Temperatures are rising in your boardroom

It may be winter outside, but inside the boardroom temperatures are rising.

• UK government targets at least 68% reduction in greenhouse gas emissions by 2030 compared to 1990 levels.
• Chancellor announced that from 2023 all publicly listed UK companies with a premium listing will be required to “comply or explain” with the Taskforce on Climate-Related Financial Disclosure’s (TCFD) requirements. Rules will then be tightened and extended further in 2025, subject to consultation.
• Bank of England announced that the central bank would carry out its first climate stress test exercise in June 2021.

Currently, around 9,600 companies, including 92% of the FTSE100, report voluntarily through CDP’s independent TCFD-aligned disclosure platform.

It is clear that much needs to be done to achieve the government’s targets and, according to the voluntary reporting, many organisations have started taking steps towards this.

The question for internal auditors is also clear.

• What steps are you and your organisation taking?
• Are they a side-shuffle or giant strides?

According to our latest research, Organisations Preparedness for Climate Change, too many of you responded that you were ‘unsure’ of what your organisation was doing. Unsure of its strategy, carbon reduction targets, TCFD reporting...

It is unacceptable for internal auditors to be unsure.

Climate change, climate assurance, climate risk adaptation...whatever terminology you want to use is not a topic to put on the slow burn pile alongside auditing culture and using data analytics. Sometimes, as internal auditors we can be cautious in adapting, slow to change and frustratingly over analytical - our profession and our planet do not have the luxury of time when it comes to climate change.

We all need to ask questions of ourselves to be of value to our organisations.

• Do I really understand the issue?
• Have I made it a personal priority?
• Am I fully aware of the risks?
• What role do I have in the solution?
• Am I doing all that I can?
• Who do I need to hold to account?
• Am I motivated to act?
• Why I am now feeling uncomfortable?

These are tough questions, it's okay to feel uncomfortable. We are challenging your emotional and intellectual compass. However, it is not okay to accept it and do nothing.

As your professional body, we are also asking these questions of us as an Institute. At a recent meeting with heads of internal audit, John Wood our CEO, said we all need to do more. We need to ask ourselves if we our doing our best and apply first principles. 

Thinking about issues from first principles enables us to see what is truly possible without the constraints of conventional wisdom or experience. When you start to explore the principles of ‘why’, you can decide if the methods you are using, the ‘how’ actually make sense.

Asking the five whys is second nature to internal auditors. It is also one of the basic elements of first principles and is useful when thinking about climate change: a novel, complex problem.

We will be doing this as an Institute in 2021. 

Will you make the same commitment?