Seeing sustainability reporting through a lens of value creation

Abstract

With a global push towards achieving the Paris Agreement as an imperative, there is a growing focus on how this will be achieved, and the role of organisations in supporting the transition to a net-zero economy and broader sustainability action. Investment decision-making is increasingly being informed by sustainability information, with stakeholders demanding greater transparency and comparability of disclosures, especially climate-related disclosures from organisations typically categorised as heavy emitters. This has ramifications for the oil and gas industry. Today, the sustainability reporting landscape is complicated, with a proliferation of sustainability disclosure frameworks developed by various standard setters. In an effort to standardise disclosures, the International Financial Reporting Standards (IFRS) Foundation launched the International Sustainability Standards Board (ISSB) in November 2021 to develop baseline global sustainability reporting standards including for climate disclosure (based on Taskforce on Climate-Related Financial Disclosures). We have also seen proposals from The US Securities Exchange Commission on climate-related disclosures, which have sparked extensive public comment. Locally, the Government has committed to introducing standardised internationally aligned reporting requirements, including climate-related disclosures, which will be mandatory for certain entities. Regardless of exactly where each jurisdiction lands, it is clear that the sustainability reporting requirements will be significant, leading to increased costs for reporters, resulting in a business imperative to leverage value creation from this compliance transformation. Indeed, organisations putting sustainability at the heart of their business strategy will be the game changer in the new sustainable and equitable energy transition. And just as there will be leaders, there will also be laggards who risk value erosion.