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EC’s climate-related reporting depends on robust governance
February 2019

ECIIA has welcomed the European Commission’s latest proposals on the reporting requirements for businesses relating to how their activities impact the climate. In particular, the document – published by the Technical Expert Group on Sustainable Finance– says that organisations’ reporting methods should depend on how far they are exposed to climate change issues.

The proposal suggest three types of non-binding disclosure, ranging from businesses that should disclose, those who should consider disclosing, to those who may not need to – all depending to how much their activities impact (or are impacted by) the environment.

“The approach with different layers of reporting for different levels of exposure to climate-related risk is very good because there is no one-size-fits-all solution for this kind of disclosure,” Farid Aractingi, ECIIA President, says.

In its response to the EC’s consultation, ECIIA said that one of the challenges in climate-related, non-financial disclosure is to ensure that controls are effective, that the right things are measured, and that systems and processes are in place to capture the data needed for reporting purposes.

“The quality of  those systems and outputs must be, as far as possible, evaluated and stakeholders assured on them,” said ECIIA’s response. “Sound governance, risk management and control processes are a fundamental foundation for good reporting.”

ECIIA supports the integrated thinking and reporting approach contained in the document as a way of coordinate organisational efforts and strategies.

“This can be achieved by ensuring that all layers of the control framework, operational management, specialist compliance and risk management, assurance providers and those with ultimate responsibility for corporate governance are closely aligned,” said the ECIIA’s consultation response. It added that the three lines of defence model was the best way to achieve these aims.

This model puts internal auditors in an ideal position to provide assurance on how well the disclosure mechanisms are working how well the overall governance processes support climate-related disclosure.

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