Why is climate and nature disclosure important for board directors?
Climate and nature disclosure is a crucial aspect for organisations and their boards:
- The information revealed by climate and nature materiality assessments (prior to disclosure) is key for board directors to make strategic decisions to manage natural capital risks and opportunities. This exercise goes beyond complying with regulation or stakeholder expectations, as it influences the core of the business strategy. The findings could influence climate and nature governance, as the board monitors the organisation’s progress against net-zero and nature-positive targets, and hold executives accountable.
- Board directors should be aware of the impact of climate and nature disclosures on different stakeholders. Investors use such disclosures to make financial decisions. Regulators and local communities also make decisions based on disclosed information and increasingly demand transparency. Some organisations, such as the World Benchmarking Alliance, compile this information and evaluate companies on their overall sustainability performance for benchmarking purposes. Developing a robust climate and nature disclosure process can help organisations maintain a competitive edge and foster stronger stakeholder relationships.
- In many jurisdictions, climate and nature disclosure is mandated by law and board directors must ensure compliance. This may be part of the disclosure obligations of board directors (see map section). Therefore, it is important to understand whether mandatory disclosure applies to an organisation or if it wishes to voluntarily report its natural capital-related issues, as is best practice.