The new measures announced by the United Kingdom’s Chancellor Rishi Sunak to make the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) mandatory are a welcome, if overdue, step.

This will make the UK one of the first in the world to do this, and hopefully more will follow. However, we should be under no illusion: this remains one small step. The path to managing the climate emergency requires a giant leap — or more accurately, several of them.

The market is screaming out for a new approach to assessing climate risk. TCFD is a starting point, but it lacks a formal structure and oversight of the data supplied. Investors and customers deserve more from businesses than what TCFD too often becomes: a tick-box exercise.

However, Sunak’s moves have opened up a broader conversation on improving financial disclosure on climate related issues. This is an essential first step to finding solutions to the question of responsibility over and what action to take on assets.

Looking ahead to 2021 and beyond, what are the alternatives to TCFD and how should businesses accurately measure and communicate their impact?

The limitations of ESG and TCFD

Mark Carney, a former governor of the Bank of England and a UN special envoy for climate action and finance, has stated that environmental social and governance (ESG) metrics used by investors to evaluate companies’ sustainability credentials are inconsistent and poorly defined.

What this results in is that neither investors nor businesses are able to accurately measure the negative or positive contribution to climate challenges that an organization makes. While ESG relates to a broader term describing a more responsible approach to investment, much of the criticism that those such as Carney have highlighted of it can also be levelled at other forms of standardization like the TCFD recommendations.

In fact, Carney’s criticisms, while valid, don’t always go far enough. The standardization of information and metrics related to climate as led by the financial sector can promote the interests of large institutional investors over the planet itself. While having comparable data is useful, and can make reporting easier for large investors or businesses, it doesn’t necessarily drive climate resilience.

Instead, it too often makes the process a box-ticking exercise. This further leaves businesses open to accusations of greenwashing and a failure to provide the information investors and customers need to make an informed decision. This is evident in the fact that the EU Alliance for Corporate Transparency (ACT) found that while there was a lot of sustainability reporting taking place, much of it was of poor quality.

Perhaps most telling is that just 14% of companies reported on how they align their climate-change targets with the Paris Agreement goals — the bare minimum needed to keep global warming below a catastrophic 2 degrees Celsius.

Amongst all the confusion, and opaque information related to these climate acronyms, there’s a real risk that businesses simply don’t report how the climate is impacting them and vice versa. Or even more dangerously, don’t even understand these issues in the first place.

Thinking beyond standardization

Moving forward, businesses must be more specific about their climate impact and responsibilities. This is key to both informing investors and customers, and giving businesses themselves the tools they need to respond to climate issues.

Because foresight and swift action are key to tackling climate challenges, whether that’s understanding the flood risk of a new HQ’s location or the risk of rising average temperatures impacting an international supply chain.

This is where climate intelligence comes in. While broad and static metrics such as a carbon output are important, they need to be supplemented with more granular insights that can identify these risks and help organizations take action.

These insights should be based on an asset-level understanding of climate. That means businesses taking responsibility for each of their assets (whether a transport fleet or an office block) and understanding how they impact and are impacted by the changing climate.

This approach can provide a more informed and sustainable long-term pathway to creating tangible change within the industry, beyond broad brush tactics and ticking boxes. But how to internalize that data?

Building independent climate intelligence

Technology has a crucial role in delivering businesses these insights. The climate is a vast, nonlinear system of fantastic complexity. Businesses alone can’t be expected to make sense of it. Advances in AI and machine learning combined with the Earth sciences however will enable organizations to build their climate intelligence.

Drawing on global data pools, a network of scientists and their satellites, it’s possible to forecast climate risk at concrete and actionable level. These are the insights that we need businesses to start using to answer questions.

How is growing humidity going to affect their storage facilities? What does a higher flood risk mean for their office expansion? Are workers able to travel during stormy weather? And, are they actively using an understanding of these risks to improve their climate security, and reduce their climate impact?

It’s welcome that the UK has added more momentum to the conversation around climate reporting. Now it’s time to move the dial from simply creating a climate report, to understanding and taking action on climate intelligence.

To do that, we must start asking the more challenging questions, and demanding better answers.