Choosing a Consultant vs. Software for Climate Risk and TCFD Reporting
As companies begin grappling with the impacts of climate change, they are increasingly turning to the Task Force on Climate-related Financial Disclosures (TCFD) to help communicate their climate risks to stakeholders. While it’s clear that addressing climate risk is important, the next big question many companies face is whether to hire a consultant or use software to help prepare their TCFD report.
In this article, we'll explore what enterprise climate risk management (ECRM) is, what goes into a TCFD report, and how to choose between a consultant or a software solution for climate risk management.
Obviously, we’re a software company and hope you choose us. But we tried to be objective and point out some of our weaknesses and a consultant’s strengths.
What is Enterprise Climate Risk Management (ECRM)?
Enterprise Climate Risk Management (ECRM) refers to the process of identifying, assessing, and managing the risks posed by climate change to a business. These risks could be physical (like floods, wildfires, or extreme heat) or transitional (such as regulatory changes, shifts in market demands, or legal risks).
Effective ECRM ensures that companies are prepared to adapt to or mitigate these risks, protecting both their bottom line and their reputation. As climate change becomes an increasingly important factor in corporate strategy, tools and frameworks like TCFD help businesses understand, manage, and report on these risks.
What Goes Into a TCFD Report?
The TCFD framework helps companies provide consistent and comparable information on their climate-related risks and opportunities. A TCFD report is typically broken down into four key areas:
Governance: How climate-related risks and opportunities are integrated into governance and risk management processes.
Strategy: The actual or potential impacts of climate risks and opportunities on the company's business model, financial planning, and strategy.
Risk Management: How the organization identifies, assesses, and manages climate-related risks.
Metrics and Targets: The metrics used to assess climate-related risks and opportunities, and the targets the company has set.
A TCFD report requires gathering a broad range of data, from financial information to climate projections, and linking this data to business strategies and performance metrics.
Consultants vs. Software for TCFD Reporting
When deciding how to tackle your TCFD reporting, you generally have two options: hiring a consultant or using climate risk management software. Both approaches have their benefits, but the right choice depends on your company’s unique needs and resources.
The Benefits of Consultants
Consultants bring years of expertise and can tailor their approach specifically to your company’s unique circumstances. They can:
Provide in-depth, personalized analysis.
Offer strategic advice based on their experience with similar companies.
Guide companies through the nuances of compliance with global regulations.
Deliver work with the board to develop risk-mitigation strategy
However, consultants can be expensive and time-consuming, and lack access to global climate models. Often, all of the interviews and manual data organizing required for a consultant to understand your transition risks can take months to schedule and complete. And while consultants provide good strategic advice on transition risks, they rarely have access to actual climate models that your team can audit and defend. Once the actual work of assessing climate risks is completed, preparing the actual TCFD report with a consultant can take several weeks or even months and cost tens of thousands of dollars.
The Benefits of Climate Risk Software
Software solutions like Beehive provide a scalable and efficient alternative for enterprise climate risk management and TCFD reporting. A modern climate risk management platform leverages automation and data analytics to:
Streamline data gathering and reporting.
Generate nearly complete TCFD reports by integrating your existing reports (such as 10Ks and ESG reports) with climate risk data already in the software.
Use generative AI to automate much of the report-writing process, saving time and money.
Provide up-to-date insights into changing climate risks, regulatory updates, and financial impacts.
Offer science-backed climate models in a visual dashboard to understand physical risk exposure
Software is often more affordable than hiring a consultant and can significantly reduce the time to produce a TCFD report. Companies in certain industries, like manufacturing, or of a certain complexity, like global conglomerates, may benefit from the tailored guidance of a consultant.
When to Choose a Consultant vs. Software
To help make the decision easier, here’s a quick breakdown of when to choose a consultant versus software:
When Software is the Best Fit
We don’t claim to be able to help everyone. But for a specific subset of companies, Beehive software is the right way to start building your enterprise climate risk management system and generate a TCFD report. Beehive’s software is ideal for US-based tech & services companies with <$10b in revenue. Our software is purpose built to evaluate risks to office, employees, and data centers, providing visual climate models for physical risk assessment and relevant guidance for transition risks.
Additionally, Beehive’s generative AI can learn from your company’s existing reports, like 10Ks and ESG reports, and integrate known climate risks to compile a nearly-finished TCFD report. With automation handling the bulk of the work, your team can focus on reviewing and refining the report rather than building it from scratch.
While consultants will always have a place in complex, highly specialized scenarios, many businesses will find that climate risk software meets their needs efficiently and affordably.
Conclusion
Whether you choose a consultant or software for TCFD reporting depends on your company’s needs, resources, and the complexity of your operations. While consultants offer deep expertise, software solutions like Beehive are a better fit for a tech or services company, offering the ability to automate large parts of the process at a fraction of the time and cost, and using actual science-backed climate models.
By considering your company's specific needs and the trade-offs between the two options, you can make an informed choice and ensure that your climate risk management strategy is both effective and sustainable.