A detailed analysis of mining, oil, and gas companies by ACCA (the Association of Chartered Certified Accountants) and the University of Glasgow Adam Smith Business School reveals the need for more clarity and depth in climate change-related disclosures.
The scrutiny of 60 companies’ 2019 annual reports indicates that many companies do not sufficiently engage with disclosures about their climate change-related risks. With COP26 taking place in Glasgow in November, this analysis comes as a wake-up call, with the report authors saying there is a more urgent need for improving climate change-related disclosures.
Richard Martin, head of corporate reporting at ACCA says: ‘Our study sheds light on the current climate change-related reporting practices of these companies, revealing that they provide, on average, overly generic disclosures and they refrain from discussing how climate change risks affect their operations. Only a small number of companies acknowledge the central role of climate change on their current and future activities.’
Diogenis Baboukardos at the University of Essex and the lead researcher in this project, adds: ‘Considering that companies in the extractive industries contribute significantly to the global greenhouse gas (GHG) emissions, climate change can no longer be seen as a side effect of their operations but as a central issue for their business model and a core business risk.’
Key findings in Climate change risk-related disclosures in extractive industries reveal:
Read More: ACCA calls for a more inclusive approach to economic recovery
Richard Martin concludes: ‘Our analysis raises questions over the consistency, relevance, and decision-usefulness of these companies’ financial reporting. In the management report – the ‘front end of the annual report – though most make reference to the issue, not all by any means provide adequate information about how climate change risk may impact their reserves, the results of different climate change scenarios, or how their business model is adjusting to these immense risks.’
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