Advancing ESG Strategy and Creating a Competitive Advantage With Climate-Related Disclosure

Discussing how companies can move from ESG compliance to competitive advantage
Jul 1, 2022 8:00 AM ET
Article

Tetra Tech’s Rachel Bigby, Jennifer Warfield, and Mary Beggs discuss what publicly traded companies can do to set up for disclosure readiness, prepare a compliance strategy to address upcoming climate change disclosure requirements, and advance their Environmental, Social, and Governance (ESG) maturity.

For many years, companies that established a public net zero greenhouse gas (GHG) emissions target were viewed as having advanced ESG strategies that set them apart from competitors. However, a net zero target is no longer viewed as adequate.

The U.S. Securities and Exchange Commission’s (SEC) climate disclosure regulation is a monumental shift from companies voluntarily developing a sustainability strategy to requiring registrants to provide annual data as an indicator of their ESG performance. Additionally, companies will be required to provide complete and valid documentation to back up their climate commitments. Whether a company is already disclosing GHG emissions and climate strategy or has yet to start, the proposed SEC legislation and the upcoming International Sustainability Standards Board (ISSB) standards provide compelling incentive for companies to proactively inventory their practices, manage risks, and capture opportunities.

The SEC draft rules emerged from more than a decade of rising demand from investors, the recommendations of an ESG Advisory Subcommittee, and a year-long public comment period. The proposed new SEC legislation incorporates frameworks on climate risk and GHG emissions from the Taskforce on Climate-related Financial Disclosures (TCFD) and the Greenhouse Gas Protocol. It seeks to provide stakeholders with consistent and reliable information on the potential impacts that climate-related risks may have on business to inform investment decisions.

With promulgation of the SEC rules and issuance of the ISSB standards anticipated at the end of this year, 2023 will bring a significant shift in how companies track and report on climate resiliency and GHG emissions. Companies can take several approaches, depending on where they are and where they aim to be along the ESG maturity spectrum. While the SEC rules are only applicable to certain publicly traded companies, companies outside of the SEC’s jurisdiction will be affected, given interrelated supply chain connections and general business advancement goals in the private sector.

We encourage companies to use Tetra Tech’s GHG Emissions Milestones of ESG Maturity and Climate Risk and Resiliency Milestones of ESG Maturity (see full article) to reflect on your company’s current sustainability practices and to inform your unique strategy and action plan. Increasing the sustainability practices within your organization can be an iterative process. No matter where you fall along the continuum, you can make frequent process improvements and take bold action to mature beyond regulatory requirements to improve business outcomes.

Whether the SEC’s proposed rule directly or indirectly affects your company, Tetra Tech can be an asset to your team as you work on what’s next for your company’s ESG progression. From strategy development to engineering and implementation solutions, Tetra Tech is Leading with Science® to help our clients reach their sustainability and ESG goals.

We cover approaches to prepare to comply with climate disclosure requirements—and move beyond compliance to create a competitive advantage—in our paper, “How Upcoming ESG Guidelines and Requirements for Climate-Related Disclosures Can Enhance a Company's Sustainability Position.”

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