Just released: new CDSB Framework for reporting on environmental information & natural capital

CDSB framework coverOn June 8th in London the Climate Disclosure Standards Board launched its Framework for reporting environmental infortmation and natural capital. Key features of the Framework are its focus on reporting environmental information linked to strategy, overall performance and financial information in mainstream reports which is useful to providers of capital. A key objective is to ‘enable and encourage investor decision making on the allocation of financial capital which supports environmental protection’.

The expectation is that if providers of capital have access to such information they will make investment and lending decisions which are compatible with long term sustainable development needs and economic returns.  This is important because a lack of information on longer term environmental risks and opportunities and associated economic benefits limits investment in infrastructure which brings environmental benefits.  It also potentially increases the cost of capital as investors overprice risk.  Hence organisations which report using the new Framework should increase their access to lower cost capital.

The release of the new Framework follows a Consultation Framework released in October 2014 and a 2010 Climate Change Reporting Framework which focused on the risks and opportunities presented to organisations by climate change. A revision of the Climate Change Reporting Framework in 2012 reflected updates to IASB pronouncements and practices established through the adoption of the Greenhouse Gas Protocol.

The newly launched Framework provides guidance to organisations in reporting: environmental results; environmental risks and opportunities; environmental policies, strategies and targets; and, performance against environmental targets.  It supports organisations in complying with increasing legislative and Stock Exchange requirements and allows them to demonstrate leadership and accountability.  The environmental impacts covered by the Framework include: GHG and other emissions; renewable/non-renewable energy generation and use; land use; water use; and, waste and spillages.

The Framework encourages organisations to report on the natural capital dependencies adopting the IIRC’s definition of natural capital.  Further, organisations “should consider the connection between their environmental impacts and natural capital dependencies and overall trends in natural resource depletion or degradation” and report activities and outputs that might limit the availability or quality of natural capital available for others or its own ability to operate its business model or execute its strategy. The Framework does not provide guidance for valuing natural capital.

Particular attention is paid to the auditability of reported information.  The Framework provides guidance on determining which information is material.  Material information is a subset of ‘relevant’ information which must have value “as in input to the predictive processes used by investors to inform their own expectations about the future performance of the business”.  This includes forward looking information. The Framework discourages disclosure of information designed to influence decision making “in order to achieve a predetermined result or outcome” i.e. whilst information should be capable of influencing user decisions, it must be neutral.

Connection with other information in the mainstream report can be demonstrated by, for example, showing how the environmental information provided links with strategy and financial performance including how environmental risks (examples provided) and opportunities might influence future strategy and ability to create value in the long term.

Overall the Framework is an important step forward in providing information useful to decision making and thereby influencing investment and lending decisions in a manner which consistent with environmental protection and long term economic benefits.

Whilst the stated purpose of the Consultation Framework seemed to have a number of inconsistencies, the purpose of this new Framework is clearly articulated and to my mind appropriate.

The issues with regard to supply chain information which I raised in response to the Consultation Framework have been addressed in a statement released by the CDSB to accompany the Framework.  The CDSB Framework seeks to ensure, as far as possible, that the organisational boundary used for environmental reporting purposes, along with approaches to materiality, is the same as is used for the mainstream report. Further, the Framework sets out circumstances in which environmental information pertaining to activities outside the organisation’s boundary should be disclosed.

The announcement of a statement of collaboration between the CDSB and the IIRC states: “CDSB and the IIRC believe that climate change and the protection of natural capital are core issues for business.”  It acknowledges the complimentary roles the two organisations have in “championing the link between corporate reporting and sustainable capital markets.”

Lois Guthrie

Lois Guthrie

Speakers at the launch included:  Anders Borg, Former Minister of Finance, Sweden; Chair, World Economic Forum’s Global Financial System InitiativeMichael Izza, CEO, Institute of Chartered Accountants in England and Wales; and, Lois Guthrie, Founding Director, Climate Disclosure Standards Board.


Carol Adams is a member of the CDSB’s Technical Working Group.  Other members of the TWG which oversaw the development of the Framework are from the largest accounting firms, professional accounting bodies and companies such as Maersk and Nestlé.

Related articles on this website

The Climate Disclosure Standards Board (CDSB): A response to the consultation draft Framework

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  1. David York says:

    The problem with this is that it ignores 99% of world business. The real world is composed of small businesses – none of which will read this or be capable of implementing its complexity. Do something for the masses instead.

  2. Yes, I agree if we are going to bring real change in how sustainable reporting and accountability for environmental impact as much as the investment into financial reporting. We need to ask what is the intrinsic value that is going to draw the wider business community into embrace the change? The solution to this issue may be in how to journey with the community and business rather than through government legislation. Remembering that in Australia’s ecosystem over 60% of employees are engage in SME not big institutions, corporate or government departments. We don’t have to dumb due diligence down but the language we use is important. Another insensitive could be additional funding when providing evidence based reporting. Just a thought for the discussion.

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