Despite the constant talk about climate change, most boardroom audit committees around the world don’t discuss climate on a regular basis or consider themselves to be knowledgeable about climate change, according to a new survey.
The survey, released Wednesday by Deloitte Global, found that half of the 350 audit committee members polled in 40 countries don’t believe they are well-equipped to fulfill their climate regulatory responsibilities. Nearly 60% admitted they do not discuss climate on a regular basis and 47% do not consider themselves “climate literate.”
The survey’s release comes the same week that the United Nations is convening its COP26 climate change conference, bringing together world leaders, climate experts, environmental activists as well as financial professionals.
“The business community must address the urgent challenge of climate change. Through greater education and engagement, audit committees can help their organizations take more decisive climate action,” saif Deloitte Global board chair Sharon Thorne in a statement. “This means ensuring their organizations are assessing their own environmental risk profiles, establishing mitigation plans to reduce their carbon footprints, ushering in global ESG standards, and accurately reporting on their progress.”
The main obstacle cited by the audit committee members polled was a lack of clear strategy (65%), followed by poor data quality, which can lead to a shortage of actionable insights for climate decision-making. When asked about external issues, 60% of the survey respondents pointed to the lack of global reporting standards.
That may be changing next year when the International Financial Reporting Standards Foundation launches the International Sustainability Standards Board. The IFRS Foundation announced the formation of the ISSB at the COP26 conference on Wednesday (see story). The ISSB will bring together several of the existing standard-setters, with the Value Reporting Foundation — the umbrella organization for the Sustainability Accounting Standards Board and the International Integrated Reporting Council, which merged earlier this year — and the Climate Disclosure Standards Board, an initiative of the Carbon Disclosure Project, agreeing to be “consolidated” into the ISSB by June 2022.
However, Deloitte Global’s research found there is work to be done internally by organizations to prepare for the regulatory outcomes that could be on the way, with 42% of respondents saying they are currently disappointed in the strength and speed of their organization’s climate response. A 70% majority of respondents admitted they haven’t done a comprehensive climate change assessment so financial statements don’t really reflect the consequences.
That means companies need to do more to prioritize the threat of climate change. The survey respondents recommended three top needs for climate progress: improving climate education for audit committees (87%); ensuring good management information as part of regular reporting to the board (79%); and having internal alignment between the corporate strategy and the climate strategy (78%).
Thomson Reuters tax alliance
Separately, Deloitte’s tax practice announced a strategic alliance Thursday with Thomson Reuters. Deloitte Tax LLP and Thomson Reuters plan to help corporate tax and legal departments across the world transform how they work, combining the content, software and technology of Thomson Reuters with Deloitte’s capabilities in consulting and technology implementation. The alliance aims to bring solutions for in-house tax and legal teams to deal with global compliance and regulatory demands.
“Now more than ever, digitization is becoming crucial to the effectiveness of tax and legal departments,” said Deloitte Tax LLP chairman and CEO Steve Kimble, in a statement. “Through this alliance, we will deliver tailored technology implementation solutions to help position our clients to focus on what they do best — deliver enhanced value in their organizations, leveraging robust data for decision-making and cost control, backed by the unmatched global breadth and depth of Deloitte and Thomson Reuters.”
The two organizations have worked together for years. “We’re thrilled to build on our longstanding relationship with Deloitte through this new alliance,” said Sunil Pandita, president of corporates at Thomson Reuters, in a statement. “Thomson Reuters and Deloitte have long worked together to support corporate tax departments as they face great transformation and change, from regulatory developments to digital disruption. We are eager to continue that relationship, as well as add a new focus around the corporate counsel. We continually see in-house tax and legal departments under immense pressure to always be fast and accurate, while combatting constrained resources and an ever-evolving business landscape. This alliance between Thomson Reuters and Deloitte will allow us an opportunity to help our customers solve their biggest pain points through content-driven technology solutions.”