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Where to Invest Efforts in the Era of Regulatory Uncertainty

Between our responsibilities as sustainability professionals and a growing set of topics to learn about, impacts to track and regulations to meet, it’s hard to know where to focus to do the most good. To help distinguish between signal and noise, I take the following approach.

Many years ago, a C-Suite executive turned to my team during a proposal review and said, “I wake up every morning and start by doing the things needed to keep me from getting fired. Will this work keep you from getting fired?” It was my project; and the honest answer was, probably not. While this wasn’t exactly inspirational, his point was clear: Start with what you need to do; and then, move to the shiny objects.

As sustainability professionals, we are overextended and under-resourced. Between our current responsibilities and a growing set of topics to learn about (ex: microplastics), impacts to track (biodiversity) and regulations to meet (CSRD), it’s hard to know where to focus to do the most good.

To help distinguish between signal and noise, I take the following approach.

The future of corporate sustainability reporting is known

Let’s start with the good news: The broad strokes of future climate-related disclosures are public.

Aligning Value Management and Regenerative Practices

Join us as Regenovate co-founders Chris Grantham and Adam Lusby lead an interactive workshop on how to rethink value in the context of regenerative innovation by linking value to the dividends and resilience that come to an organisation from enhancing system health — Thurs, May 9, at Brand-Led Culture Change.

The best place to see where disclosures are headed is to go a step above any specific regulation and look to a global institution that seeks to set and harmonize global regulatory standards. For financial accounting, this is the International Financial Reporting Standards Foundation (IFRS), the group behind the IFRS Accounting standards, which “have become the de facto global language of financial statements — trusted by investors worldwide and required for use by more than 140 jurisdictions.”

At COP26 in Glasgow in 2021, IFRS announced that it was establishing an International Sustainability Standards Board, which put out its first set of recommendations in March 2022. One of the more easily overlooked documents was a comparison of the IFRS Climate-related Disclosures Exposure Draft and the recommendations that the Task Force on Climate-Related Financial Disclosures (TCFD) released across corporate Governance, Strategy, Risk Management, and Metrics and Targets back in 2017. While there are a few changes (such as Scope 3 emissions disclosures going from recommended for most to mandatory for all), what strikes me is the similarity between the documents.

I won’t detail the recommendations in that comparative chart here; though I encourage everyone to print it out and have it as a reference material on your desk — because it’s reasonable to expect all of the disclosures summarized in that comparative chart will be requirements for your brand within 10 years. None of us know exactly when, in what order, or how brands will meet these requirements; but we can assume this: Building a foundation that prepares your company to report on these climate-related issues is a good idea.

The question is how to prioritize this mountain of work.

Start with carbon, but think about infrastructure

When building your program, it’s critical to start with the most critical priority with an eye towards what comes next. For corporate sustainability, that means carbon emissions. In the coming years, additional social and

environmental impacts will be of equal reporting importance around the globe. While this may seem overwhelming, the good news is that the three components of a strong carbon-reporting program^2^ are applicable to additional impacts. They are:

  • Measure — have a set of tools to effectively measure corporate emissions, automating steps where possible.

  • Report — disclosing a corporate emissions inventory in a manner that meets regulatory requirements and corporate goals.

  • Reduce — define, implement and track progress of programs designed to reduce impacts.

At Worldly, we believe that the backbone of this infrastructure for brands and retailers will be an ability to engage with, collect primary data from, and collaborate with supply chain partners. Because the majority of impacts for consumer brands and retailers are found in their supply chains, we expect regulatory disclosures to require an increasing amount of primary data from supply chains over time.

When building factory data collection and scope 3 carbon-reporting capabilities at Worldly, we’re focused on both solving a current problem for our customers and creating the infrastructure to enable them to respond to their next set of measurement, reporting and reduction needs.

Putting it all together

When building out your corporate emissions-reporting infrastructure, look for ways to lay the foundation for the next set of sustainability-related impacts you want to focus on. This approach can prevent you from getting fired (always a good thing) and prepare your team to go after the next impact that may look like a shiny object to an executive, but you know will be a need-to-have within the next three years. In this way, you can develop a “yes, and” strategy that solves your current needs while positioning you and your team for future success.

^2^ This is essentially what life cycle assessment (LCA) does. While many people focus on the greenhouse gas emissions output of an LCA, the popular ReCiPe method of LCA includes 18 midpoint and 3 endpoint indicators that quantify damage to human health, the ecosystem and resource availability.