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TCFD a Welcome Tide of Change

By Rebecca Gale, Head of Sustainability, Waterscan

The UK government’s introduction of mandatory Task Force on Climate-related Financial Disclosures (TCFD) reporting is a welcome evolution in corporate responsibility. It’s a significant step, sending a clear signal that safeguarding the environment on which we all depend is now a critical component of commercial success. Failure to build sustainability into financial and strategic planning builds business risk.

Water rising up

Water is a critical environmental metric of relevance. After all, no business can operate without water. No business will succeed in the future without a good grip on its water data and a sound water stewardship strategy. So it’s good to see water rising up the corporate agenda and, in some cases, incorporated into net zero plans.

Poor water management is recognised as a significant investment risk due to its potential to disrupt normal business operations, a fact long recognised by the World Economic Forum, whose Global Risk Report has ranked water crises among the top 5 risks in terms of impact for the last 10 consecutive years.

Similarly, global disclosure experts CDP reported that its Water A-List grew from 106 to 118 in 2021 as more companies decided to take a leadership position on protecting this vital resource. Eight UK companies made it onto this A-List despite the criteria being strengthened. These include Waterscan customers Coca-Cola Europacific Partners and Sainsbury’s, while Whitbread boosted their score to an impressive B.

Need to do

It’s highly appropriate then, that TCFD is mirroring these global trends by recommending that companies disclose on water. This transition from ‘nice to do’ to ‘need to do’ has not taken any of us working in the sustainability arena by surprise. Indeed, for those used to disclosing environmental performance on platforms like CDP, the process and data requirements for TCFD will pose little challenge.

Currently, the primary TCFD requirement is to consider physical risks like water scarcity, water quality or extreme weather events like flooding. It doesn’t yet explicitly refer to regulatory or reputational water risks. However, given that these can cause equally significant commercial impacts if overlooked, we can anticipate these risks being incorporated in due course.

CDP’s five-year strategy encourages action on more issues including land, oceans, biodiversity, resilience, waste and food. Further, it is integrating water security into financial institution disclosures in what it says moves us towards a more holistic, integrated approach that tracks progress against not just climate, but all environmental metrics of relevance.

Balancing act

As TCFD Chair Mike Bloomberg says, ‘Disclosure is one of the most powerful tools we have in the global climate fight,’ but it’s also a powerful tool in creating sustainable businesses – if the process is embraced and regarded positively. The important thing to remember is that all risks can be balanced with opportunities; opportunities for improving efficiency and generating innovation.

Transparency and engagement are the first steps towards this and I, along with many I’m sure, look forward to collaborating with other forward-thinking companies that want to be a part of this tide of change.