Manage Risk and Identify Opportunities Under Climate-Related Reporting Frameworks: 6 Companies Show How It’s Done

Manage Risk and Identify Opportunities Under Climate-Related Reporting Frameworks: 6 Companies Show How It’s Done

By | June 20, 2022

The public comment period for the climate-related disclosures proposed by the U.S. Securities and Exchange Commission (SEC) ended on June 17th, and while it will be a while before we know what the final regulations look like, there’s one thing we know for sure: regulatory change is coming. 

But this isn’t a new development. In fact, requirements for climate-related disclosures—many based on recommendations from the Task Force on Climate-Related Financial Disclosures (TCFD)—have been proposed in numerous parts of the world over the past few years. The European Sustainability Reporting Standards (ESRS) under the Corporate Sustainability Reporting Directive (CSRD), the Sustainable Finance Disclosure Regulation (SFDR) and the SEC’s climate-related disclosure requirements are just a few examples. While they have massive implications for businesses around the world, the real challenge is what lies behind the regulations: climate change. The regulations are the drivers for change that will push companies to address it in a more transparent way.  

These regulations seem daunting to many, but businesses regularly face external and internal challenges, and those that tackle the challenges head-on tend to emerge stronger. Business leaders who go one step further by turning challenges into opportunities are those who will truly win. Think of regulatory challenges as an oyster: Sometimes there’s a pearl hiding inside.  

Look to the Medium and Long Term to Identify Climate-Related Risks and Opportunities

In the short term, these regulations represent real stressors that can obscure the risks and opportunities that accompany them. In a recent podcast, Sandy Smith, PhD, Sphera’s vice president of EMEA / APAC EHS&S sales, advised companies to apply the TCFD recommendations when looking at the medium term (the next three to five years) to get to the long term (10 years), where the risks and opportunities related to climate change are more visible. 

Many companies have already identified opportunities. Dr. Smith points to the oil and gas sector, where, to manage risk, businesses are diversifying and moving into renewable technologies to find new forms of energy. Effective risk management can translate into opportunities, and the next three to five years will likely present ways for businesses to tap new markets or grow their market share as they take advantage of the new low-carbon, net-zero economy.  

Aptar worked with Sphera to validate a risks and opportunities assessment according to the TCFD methodology.
Case StudyEnhancing Sustainability Through TCFD Assessments and CDP Disclosure
Aptar worked with Sphera to validate a risks and opportunities assessment according to the TCFD methodology.

6 Businesses Leading the Way to a Green Revolution

A Green Revolution is taking shape and there are quite a few businesses at the forefront.  

Luxury goods multinational Kering, whose brands include Balenciaga, Bottega Veneta, Gucci, Alexander McQueen and Yves Saint Laurent, is moving toward regenerative production of raw materials to support biodiversity and mitigate its impact on the environment. In January 2021, Kering and Conservation International launched the Regenerative Fund for Nature with the goal of transforming 1,000,000 hectares (2,471,054 acres) of crops and rangelands into regenerative agricultural spaces. Kering notes: “Though agriculture is currently a major driver of biodiversity loss and climate change, it can be transformed from a ‘problem’ to a powerful nature-based solution.”    

In an earlier blog, we highlighted Bridgestone’s investment in the guayule shrub, which represents a solid step toward the expansion and diversification of renewable resources. Bridgestone produced the first tire made from guayule-derived natural rubber in 2015. The guayule shrub originates in the arid zones of the U.S. southwest and northern Mexico, which offers an alternative to the South American, African and Asian rainforests, where para rubber trees—the primary source of natural rubber—grow along river banks.   

France’s TotalEnergies and Indian multinational conglomerate Adani recently announced a partnership that will create the world’s largest green hydrogen ecosystem. Through the partnership, Adani New Industries Ltd. (ANIL) plans to invest over $50 billion over the next 10 years to develop 1 million tons per year of green hydrogen production capacity by 2030.   

Nike implemented Nike Grind, a recycling program which uses manufacturing scrap, unsellable products and worn-out footwear to make new shoes and apparel, as well as running tracks, basketball courts and outdoor play equipment. To date, the initiative has recycled 120 million pounds of material, equivalent in weight to roughly 700 jumbo jets.   

Finally, Tesla is undeniably one of the leaders of the Green Revolution. Its new technologies and low-carbon solutions have disrupted the marketplace in a relatively short span of time, delivering electric vehicles (EVs), solar panels and roof tiles, and other products to the marketplace.  

Don’t Miss the Opportunity

The emerging regulations will affect different businesses in different ways. There is no question that the regulations recently put forward by the European and American regulatory bodies will put a strain on the companies that must comply with them, and some will have better capacity to identify and tap new opportunities than others. But as the American inventor and businessman Thomas Edison said: “Opportunity is missed by most people because it is dressed in overalls and looks like work.” Achieving compliance is hard work and so is identifying new opportunities hidden within the challenges. But the pearl it reveals can be beautiful.     

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