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The Need for Reporting and Disclosure of Data on Environment and Climate

Nowadays, there is an increasing interest at a society level in the issues of the Environment and Climate Change and the role that businesses play in them. Therefore, transparency about the impacts and risks of Environment and Climate Change can contribute to enhancing the corporate profile towards society on the one hand, and on the other hand can enhance the trust and credibility towards the company by investors and other stakeholders. Today there is a belief (which is not correct and sufficient) that it all starts (and ends) in the reports issued by the auditors, usually as annexes to the annual financial statements, who certify that the procedures they have examined in relation to the Environment and/or Climate Change are those that the auditee claims are adequate. In other words, that there is compliance of the auditee with the established procedures and practices. This is no longer sufficient.

Environmental reporting involves the disclosure of data related to the Environment and Climate and includes the reporting of the environmental impacts of business activities. These reports also include information on legal provisions and regulations as well as information on environmental management practices within the regulatory framework. In addition, the issue of Climate Change is included here, i.e. information is often disclosed on how business activity improves or worsens Climate Change and how the direct and indirect impacts of Climate Change can affect (either positively or negatively) business activity.

The benefits of these reports are multiple for businesses, contributing to the development of a vision and strategy for sustainability, the improvement of management systems and internal processes, the identification and achievement of objectives, the identification of strengths and weaknesses of the business, the attraction of new employees and investors, thus giving a competitive advantage.

These reports are usually prepared in accordance with a) the EU's Non-Financial Reporting Directive (NFRD) and the guidelines on reporting non-financial information, and b) the Task Force on Climate-related Financial Disclosures (TCFD) supplement to the above guidelines on climate-related information reporting (i.e. disclosure of financial information on climate change risks and opportunities).

Standards have also been established for sustainability disclosure (e.g. Global Reporting Initiative - GRI) which help to present information in a structured and reliable way so that the information is comparable between different companies and understandable by external readers of the relevant reports.

There is a wide variety and dispersion in the way information is presented and a lack of data despite clear reference to disclosure standards

However, there is a wide variety and dispersion in the way information is presented and a lack of data despite clear reference to the disclosure standards. A very common example in sustainability is the inability to analyse issues in depth and to publish data only at a high level analysis. For example, we have identified the inability to analyse indirect greenhouse gas emissions (breakdown), which are often considered negligible without this being the case. Also, very often the inability to identify the areas/points upstream and downstream of the business value chains that may be affected or impacted by Climate Change is identified, as well as the inability to accurately assess (quantify) the impacts of Climate Change (risks and opportunities).

In conclusion a detailed analysis that addresses all issues along the business activities in a scientifically sound and quantified way, and goes beyond a high-level headline approach, needs the presence of experts. These experts will collect and interpret relevant metrics of environmental management and Climate Change parameters, and help auditors understand the business impact of the changes. The issues are too many and complex. No matter how well prepared an auditor with an economics degree may be, he or she has difficulty appreciating the many variables of natural phenomena or qualitative parameters related to Climate Change that are often not understood by him or her. For this reason, cooperation with environmental experts can be crucial for the full preparation of environmental reporting and the development of sustainability strategies for a company.


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