The oil and gas industry continues to receive increasing pressure from investors, communities, governments, and other stakeholders to be more transparent about their operations and the associated climate risks. This can be seen with more countries mandating climate disclosure requirements based on the TCFD framework such as the U.S. SEC’s proposed climate disclosure rules and Canada’s climate disclosures for federally regulated institutions.
As a highly regulated industry, most oil and gas companies are aware of or already reporting using the TCFD’s recommendations but not all are taking full advantage of its benefits. When treated as just another reporting regulation, oil and gas companies miss out on how the TCFD framework can help their organization create more value in the long term.
In this blog, we dive into how the TCFD framework can help oil and gas companies more efficiently and effectively meet mandatory reporting requirements and the demands of stakeholders for climate disclosure and ESG reporting while helping them prepare for the future.
Why is the TCFD Important for the Oil and Gas Industry?
In order to make more informed decisions, investors and other stakeholders need to understand how climate-related risks and opportunities might impact oil and gas companies’ future financial positions. The TCFD framework acts as a guide for organizations to determine and disclose their climate-related risks and opportunities and their potential financial impacts now and in the future.
The TCFD’s reporting process makes it easier for oil and gas companies to provide the relevant information and data that stakeholders are increasingly requesting while gaining valuable insights into their sustainability and ESG programs as well as different future financial outcomes relating to the impacts of climate change.
How the TCFD Framework helps Oil and Gas Companies
When oil and gas companies report climate-related disclosure using the TCFD framework, they are able to easily:
- Adapt to different climate change scenarios
- Maintain and grow financial performance and position
- Make climate-informed strategic decisions
- Manage climate-related risks and opportunities
- Establish and track climate-related metrics and targets
The TCFD’s recommendations also help organizations save time and resources by simplifying the disclosure and reporting process. By utilizing the TCFD framework, sustainability leaders at oil and gas companies can compile their climate-related disclosures in less time with greater efficiency and accuracy.
The TCFD framework can also prepare oil and gas companies for upcoming regulatory measures like the ones mentioned above. The European Union, the United States, and Canada are just a few governments around the world putting into place legislation around climate disclosure and ESG reporting based on the TCFD framework. By implementing the TCFD’s recommendations, oil and gas companies can be one step ahead of these upcoming regulations.
Doing so also helps the oil and gas industry to be more transparent with its various internal and external stakeholders about its climate-related risks and opportunities. Disclosing according to the TCFD ensures oil and gas companies are providing stakeholders with all material and relevant information. Which in turn builds greater trust and engagement between an organization and its stakeholders.
There are four pillars of the TCFD’s recommendations that guide organizations in disclosing their climate-related risks and opportunities and the actions they’re taking to address these issues. These pillars include:
The TCFD framework provides step-by-step guidance for disclosing all the recommendation information for each of these four pillars.
Benefits of Implementing TCFD Recommendations for the Oil and Gas Industry
Some of the potential benefits of implementing the TCFD’s recommendations include:
- Greater access to capital with increased confidence from investors and lenders that an organization’s climate-related risks and opportunities are assessed and managed
- More effectively meeting existing and future disclosure requirements
- Increased awareness and understanding of climate-related risks and opportunities within the organization,
- Better risk management and more informed strategic planning
- Proactively addressing stakeholders’ demands for climate-related information
These are just a few benefits oil and gas companies may take advantage of when implementing the recommendations from the TCFD framework. By following the recommendations organizations can improve their disclosure practices and better manage climate-related risks.
How Software Can Help Oil and Gas Companies Tackle the TCFD
Oil and gas companies are more than familiar with reporting regulations but with the large amount of data needed to report all the TCFD’s recommended disclosures a comprehensive ESG and sustainability software solution is needed to bring together all this data into one system.
FigBytes is a cloud-based ESG platform that helps organizations keep track of their sustainability and ESG reporting, including climate disclosures using global-approved frameworks and standards like TCFD. Working with a partner like FigBytes helps organizations:
- Assess, manage, and report climate-related risks and opportunities
- Meet mandatory disclosure requirements and stakeholder demands
- Reduce disclosure reporting time and costs
Ready to start reporting using the TCFD Framework? FigBytes can help! Our ESG Insight Platform has multiple pre-programmed frameworks including TCFD to help you simplify your ESG and sustainability reporting.