Essential Questions for Boards: Preparing Your IT Team for Climate Reporting
As the deadline for mandatory climate reporting approaches, organisations must ask: Is our enterprise technology team prepared to meet the challenges ahead? Beginning January 1, 2025, the first of 6,000 Australian businesses will begin preparations for this significant shift, which will be phased in over three waves and will impact many more as sustainability becomes a focal point in corporate procurement processes.
Immediate reporting mandates require organisations to account for both direct (Scope 1) and indirect (Scope 2) emissions, including those generated by company ICT facilities (e.g., owner-operated data centres) and purchased electricity consumed by devices in offices and remote locations, such as homes. Over time, organisations will also need to calculate and disclose upstream supply chain and downstream activities (Scope 3 emissions), which encompass embodied emissions in products or services, including Purchased Goods & Services, Capital Goods, Leased Assets, and Transport & Distribution activities.
These reporting requirements cover a broad range of enterprise IT service lines, including End User Devices, data centres (both owned and third-party), Cloud computing (including AI), Software (including SaaS), IT Services, Telecom, and Internal Services.
Importance of Board Accountability
Boards will play a crucial role in ensuring management meets these mandatory climate reporting obligations. As the regulatory landscape evolves from voluntary disclosures to comprehensive mandatory non-financial climate reports, boards must be vigilant to mitigate significant litigation risks associated with these disclosures:
1. Increased Accountability: Boards are accountable for ensuring accurate and meaningful disclosures of climate-related risks and opportunities. Non-compliance can result in legal repercussions.
2. Serious Breaches: The Australian Securities and Investments Commission (ASIC) has indicated it will pursue serious breaches of climate change reporting obligations. Boards must remain vigilant to avoid falling into this category.
3. Stakeholder Scrutiny: As transparency becomes the norm, stakeholders — including investors, customers, employees, and regulators — will scrutinise reports closely. Inaccuracies or misleading statements can lead to legal claims or reputational damage.
4. Management Collaboration: Boards must work closely with management to ensure disclosures are complete and accurately reflect the organisation’s climate strategies. Failure to detect inaccuracies could result in liability.
5. Risk of Greenwashing Claims: With increased regulatory focus on preventing greenwashing, boards must avoid making unfounded claims about climate initiatives, which could lead to legal challenges. ASIC has already initiated 47 regulatory interventions since April 2023 to address greenwashing misconduct.
Assessing IT Team Preparedness
To prepare for these impending obligations, boards should assess their IT teams with the following questions (answer with Yes or No; if in doubt, answer No):
Is there a designated individual or team responsible for overseeing ICT Environmental Sustainability within your organisation?
Does your organisation have sustainability experts on staff, and is relevant information consistently shared with the IT organisation?
Can you and your IT teams explain the fundamental concepts of climate change and the critical need for greenhouse gas reduction actions within this decade?
Are you able to describe the Greenhouse Gas Protocol, particularly the distinctions between Scope 1, Scope 2, and Scope 3 emissions?
How does your organisation’s software development and usage contribute to global warming?
When selecting or developing tools to evaluate your Enterprise ICT environmental impact, does your organisation consider methodology, metrics, and auditability?
Does your organisation have a baseline measurement for its annual enterprise ICT carbon expenditure?
How often does your organisation review and monitor monthly carbon data provided by your ICT service providers?
Can you contextualise the organisation’s ICT expenditure within overall carbon spending and reduction objectives?
Has your organisation set specific targets for reducing its ICT carbon expenditure
Does your organisation consider the carbon intensity of the power grid when utilising IT services?
Do your IT teams prioritise efficiency in decisions about IT resource usage?
Are you equipped to present a compelling business case for minimising your organisation’s IT carbon footprint?
Do your teams utilise existing automated processes and data from other teams to analyse and report on IT economics or emissions?
Are you aware of the broader environmental impacts of IT usage beyond just greenhouse gas emissions?
Long-Term Sustainability Goals
Achieving sustainability goals takes time and commitment. For IT functions, the long-term objective is to transition from Passive Reporting to Actionable Informed Insights.
Long Term Goal for Enterprise IT Sustainability
Add Value by Moving on from Passive Reporting to Actionable Insights
In organisations with significant reliance on third-party providers and to avoid litigation risk, consider additional questions:
Does the service provider’s sustainability data cover all Scope 1, 2, and 3 emissions, as well as water use?
What is the age of the carbon data (hourly, daily, monthly, quarterly, etc.)?
What is the calculation period for carbon data (hourly, daily, weekly, monthly)?
Does the service provider cover all services or only partial coverage?
Is reporting provided at a detailed product/resource instance level or at an account level?
Is data provided with a geographic breakdown (country or regional level)?
Is API (Application Programming Interface) access offered for integration/automation into organisational systems and processes?
8. Is the service provider ISO 14064 Verified?
Call to Action
As the deadline for mandatory climate reporting approaches, organisations must prioritise their preparedness. Boards should actively engage with their IT teams to ensure they have the necessary knowledge, resources, and strategies for effective climate reporting. Conduct the assessment outlined above to gauge your team’s readiness and identify areas for improvement. Collaborate with sustainability experts, develop a clear action plan, and set measurable targets for reducing your organisation’s carbon footprint.
Conclusion
In an era where transparency and accountability in climate reporting are mandatory, organisations must recognise that non-compliance has significant implications beyond legal repercussions, affecting reputation, stakeholder trust, and long-term viability. By proactively addressing climate reporting obligations and embracing sustainable practices, businesses can mitigate risks, enhance their brand image, and contribute positively to the global effort against climate change. The journey toward environmental responsibility begins now and requires commitment from all levels of the organisation. Let us move forward with determination and align our IT operations with our sustainability goals for a greener future.