EY has assessed the quality of climate-related disclosures of 34 Dutch companies and analyzed how they compare to their peers in Europe. We scored companies on the Task Force on Climate-related Disclosures (TCFD) recommendations.
In this report, we also discussed the national climate agreement (Klimaatakkoord) and the relevance of physical risks for companies in the Netherlands. Reach out to our specialised EY climate team for further information on how climate change is impacting your business.
Climate disclosure quality is relatively poor for Dutch companies
Climate risk disclosures by Dutch companies are relatively good in terms of the numbers of elements discussed. However, the level of detail is often limited and the Netherlands ranks relatively low compared with other European countries, such as UK, France and Germany.
Quality also differed across sectors with financials scoring relatively low, while nonfinancial carbon-intensive companies achieved the highest scores.
Our analysis shows three improvement areas for all sectors. The first is formulating carbon reduction targets. Most companies are measuring climate metrics such as carbon emissions, but few have set reduction targets.
The second is the use of scenario analysis as a tool to test resilience of strategy and business model. Climate scenario analysis is still limited in all sectors.
Finally, physical risks disclosures are suggested to improve, as they do not reflect the risks posed by the position of the country in a delta region.
Companies have just enough time to start preparations on elements and KPIs to report on
Preparing for EU disclosure requirements
Although the TCFD framework is voluntary, climate-related reporting will likely become compulsory in the EU. In January 2019, the EU technical expert group (TEG) on Sustainable Finance issued a draft report with climate-related disclosures to be added to the Non-Financial Reporting Directive 2014/95/EU. Whilst many of TEG proposed suggestions overlap with TCFD, the EU approach is broader as it includes the company’s impact on climate, and more.
After receiving responses from 70 organizations, the European Commission is expected to publish its updated guidelines in June 2019. It will probably take a couple of years before these guidelines need to be included in company’s annual reports. Therefore, companies have just enough time to start preparations on elements and KPIs to report on in due course.
Advancing your climate strategy
Climate risks are more complex and longer term in nature than most traditional business risks. This has contributed to a lack of understanding and measurement of their potential impacts. EY can help companies that seek to understand their climate risk exposure by answering questions such as: