European companies have improved their non-financial reporting on how they are preparing for climate change and on the climate impact of their own activities. Nevertheless, while the objectives are clear, there is still a long way to go to achieve them.
This is the finding of the working group set up by the European Lab of the European Financial Reporting Advisory Group (EFRAG), which has just presented a report designed to present good practices in reporting on climate issues identified in a sample of 150 companies.
This report aims to propose climate reporting practices that are useful to both issuers and users, in a context where companies want to better communicate their climate strategy and investors want to know what their exposure to climate issues is.
"Certainly, progress has been made in climate reporting. But we are still a long way from the target" identified in the recommendations of the Financial Stability Board working group and in the obligations linked to the European Directive (2014/95) on non-financial reporting, Michèle Lacroix, who led the drafting of the report, stated in an interview with EUROPE on Friday 7 February.
Some companies view climate reporting as a mere compliance exercise and miss the opportunity to make sense of it by analysing their resilience to climate change and the climate impact of their activities, the authors of the report note.
Another shortcoming identified concerns the articulation between the different sections of the reporting. The disconnection between the time horizon covered by a company's strategic planning (often less than five years) and the time horizon needed to realise the effects of climate change (more than five years) is another element that complicates climate reporting.
Ms Lacroix also pointed to the "dilemma" that companies face: disclosing sensitive information can put them in a difficult position vis-à-vis their competitors. "There can be a perverse risk at best", she added.
What can be done at European level? For this expert, Europe is already at the forefront of climate reporting compared to other jurisdictions and the European Union will not stop there.
At the end of January, at a conference on the European Green Deal, the Vice-President of the European Commission, Valdis Dombrovskis, announced a revision for 2020 of the Non-Financial Reporting Directive to ensure that the companies covered disclose reliable data on the sustainability of their activities. In addition, outside the legislative field, the Commission will support the process to develop European standards for non-financial reporting. (Original version in French by Mathieu Bion)