Why climate disclosure is a systems issue

Climate Action and Resilience 🌍 As climate risks intensify and regulatory expectations evolve, companies across sectors are under pressure to adopt more strategic and integrated climate responses. This requires a shift from isolated actions to system-wide business transformation. A comprehensive climate strategy involves more than emissions reductions. It starts with aligning climate priorities with corporate strategy, embedding them into investment and risk management decisions, and ensuring board-level accountability. Robust GHG accounting and disclosure frameworks are essential. Measuring Scope 1, 2, and material Scope 3 emissions using recognized protocols enables businesses to understand their impact and develop informed strategies. Transparent reporting aligned with leading frameworks such as ISSB and TCFD builds credibility and investor confidence. Operational adjustments play a critical role. From transitioning to renewable energy and increasing efficiency to electrifying fleets and evaluating climate-related risks, every step contributes to reducing exposure and enhancing resilience. Supply chains must also evolve. Integrating climate criteria into supplier selection, improving traceability, and collaborating to lower upstream emissions are key steps in building more resilient and sustainable value chains. Product and service decarbonization offers a pathway to long-term differentiation. Businesses are rethinking product design through circular economy principles and regenerative models, while supporting customers in lowering their environmental footprint. Internal alignment is equally important. Building climate competencies across leadership and staff, supporting local adaptation efforts, and engaging in cross-sector coalitions accelerates meaningful transformation. The path forward requires more than commitment. It calls for a structured, multi-level approach across strategy, operations, procurement, product, and people systems to drive real progress in climate action and resilience. #sustainability #sustainable #esg #business #resilience

The latest Corporate Climate Responsibility Monitor 2025 is a deep, 165-page analysis of the #climate strategies of 55 major global companies (https://lnkd.in/eNKsG7iB). And the results? They are are not great, to say the least. The analysis finds that NONE of the 20 companies assessed demonstrate a climate strategy with ‘reasonable’ or ‘high’ integrity—where integrity reflects the credibility, transparency, and sector-specific robustness of a company’s climate approach. Only a few, such as H&M Group, adidas, and Danone, achieve a “moderate” rating, reflecting early steps toward more credible strategies and sector-specific transition efforts. One word that comes to mind when reviewing the report is messiness. For example, the authors note they can’t calculate a median reduction commitment for 2030 due to persistent structural obstacles—like sector-specific accounting malpractices and incomplete emissions disclosures—that make it increasingly unclear what companies are actually committing to. But this messiness isn’t accidental. It reflects not only flaws in the current assessment and validation systems like #SBTi or #TPI (see pp. 13–14 of the report), but also the deeper dysfunctions of sustainability-as-usual. The problem isn’t just tactical or strategic—it’s #systemic. Companies operate within a framework that prioritizes short-term growth and profit maximization, making anything outside that logic—including meaningful #climateaction—extremely difficult to pursue. This will only change when the system itself changes. Until then, companies will continue to make mostly incremental progress—but it will remain insufficient, because truly sufficient progress would require rethinking and redesigning their #businessmodels. And that kind of transformation still lacks both the leadership courage and the ‘permission’ of financial markets needed to move forward.

If you’re a CFO and still think climate regulation is just a compliance headache, I’d encourage you to read SB 253 and SB 261 a bit more closely. These two bills won’t just require you to report climate data. They’ll expose how prepared (or not) your company is to handle climate risk — financially, reputationally, and operationally. That has implications for capital markets. Investor relations. Insurance premiums. And future access to public and private funding. Let me make it tangible: → SB 253 will force companies doing business in California to disclose full Scope 1, 2 and 3 emissions. That means mapping your upstream and downstream value chain. Not estimating. Not modeling. Disclosing. → SB 261 demands public disclosure of climate-related financial risks and how your company plans to manage them. Think TCFD-style reporting — but public and enforced. And yet, many companies are still thinking in terms of ESG checklists and one-off materiality assessments. That’s not going to cut it anymore. What’s coming isn’t “more compliance.” It’s a shift in how financial performance and sustainability are tied together. Regulators are accelerating that shift. If I were in your seat, I’d ask two simple questions: Do we have a clear line of sight from raw supply chain data to our financial disclosures? Can we actually prove what we’re reporting? If the answer is no — that’s not a reporting problem. It’s a business readiness problem. The good news? There’s still time to move. But in Q3 and Q4, as budget conversations start ramping up, the cost of not preparing will start to show up on the balance sheet. Because climate risk is now business risk. And this time, it’s not just your CSO’s responsibility to solve it.

California climate disclosure law isn’t the outlier. It’s the preview. A lot of companies are looking at SB 253 and 261 as isolated state laws. They're not. They’re a signal of where regulatory frameworks globally are heading—faster than many expect. CSRD in Europe, mandatory disclosures in the UK, Singapore, Canada. Same themes. Same direction. And they all converge on one message: You need to understand, validate, and explain your emissions data—financially, operationally, and strategically. This isn’t a sustainability issue. It’s a systems issue. If you're a global company, you'll be required to align your emissions data, risk models, and strategic plans across dozens of jurisdictions. That requires infrastructure - not spreadsheets. And it requires internal coordination. Legal. Finance. Ops. Procurement. Sustainability. Audit. If even one link is weak, the whole disclosure risks falling apart. But what does “readiness” actually mean? It means leadership alignment on what data matters. It means traceability of every single figure. It means designing governance around your data - not just your report. Because compliance isn’t about filling out a form. It’s about proving control. And in this new era, those who can prove it - will lead. #climate #sustainability #carb #californiasb253 #californiasb261