Minimum business shifts: Science-based targets, climate-related financial disclosures and common info and stakeholder not shareholder orientation

GreenBiz, Jan 22, 2020, excerpt – Fix Capitalism

Peter Bakker argued in his earlier “Garbage in, garbage out: systems transformation in a capitalist world” blog that the conversation needs to focus on how to truly accelerate the required transformations. The fix is relatively simple and I would call it the Triangle of Stakeholder Capitalism:

  • Science-Based Targets (SBTs): The SBTs for climate and biodiversity are clear: net zero carbon by 2050 and net zero loss of nature by 2030 — business needs to focus on creating the pathways both individually and collectively in sectors and along value chains.
  • Task Force on Climate-related Financial Disclosures (TCFD): The TCFD recommendations are the most important and transparent leverage to link the big environmental risks to company decisions and capital market valuations. For further impact and change, the TCFD recommendations need to expand its scope — TCFD+, going beyond just climate to include nature and biodiversity loss — and be made mandatory for all businesses everywhere. This will accelerate the speed and scale of transformation faster than any other measure.
  • Environmental, Social and Governance (ESG) information: We need to urgently push for a standardization of the ESG information that all companies will use in their disclosure to investors and other stakeholders. The current fragmentation of KPIs, reporting frameworks, surveys, ratings and benchmarks, makes comparability of information impossible and thus ineffective. The work that the WEF is doing on ESG standardization should be the start of a revolution in the corporate reporting space. Fewer indicators that are materiality-based and aim to create comparability will enhance the capital market inclusion.

Simple accounting rules around meaningful ESG indicators — driving the risk assessment, strategic scenario building and management decision-making as TCFD is doing — towards the delivery of the science-based targets will make capitalism drive us towards the sustainable world that will serve all people and protect our planet.This story first appeared on: World Business Council for Sustainable Developmen