a critical step to building a climate strategy. With so many organizations disclosing their net-zero targets and reporting their financial risks and opportunities, chances are that you can learn from others who have gone before you in your industry.
Competitor disclosures can offer insights into material risk factors, while the disclosures of leaders in your industry — or those of climate leaders in other industries — can reveal best practice actions and helpful next steps.
Track peer progress on climate with Manifest Climate
Our Tracker feature allows sustainability teams to track and benchmark their companies’ climate-related actions and disclosures against industry peers and cross-sectoral climate leaders. Build a custom view that shows the climate disclosures of organizations relevant to your business. With hundreds of data points per company, your team gets a consolidated, fully traceable view of what others are doing — from climate disclosure and management, to scenario analysis, transition planning, metrics and targets, and more.
4. Follow relevant regulations and ‘gold standard’ frameworks
Benchmark your disclosures and climate actions against the requirements and recommendations of leading global frameworks and standards.
Many new regulations worldwide are — and will continue to be — based on leading existing disclosure frameworks like the TCFD. Companies beginning on their climate journeys can therefore use the TCFD framework as a starting point and build out their disclosures from there to comply with other applicable national and international regulations and standards.
Understand what the relevant regulations and frameworks ask for and reverse-engineer these requirements into your climate strategy. Working from a leading set of recommendations like the TCFD will provide a strong foundation for climate action and disclosure — particularly for large, international companies that may need to comply with multiple reporting mandates.
Manifest follows the gold standard for climate risk
The right software can simplify how companies produce climate disclosures and improve their climate management. Manifest Climate’s software is built around the TCFD’s 11 recommendations and can evaluate your climate disclosure and management across multiple other regulations and standards. This includes climate reporting rules in the US, Canada, and UK, as well as the ISSB’s new climate disclosure standard.
5. Make a plan
After you’ve done the appropriate research and identified your material climate risk factors and opportunities, it’s time to develop short-, medium-, and long-term targets, as well as a plan outlining how you’ll achieve these targets. Your roadmap should also be customized to the specific challenges and opportunities of your sector.
As part of your climate strategy, we recommend developing a climate transition plan that fulfills the requirements of the standards or frameworks you’re reporting against. This can become a helpful document, both internally and externally, for communicating plans and staying accountable. We also recommend that any climate plans be integrated into a company’s overall enterprise risk planning.
Identify next steps with Manifest Climate
Manifest Climate’s proprietary methodology helps you solve challenges associated with identifying next steps and prioritizing which actions to take.
Our Workspace feature assesses your climate disclosures and management. It also provides data-driven recommendations for improvement based on best practices and climate expertise.
6. Include provisions for communications and disclosures
Climate strategies are necessary for internal use as they guide a company through a changing climate and transitioning economy. But these strategies go twice as far when they are strategically communicated with the public and other stakeholders. Make sure your climate strategy includes provisions for how you will communicate your targets and progress. A plan for regular reporting and communications improves corporate accountability and transparency. It can also foster better trust and stronger relationships with stakeholders.
Beyond voluntary communications, incorporate current or future regulatory requirements into your climate strategy. Many companies will soon face reporting mandates under the US Securities and Exchange Commission’s proposed climate disclosure rule, the ISSB’s climate disclosure standard, Europe’s Corporate Sustainability Reporting Directive, and others. Meeting disclosure commitments is already a central part of both environmental, social, and governance (ESG) and sustainability teams’ responsibilities, with companies spending an average of USD $533,000 per year on climate reporting. This compliance burden will only increase as new regulations come online. Be sure to earmark adequate resources for establishing and improving communications and disclosure, and look into technology solutions that can simplify your climate disclosure.
Close ‘say-do’ gaps with Manifest Climate
Manifest Climate improves your climate disclosure and management by identifying information gaps and helping you provide relevant, decision-useful information to investors and key stakeholders. Evaluate the alignment of your public disclosures against multiple frameworks and standards, and uncover new opportunities for stronger climate risk management.
Our software also saves your team up to 75% of manual time and effort and up to 50% in compliance costs.
Manage cross-jurisdictional reporting with Manifest Climate
The right software can simplify and improve the way that companies disclose and manage climate risks. Manifest Climate’s software is built around the TCFD’s 11 recommendations and can evaluate your climate disclosures and management across multiple standards and regulations, including reporting rules in the US, Canada, and UK, as well as the ISSB’s climate standard.
7. Stay up to date with the ever-evolving world of corporate climate news
The world of corporate climate risk doesn’t stand still for long. With policy and legislative changes taking place almost daily, new guidance emerging from industry-leading bodies, and other market-driven trends changing across industries and sectors, keeping up with what you need to know can be a full-time job.
Your climate, sustainability, and ESG team members must stay on top of climate news that is relevant to your company, but filtering through the noise is an incredibly demanding task. Technology powered by AI can help to process large amounts of data and present relevant insights.
Stay up-to-date with Manifest Climate
Our Trends feature delivers business-relevant climate news to your inbox regularly. Our in-house climate experts provide clear insights and takeaways on how climate updates will affect your business. This will help your organization make better decisions and understand its position in the low-carbon transition.
Good climate strategies aren’t built in a day
Developing a credible strategy is a key first step on any company’s climate journey. Climate change requires urgent action on behalf of the private sector, but it’s important not to rush the strategic development process. Focus instead on completing each of these key steps thoroughly. With a detailed, well-informed climate strategy, your company can mitigate and adapt to climate risks, capitalize on climate opportunities, and embrace the new net-zero economy.
Getting started on your climate journey? Manifest can help.
Manifest Climate is a Climate Risk Planning software that helps companies supercharge their climate strategies. Our platform is the world’s best at assessing climate disclosures. We help to highlight your climate disclosure and management gaps, while providing data-driven recommendations for improvement.