What this means:

While there will very likely be a derogation for credit unions in respect of the Corporate Sustainability Reporting Directive (‘CSRD’), its adoption by companies over the coming years, including smaller companies, will at the very least shift public expectations in terms of sustainability reporting. Higher standards will be expected of all organisations, even those for whom there is no strict, mandatory requirement to report.

Credit unions should seek to keep their Members informed on their progress in achieving the aims of their Sustainability Strategy frequently, but might also consider a comprehensive annual report that will serve as an open and transparent update to Members. At a high level, the Report might cover;

1. About the CU:

a high-level description of the CU’s purpose, values, and organisational strategy.

 

2. Sustainability strategy:

showing clearly whether it is integrated into organisational strategy or how it is aligned.

 

3. Governance:

a high-level description of the processes, controls and procedures used to monitor and manage sustainability issues

 

4. Approach to identifying the material ESG issues:
   1. A description of how the material ESG issues were identified (the materiality assessment process)
   2. A description of if/how the materiality assessment was informed by stakeholder engagement
   3. Confirmation that a double materiality approach was adopted to identify the material issues.

 

5. Further detail on each of the material issues, including:
   1. Definition, and why it matters. Linkage may be specified to relevant CU Operating Principle or UN Sustainable Development Goal
   2. Targets
   3. Key policies and actions to achieve targets
   4. Actual performance on each issue

 

Characteristics of Effective Metrics

In terms of selecting reporting metrics, it should be a matter of quality over quantity. The TCFD observe 4 Characteristics of Effective Metrics;

1. They are decision useful
2. They are clear and understandable
3. They are reliable, verifiable and objective
4. They are consistent over time, where there are 3 relevant time horizons;
   1. Current
   2. Historical
   3. Forward Looking

 

Worked example for reporting on impact reduction:

Below is a worked example of reporting metrics, specific to the topic of impact reduction. Here we set out;

• The material issue identified;
• Definition of the issue;
• Target;
• Performance toward the target.
• For reference, we also set out where the data source may be for each issue. This is for reference only.

Metric Reported	What is it?	Target	202X Performance	Data Source (for internal use)
Reporting Under GHG Protocol
Scope 1 Buildings – direct emissions	Primarily emissions from onsite activities in our buildings e.g., burning fossil fuels for heat. (May also extend to company vehicles if applicable)	% reduction in metric tons emitted per year		For gas heated buildings – from supplier, on bill. For oil heated buildings – (*potential data gap) calculate litres burned x emissions per litre
Scope 2 Buildings – indirect emissions	Generally, emissions relating to powering our owned assets, e.g., electricity for our buildings	% reduction in metric tons emitted per year		From electricity supplier, on bill
Scope 3 Category 1 – purchased goods and services	Emissions relating to products or services we use, e.g., power used by cloud hosting servers by our IT suppliers	% reduction in metric tons emitted per year		From our suppliers (*potential data gap)
Scope 3 Category 6 – business travel	Transportation of employees for business-related activities	% reduction in metric tons emitted per year		Ideally records kept of all business-related travel – mode of transport, fuel type and distance travelled so a fuel based calculation can be used
Scope 3 Category 7 – employee commuting	Transportation of employees between their homes and their worksites	% reduction in metric tons emitted per year		Ideally records kept on all commute-related travel – mode of transport, fuel type and distance travelled so a fuel based calculation can be used
Scope 3 Category 15 – investments	Guidance from PCAF Standard on accounting for certain lending products and  some investment classes potentially applicable to credit unions	% reduction in metric tons emitted per year (where portfolio is growing, e.g. mortgages, a proportionate metric may be appropriate to factor for this)		(* potential data gap) multiple data sources will present reporting challenges. See worked example below for mortgages
Other Reporting Metrics Examples
Breakdown of energy consumption in year by source (by electricity, natural gas, oil, etc.)	A consumption breakdown for each energy source	KwH consumption per year by each source		From supplier – on bill for electricity and gas. Calculation required for oil (*potential data gap)
Breakdown of electricity consumed by method of production (renewable, natural gas, coal, etc.)	A breakdown of method of production of consumed electricity	KwH consumption per year attributable to each method of production		From supplier – on bill
Water consumption	Water consumed in our buildings each year	Megalitres consumed		From supplier (*potential data gap)
Waste produced	Waste produced in our buildings each year	Tons per year – general waste and recyclables		From supplier (*potential data gap)
Supplier Engagement	Suppliers who are providing emissions data to credit union	% of total suppliers providing required data		Count of all suppliers
Electric Vehicle Facilitation	Charging points on credit union premises	Number of available charging points		Count
Retrofit support	Proportion of home improvement lending supporting energy retrofits	% of retrofit loans as proportion of total home improvement lending		By engaging in one-stop-shop; data will be available of KwH saved and improve reporting quality
ESG Committee Meetings	Number of meetings held	Regular meetings (at least quarterly)		Count

 

Did you know?

Globally, financial services lag behind other industries in their disclosures of climate-related metrics and targets. According to the Task Force on Climate-related Financial Disclosures (TCFD), 47% of banks reported on climate-related targets in 2022, compared to 80% of energy companies and 63% of consumer goods companies.

 

Steps that won’t take much effort:

• Ensure progress against sustainability targets are reported frequently internally. They might be included monthly or quarterly in the Board Report.
• Ensure roles and responsibilities are clearly set out and understood, in particular, any functions and/or committees providing oversight should include sustainability matters in their work plans.
• Adopt an ESG Policy and ensure that it clearly defines the roles and responsibilities of the board and senior management together with details of where key metrics and targets will be set out. This could well be the Sustainability Report or the Sustainability Strategy.

 

Steps that will have a big impact:

• Commit to an annual Sustainability Report to Members that will include a list of all material issues identified by the Credit Union, the targets for each and the progress made against the target. Ensure disclosures are also made to Members, reference existing frameworks like TCFD for ideas here.
• Look for guidance from globally accepted standards for reporting and disclosures such as TCFD, SME ESRS, GRI, GHG Protocol, PCAF etc. However, none will be a perfect fit for Irish credit unions so they will need to be tailored in their adoption.
• Keep chosen metrics under continual review. In particular, where a material issue has been identified but a data gap has prevented setting a target or reporting on progress against a target, keep on top of efforts to plug those data gaps. If a chosen metric is not verifiable, it is not an effective metric.

 

Watch outs:

Adopt a comply or explain approach in reporting on all metrics – if a metric can be reported on, give an accurate update. If it is not possible to provide an update or to measure a particular metric, it is far preferable to briefly explain the rationale as to why it can not be reported at present, rather than drop it from the Report.

 

Resources:

Canadian Credit Unions and Effective Climate Governance by CCUA –

https://ccli.ubc.ca/wp-content/uploads/2023/06/Canadian-Credit-Unions-and-Effective-Climate-Governance.pdf

 

Reporting on Sustainability by an Irish Credit Union – guidance from ACCA –

https://www.accaglobal.com/content/dam/ACCA_Global/Technical/cred/Reporting%20on%20Sustainability%20by%20an%20Irish%20Credit%20Union%20Version%204.pdf

 

TCFD Metrics and Targets Workshop –

https://assets.bbhub.io/company/sites/60/2022/02/Metrics-and-Targets-Workshop.pdf

 

TCFD Governance Wrokshop –

https://assets.bbhub.io/company/sites/60/2022/02/TCFD-Governance-Workshop.pdf