Tag Archives: Sustainability strategy

Setting effective metrics and climate targets in line with ASRS

Previously in the series

Before we look at developing metrics and setting targets in line with ASRS, ensure you’re up to date with our discussion on climate risks and opportunities and developing a carbon footprint under ASRS.

Introduction

As the Australian Sustainability Reporting Standards (ASRS) near full implementation, it’s critical for businesses to grasp the importance of establishing and managing climate targets and metrics. These requirements are not just regulatory formalities but strategic tools that can drive business resilience and sustainability in a changing climate. This extensive guide analyses the ASRS’s detailed requirements for metrics and targets, offering actionable insights for your business to align with these new standards.

Join Barbara Albert, our Co-CEO, as she discusses the strategic importance of climate metrics and targets.

The strategic importance of climate metrics and targets under ASRS

Why are metrics and targets under ASRS so crucial? Beyond the obvious regulatory compliance (read this blog post for more information on thresholds), they drive competitive advantage in several ways:

1️⃣Investor confidence: Clear, quantifiable targets and metrics enhance transparency, boosting investor confidence where a proactive response to the climate change challenge by businesses is valued.

2️⃣Operational improvements: Metrics and targets drive operational efficiencies by focusing efforts on measurable sustainability outcomes.

3️⃣Market differentiation: Demonstrating commitment to sustainability and transitioning to a low carbon economy can distinguish your brand in a competitive market, attracting customers and top talent.

ASRS requirements for climate metrics and targets

ASRS mandates comprehensive disclosures that allow stakeholders to assess your company’s performance against climate-related risks and your progress towards decarbonisation goals. These disclosures should include:

➡️Performance metrics: These should reflect direct measures such as GHG emissions, and indirect impacts like financial implications of climate risks.

➡️Progress on targets: Detailed reports on the steps taken towards achieving climate targets are essential, including strategies and action plans.

➡️Compliance with legal targets: Any mandatory targets set by legislation must also be disclosed, with progress reports and compliance strategies.

Join Barbara Albert, our Co-CEO, as she presents a three-step guide for how you can set effective climate metrics and targets under ASRS.

Steps for setting effective climate metrics and targets under ASRS

Step 1 – Establish a baseline

Calculate current emissions across all three scopes to establish a baseline. This quantifies the challenge and helps in setting realistic and impactful targets. For more information on developing an ASRS-compliant carbon footprint, please read this blog post.

Step 2: Choosing the right metrics

Select metrics that directly relate to climate factors affecting or impacted by your business operations. These may include:

  • Greenhouse gas emissions: Total emissions by scope (Scope 1, 2, and 3).
  • Energy usage: Efficiency and sources of energy.
  • Water and waste management: Metrics on reduction, recycling, and reuse.

Incorporating both leading and lagging indicators provides a balanced view of current performance and foresight into future improvements. For instance:

  • Leading indicators: Such as investments in renewable energy or sustainability training programs, provide early insight into the potential effectiveness of initiatives.
  • Lagging indicators: Like total GHG emissions or energy consumption, offer concrete data on the outcomes of implemented strategies.

Additionally, it’s important to differentiate between absolute and intensity-based metrics:

  • Absolute metrics quantify the total impact, such as total greenhouse gas emissions or total water consumption. These metrics are essential for understanding the overall scale of environmental impacts and are straightforward in tracking changes over time.
  • Intensity metrics express environmental impact relative to a business activity or economic output, such as emissions per unit of production or per dollar of revenue. These metrics are useful for comparing performance across different sizes of businesses or sectors, allowing for benchmarking against peers and industry standards.

Both types of metrics are important. Absolute metrics help track progress towards total impact reduction goals, while intensity metrics provide insight into efficiency improvements and can normalise performance across varying business scales. Under ASRS, you need to disclose whether the metric is an absolute measure, a measure expressed in relation to another metric or a qualitative measure (such as a red, amber, green—or RAG—status).

One final word before we move on to step 3: Developing meaningful climate metrics presents challenges, particularly in data collection and maintaining a balance between detail and manageability. Ensuring consistency and comparability across the industry is crucial for benchmarking and credibility.

Step 3: Developing SMART targets

Targets should be:

  • Specific: Clearly define what is to be achieved.
  • Measurable: Quantify or at least suggest an indicator of progress (refer to your metrics).
  • Achievable: Attainable and realistic within a given time frame. Consider using milestones and interim targets to gauge progress and to keep you on track.
  • Relevant: Relate to your business’s operations and strategic goals.
  • Time-bound: State when the result(s) can be achieved and the base period from which progress is measured, if applicable.

While ASRS does not specifically mandate that your targets align with the latest climate science, the standards do require disclosure of how the latest international climate change agreements have informed your targets. Although not a requirement under ASRS, aligning your targets with science is widely regarded as best practice.

Remember that climate targets should not be static. Regular reviews and adjustments in response to technological advances, regulatory changes, and market dynamics are essential. Establish a routine review process to assess progress towards targets, adapting strategies as needed to respond to new challenges and opportunities.

Integrating climate metrics and targets into your business strategy

Effective climate action requires integrating metrics and targets into all aspects of your business strategy:

1️⃣Governance and oversight: Establish board oversight and accountability mechanisms to ensure climate targets are prioritised at the highest levels of the company.

2️⃣Strategic integration: Incorporate climate risks into the overall risk management framework, using established targets as benchmarks for mitigation efforts.

3️⃣Risk management: Incorporate climate considerations into your overall risk management strategy, identifying and mitigating potential impacts on your business operations and financial performance.

4️⃣Investment decisions: Align investments with climate objectives, ensuring that capital expenditure contributes to achieving the set targets.

Further information on the disclosure of cross-industry metric categories

Here are cross-industry metric categories you need to report under the Australian Sustainability Reporting Standards.

➡️Climate-related transition risks: The amount and percentage of assets or business activities vulnerable to climate-related transition risks.

➡️Climate-related physical risks: The amount and percentage of assets or business activities vulnerable to climate-related physical risks.

➡️Climate-related opportunities: The amount and percentage of assets or business activities aligned with climate-related opportunities.

➡️Capital deployment: The amount of capital expenditure, financing or investment deployed towards climate-related risks and opportunities.

➡️Internal carbon prices: You need to disclose whether you are applying a carbon price in decision-making (e.g., investment decisions, transfer pricing and scenario analysis) and the price for each tonne of GHG emissions you use to assess the costs of your carbon footprint.

➡️Remuneration: A description of whether and how climate-related considerations are factored into executive remuneration and the percentage of executive management remuneration recognised in the current period that is linked to climate-related considerations.

Further information on GHG emissions targets under ASRS

For each greenhouse gas emissions target you need to disclose:

  • Which greenhouse gases are covered by the target
  • Whether Scope 1, Scope 2 or Scope 3 greenhouse gas emissions are covered by the target
  • Whether the target is a gross or net greenhouse gas emissions target
  • Whether the target was derived using a sectoral decarbonisation approach
  • Your planned use of carbon credits to offset greenhouse gas emissions to achieve any net greenhouse gas emissions target. In explaining your planned use of carbon credits you need to disclose information about
      • The extent to which, and how, achieving any net greenhouse gas emissions target relies on the use of carbon credits
      • Which third-party scheme(s) will verify or certify the carbon credits
      • The type of carbon credit, including whether the underlying offset will be nature-based or based on technological carbon removals, and whether the underlying offset is achieved through carbon reduction or removal
      • Any other factors necessary for users of your general purpose financial reports to understand the credibility and integrity of the carbon credits you plan to use (for example, assumptions regarding the permanence of the carbon offset).

Conclusion

Adopting a strategic approach to setting and reporting climate targets and metrics as outlined by ASRS not only ensures compliance but also positions your business as a leader in sustainable practice. By leveraging these standards, you can transform regulatory requirements into opportunities for innovation, competitive advantage, and enhanced stakeholder trust, ultimately driving your business towards greater sustainability and resilience in the face of climate change.

How we can help

As you navigate the complexities of setting meaningful climate metrics and targets—whether for ASRS compliance or broader sustainability initiatives—our firm is here to guide you every step of the way. Our team of experts offers tailored consulting services that align with your unique business needs and sustainability goals. We provide strategic insights and practical solutions to ensure your climate strategies are not only compliant but also effective and ambitious.

Contact us today to learn how we can help your business achieve its environmental objectives and enhance its sustainability profile. Let us support you in transforming these challenges into opportunities for growth and leadership in sustainability.

Next in the series

In our next blog post, we’ll discuss what you need to disclose in your ASRS sustainability report and what additional voluntary reporting you can consider.

Our ASRS complimentary course

In our ongoing dedication to assist businesses in their sustainability endeavours, we’ve revamped this multi-part blog and video series into a complimentary online course. Alongside the video content, the course offers additional resources and quizzes designed to enhance your comprehension of the ASRS.

Kickstart your journey towards mastering the ASRS. Join now by following this link. Don’t hesitate to share this opportunity within your network to collectively advance the climate agenda.