Climate change has become a significant concern for businesses and governments worldwide in recent years. Despite this, the agriculture, food, and forest sectors have historically scored the lowest for all nonfinancial sectors’ coverage and quality of climate-related disclosures. According to a report by EY, this trend continued in 2020.
The report found a significant discrepancy across regions, with some companies scoring 10% less for quality than others.
EY examined the four main TCFD areas for agriculture, food, and forest sectors, which revealed several problems.
Regarding governance, the level of disclosure regarding the board’s responsibility and governance structure for climate-related issues needed to be increased. Over one-third of the assessed companies provided some information, which often required more detail. Good performers offered detailed information on their governance structures and their interactions.
Regarding strategy, over half of the assessed companies disclosed climate-related risks, with a quarter giving detailed descriptions of risks, opportunities, and time horizons. Those who responded to the CDP generally provided information aligned with TCFD recommendations on strategy. However, only three companies published detailed information on climate-related scenarios, with two discussing their company’s resilience.
Regarding risk management, the report states that 40% of companies provided some information on climate-related risk identification and management, with the most detailed descriptions found in CDP responses. However, most companies still need to give detailed information on integrating climate risk management into their overall risk management process. The highest performers disclosed an exact materiality process, a report to the board on identified risks, and a description of the divisions responsible for climate-related risk management.
Finally, targets and metrics were the sector’s most commonly adopted TCFD pillar. Sixty-five per cent of assessed companies disclosed quantitative indicators like GHG emissions or energy consumption. Although many companies disclosed Scope 1 and 2 emissions, only a few provided clear information on their Scope 3 emissions.
So what are the risks following this driving change nowadays?
Based on UNEP IF Report, critical climate risks and possible solutions for agriculture are the following:
In conclusion, the agriculture, food, and forest sectors must improve their climate-related disclosures to align with TCFD recommendations fully. There is a need for greater transparency and detail regarding governance, strategy, risk management, and targets and metrics. With climate change becoming a growing concern, businesses in these sectors must prioritize disclosing their climate-related practices to investors, customers, and stakeholders.
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