Making climate metrics decision-ready

If I’m the CFO, I don’t need a sustainability report. I need a business case. That means we don’t start with targets or frameworks — we start with real questions. Where can we cut costs with lower-emissions inputs? How does energy use vary by site, and what would it take to reduce it? What’s the cost of inaction if a customer makes emissions part of vendor selection? If sustainability can help me answer those questions — we’re in business. But that only works if the data holds up. I need to know where the numbers come from, what assumptions are baked in, and what we’re doing to improve accuracy quarter over quarter. And I need it structured in a way that speaks the language of finance: capex, opex, margin, payback, risk. Not just “carbon reductions,” but “cost per unit improvement.” Not just “engaged suppliers,” but “procurement risk exposure cut by X%.” If we can get to that level of clarity, sustainability stops being a reporting obligation. It becomes a line of influence in budget decisions, product roadmaps, and investor conversations. But that alignment has to be built — not assumed. So if I’m the CFO, here’s the conversation I want to have with the sustainability lead: • What data do we have today that’s decision-ready? • Where are the gaps? • What’s the first business case we can validate together — and how do we measure it? From there, we build trust. And from trust, we build outcomes. Because when sustainability is framed in business terms — it gets funded. When it’s not — it gets delayed.

Why is measuring sustainability or ESG so hard? In our new article that introduces a themed section on sustainability measurement in Organization Studies, we highlight three cornerstones that have been identified as ideal aspirations of successful measurement schemes, but which face challenges:   o  Comprehensively covering all topics of interest: this assumes organizations practice good governance and that all interests can be addressed, without trade-offs o  Accurately acquiring and interpreting (perfect) information: this assumes that desired outcomes can be captured and meaningfully translated into metrics o  Being able to practically and feasibly collect the right information: this assumes that all relevant information can be collected and shared, without excessive strain on organizational resources   Each of these attributes has its own challenges, that companies face daily in their sustainability measurement processes. For example, topics of interest are seen differently by different stakeholders, resulting in stakeholder/topic conflicts and requiring tradeoffs. Not all information can be acquired or captured with a metric. And, companies face resource constraints not only in-house but also along the supply chain, with changing demands over time.   On top of that, tensions exist between these three characteristics. These tensions arise around commensuration, scope and scale, which create ambivalence.    Commensuration: The more topics of interest that are measured, the higher the challenges for accuracy.    Scope: measuring a broader scope of information reduces practical feasibility.    Scale: Capturing information accurately can be impractical for complex socioenvironmental systems.   Given these challenges, what can companies do to develop more effective measurement schemes?   1)       Improve their governance systems: develop good decision-making processes, put the right governance structures in place, ensure stakeholders inclusiveness, and be transparent. 2)       Tap into alternative data sources: leverage technological developments such as remote sensing/satellite data and artificial intelligence, and work with experts like natural and climate scientists 3)       Standardize and streamline measurement schemes: advocate for standards in measurement to minimize confusion, share data along the supply chain, but without losing sight of optimizing (relevant and accurate measurement) 4)       Make schemes simpler and more robust: reduce the complexity in schemes by selecting the most important topics and stakeholders, tailor schemes by using measurements that are relevant for the sectors in which companies operate, and select relatively simple measures that are reasonably accurate rather than aiming for perfection   Want to know more? Find our paper, co-authored by Frank Wijen, Rodolphe Durand, Shon R. Hiatt, Juliane Reinecke and myself here:   https://lnkd.in/gg9X69FP  

California Climate Regulations are coming, yet guidance for companies in scope is slow to develop. FSI Consulting has put together a list of actions that companies can take today, that will prepare them for what will likely be a shortened runway for compliance. If you and your company are struggling with CA readiness and where to start, here are 5 no regret actions you can start taking towards compliance: 1- Engage with Key Stakeholders and Determine Overall Approach  Start by assembling a cross-functional team (Sustainability, Finance, Legal, Operations) to manage and support efforts. Work as a team to secure executive and Board-level buy-in while ensuring adequate resources and oversight. Investigate options to keep work in-house or engage with a consultant to calculate GHG emissions and/or prepare a climate risk report.   2- Start Compiling Climate Risk Data  Compile a list of potential physical risks (floods, fires, heat, etc.) to facilities, and research potential transition risks (carbon pricing, regulations, market changes, etc.) based on your organizational boundaries. Think about and identify internal climate risk governance activities and collect relevant metrics and targets for evaluating climate risk mitigation activities. Review peer companies’ climate risk reports in the public domain.   3- Evaluate GHG Emissions Inventory Reporting Readiness  Conduct an internal review of current GHG inventory processes (with future attestation in mind), assess data quality management systems and identify reporting gaps versus requirements.   4- Engage Third-Party Assurance Provider for GHG Emissions Inventory  Select and onboard a qualified verification body and get early feedback on data collection processes and controls.   5- Review Climate Strategy Documentation  Assess current climate commitments and targets, identify gaps in current documentation and create a clear paper trail for compliance purposes.

Climate Risk Maturity Model 🌍 This diagram developed by Aon is a great resource to assess how prepared a company is to respond to increasing climate-related risks and regulatory requirements. It outlines a clear path to move from basic environmental awareness to full integration of climate risk into business strategy and governance. At the early stages, companies typically focus on isolated sustainability initiatives, basic environmental metrics, and assigning initial roles. These actions are necessary but insufficient in the face of growing regulatory scrutiny and stakeholder expectations. Progression involves establishing board oversight, setting clear environmental goals, and conducting structured climate risk assessments. This includes using scenario planning tools and monitoring climate trends for better strategic alignment. As maturity increases, climate considerations become part of enterprise risk management systems. Companies begin reporting consistently, adopting global frameworks such as TCFD, and setting science-based targets aligned with transition goals. At advanced levels, organizations assess climate risks across their full value chain and disaggregate responsibilities across business units. Leading companies link environmental performance to executive compensation, reinforcing accountability at the highest level. The model also highlights the importance of internal and external communication throughout the journey. Transparent engagement supports alignment, improves reporting, and enables informed decision-making. This framework is particularly useful for companies preparing for regulations such as the SEC climate disclosure rules, California SB 253 and SB 261, and the EU CSRD. It can also guide firms aiming to strengthen ESG performance in capital markets. Understanding a company’s position on this maturity curve allows for targeted improvements and more credible climate risk management. It also helps align ESG efforts with long-term business resilience. Source: Aon #sustainability #sustainable #esg #business #risk

𝗖𝗮𝗹𝗶𝗳𝗼𝗿𝗻𝗶𝗮 𝗔𝗶𝗿 𝗥𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀 𝗕𝗼𝗮𝗿𝗱 (𝗖𝗔𝗥𝗕) 𝗵𝗮𝘃𝗲 𝗿𝗲𝗹𝗲𝗮𝘀𝗲𝗱 𝗮 𝗰𝗵𝗲𝗰𝗸𝗹𝗶𝘀𝘁 𝘁𝗼 𝘀𝘂𝗽𝗽𝗼𝗿𝘁 𝗰𝗼𝗿𝗽𝗼𝗿𝗮𝘁𝗲 𝗰𝗹𝗶𝗺𝗮𝘁𝗲 𝗿𝗶𝘀𝗸 𝗰𝗼𝗺𝗽𝗹𝗶𝗮𝗻𝗰𝗲. Starting in 2026, many US companies doing business in California must biennially disclose their climate-related financial risks under Senate Bill 261. The California Air Resources Board (CARB) has now released a draft checklist to guide these disclosures. This new checklist helps companies prepare their first report, due on 𝗝𝗮𝗻𝘂𝗮𝗿𝘆 𝟭, 𝟮𝟬𝟮𝟲. The guidance is a baseline for disclosure. It is largely based on the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD). 𝗧𝗛𝗘 𝗙𝗜𝗩𝗘 𝗣𝗢𝗜𝗡𝗧 𝗖𝗛𝗘𝗖𝗞𝗟𝗜𝗦𝗧 𝟭. 𝗣𝗶𝗰𝗸 𝗮 𝗥𝗲𝗽𝗼𝗿𝘁𝗶𝗻𝗴 𝗙𝗿𝗮𝗺𝗲𝘄𝗼𝗿𝗸 Select a framework for reporting climate-related risks and opportunities. Reports may follow TCFD or International Sustainability Standards Board (IFRS S2) or other governmental standards. A report should contain a statement on which reporting framework is being applied, and which recommendations and disclosures have been compiled. 𝟮. 𝗚𝗼𝘃𝗲𝗿𝗻𝗮𝗻𝗰𝗲 Disclosures should describe the organisation's governance structure for identifying, assessing, and managing climate-related financial risks. 𝟯. 𝗦𝘁𝗿𝗮𝘁𝗲𝗴𝘆 The report should describe the actual and potential impacts of climate-related risks and opportunities on a company's operations, strategy, and financial planning. 𝟰. 𝗥𝗶𝘀𝗸 𝗠𝗮𝗻𝗮𝗴𝗲𝗺𝗲𝗻𝘁 The disclosures should describe how the reporting entity identifies, assesses, and manages climate-related risks and how those processes are integrated into the organisation's overall risk management. 𝟱. 𝗠𝗲𝘁𝗿𝗶𝗰𝘀 𝗮𝗻𝗱 𝗧𝗮𝗿𝗴𝗲𝘁𝘀 The report must disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities. 𝗠𝘆 𝗧𝗮𝗸𝗲 This checklist brings clarity to a complex mandate. It sets minimal expectations for companies navigating these new reporting requirements. Companies should not wait for the final rules to be published. They should proactively prepare for compliance by assembling a cross-functional team, identifying existing data, and assessing reporting gaps. Organisations should integrate climate-related risk management into their overall risk management framework. Viewing climate change with the same rigour as any other strategic risk is a forward-looking practice that will build resilience and support investor confidence. For support with meeting SB261 requirements, please get in touch. #ClimateRisk #Sustainability #ESG #CorporateGovernance #Regulation #California #Finance TCFD Source: https://lnkd.in/eWp5ERuX ___________ 𝘍𝘰𝘭𝘭𝘰𝘸 𝘮𝘦 𝘰𝘯 𝘓𝘪𝘯𝘬𝘦𝘥𝘐𝘯: Scott Kelly