From compliance to strategy: how companies can master Climate-Related Financial Disclosures
As climate-related financial disclosures (CFD) become mandatory, companies are struggling to move beyond a compliance-driven approach. Accountancy Today explores how firms can integrate climate risk into their financial strategy, with insights from experts and industry findings

The year 2023 marked a major shift in corporate accountability, as mandatory Climate-related Financial Disclosures (CFD) under the Companies Act 2006 came into effect for AIM and large private companies. The transition, however, has not been smooth. While many companies have made efforts to comply, the Financial Reporting Council (FRC) has found significant inconsistencies in reporting quality.
In its latest thematic review, the FRC highlighted widespread challenges, including inadequate scenario analysis, unclear climate targets, and governance disclosures scattered throughout annual reports. The message is clear: businesses must do more than tick compliance boxes—they need to embed climate considerations into their strategic framework.
So how can companies elevate their climate reporting from a regulatory obligation to a core component of their financial and operational planning? We spoke with Alex Hindson, head of sustainability at Crowe, to gain expert insights on how firms can approach CFD more effectively.
Where companies are falling short
The FRC’s review found that many companies have yet to fully grasp the implications of climate change for their business models. One of the most pressing issues was the lack of scenario analysis, with many companies failing to assess how climate risks could impact their long-term business strategy under different climate scenarios.
Another common shortfall was the absence of clear climate targets, as half of the companies reviewed did not provide key performance indicators (KPIs) to measure progress.
Additionally, governance disclosures related to climate were often fragmented, buried across multiple sections of reports, making it difficult to assess a company’s overall approach. While most companies identified climate risks, their assessments were often superficial, lacking a structured timeline or consideration of corresponding opportunities.
Hindson sees this as a fundamental issue, explaining that many companies have not yet developed a strategic response to climate change: “They cannot articulate what implications (positive or negative) climate change may have on their business model, operations and ultimate viability. Not having done the homework means it is hard to report on the findings. This is the greatest gap in most disclosures, but it is a fairly fundamental ‘so what’.”
To transition from compliance-driven reporting to a more meaningful approach, Hindson emphasises the importance of starting with a strong narrative: “We would always recommend to clients to start with the narrative storyline of what they want to communicate. This implies approaching the disclosures from the perspective that this is an opportunity to communicate with stakeholders, and not simply a compliance exercise.”
This shift in mindset leads to a more holistic disclosure process, avoiding the common pitfall of sequentially completing a checklist without a coherent message.
Hindson also warns against “cherry-picking” disclosures, where companies selectively present information that meets minimum requirements but lacks strategic depth. He emphasizes that the most effective approach is to first establish a clear narrative about how they manage climate-related issues as a business priority. Only after that should they ensure they have met all mandatory disclosure requirements.
Making climate risks actionable
One of the biggest gaps in CFD reporting is the lack of structured scenario planning. The FRC found that many companies either failed to conduct scenario analysis altogether or presented vague, non-specific disclosures.
Hindson outlines a structured approach to scenario planning. “Linking scenarios to action outcomes requires the firm to ask the ‘so what does this mean for us?’ question when reviewing the results of the scenario analysis,” he says. “The firm needs a view of what scenarios it can withstand, and which provide a meaningful threat to the organisation’s survival. This threshold is often termed a ‘risk appetite’.”
While some companies may lack the resources for detailed quantitative modeling, he suggests that even a simple qualitative approach can be effective: “The simplest approaches we have seen have been qualitative in terms of describing how the impacts develop over time (from short to long term) on a simple High/Medium/Low scale, possibly using colour coding for emphasis,” notes Hindson.
The FRC’s review found that few companies reported on climate-related business opportunities, despite this being a mandatory requirement. This represents a major missed opportunity—not only for compliance but for stakeholder engagement.
Hindson stresses the importance of framing climate disclosure as a growth opportunity rather than just a risk-management exercise: “Articulating how the organisation can not only survive, but thrive under these scenarios, should communicate to stakeholders why the organisation should merit their support as customers, investors or employees.”
The FRC also noted that many companies produced CFD disclosures that were overly complex, lengthy, and repetitive—making it difficult to assess whether they met regulatory requirements.
Hindson advises companies to use structured formats like tables and diagrams to enhance clarity: “The key is to decide on the storyline which is being communicated and then identify the best tools (tables, diagrams) to transmit the message in a clear way to a general audience.”
The FRC’s report outlines several best practices for effective CFD disclosures. It recommends incorporating tables and diagrams to minimize long narrative sections. Companies should focus on the main risk exposures while omitting risks that have little impact. The report also suggests clearly outlining the evaluation process, including risk identification, impact assessment, scenario analysis, and mitigation strategies. Additionally, it emphasises the importance of providing a clear cost-benefit analysis for mitigation actions.
For CFD to be meaningful, companies must integrate climate risk assessment into their broader financial reporting processes. Hindson emphasises that this requires early preparation: “The key to doing this well is to be well prepared and for it not to become an afterthought, once the numbers are signed off.”
The role of accountants and external advisors is also evolving in this space. Hindson suggests that ongoing education is crucial: “The primary way external advisors can help is by providing periodic education sessions, so companies remain up to date with rapidly changing regulations in the area of sustainability.”
The First Step Toward Action
Overall, the review of Climate-related Financial Disclosures found that half of the companies in its review had not set clear climate risk targets—despite this being a mandatory requirement. Hindson recommends that companies start with a baseline assessment: “The first step is to get a good understanding of their baseline climate impacts, primarily their greenhouse gas emissions. The Greenhouse Gas Protocol lays out a methodology broken down into Scope 1 and 2 (direct emissions) and Scope 3 (indirect emissions).”
With a clear understanding of current emissions, companies can then set realistic reduction targets and track progress – which ultimately benefits businesses directly, by reducing energy consumption and saving money.
Being this the first time that the FRC has carried out a review of this reporting, the reporting council acknowledges that CFD reporting practices will also continue to mature over time. With increasing regulatory scrutiny and growing investor expectations, companies that proactively integrate climate risk into their strategic decision-making will be better positioned for long-term success.
With this in mind, climate disclosures can become a tool for building resilience, securing investment, and driving sustainable growth. As Hindson reiterates: “Companies need to see this as an opportunity to engage with stakeholders, not just a compliance requirement.”