This study aims to analyse the reporting practices of a sample of companies listed in Italy and Spain that prepare a Task Force on Climate-related Financial Disclosures (TCFD) report. The main purpose is to analyse the reporting’s compliance with the TCFD framework and the extent of climate-related information disclosed.
This study performs a content and comparative analysis of climate-related information disclosed by Italian and Spanish companies listed on the FTSE MIB and IBEX-35, following the consolidated narrative interrogation (CONI) model. The analysis is carried out on 31 TCFD reports published in 2020, 2021, 2022 and 2023, using NVivo software for content analysis and information coding.
Overall, the study shows that Italian and Spanish companies comply with the TCFD framework. However, some topics, such as governance-related aspects and risk management, are disclosed differently and may merit more in-depth reporting.
The findings of this study are valuable for companies and their stakeholders, in particular investors. The increasing focus on mandatory climate reporting and the adoption of new climate standards are increasing the pressure on companies to manage these issues, and the results of this work already indicate which aspects of the reporting process need to be improved to meet the new information requirement.
This study strengthens the theoretical and empirical literature on climate change information by conducting a cross-country content analysis of TCFD reports. The results provide a basis for future analysis of climate disclosure according to the latest developments in standards and frameworks.
1. Introduction
Climate change is a critical global challenge with long-term implications for countries, people, the environment and economies. Reducing greenhouse gas (GHG) emissions is recognised as one way to mitigate climate change, along with proper climate policies, mitigation and adaptation measures and international cooperation [United Nations (UN), 2023]. GHG emissions from economic activities are the main contributor to climate change, thus companies face increasing stakeholders’ pressure to cut and report emissions from their operations and supply chain (Liesen et al., 2015; Kaplan and Ramanna, 2021). Sustainable development goal (SDG) 13 on climate action is a reminder of the need to take urgent action to fight climate change and its impacts, as time is running out to avoid further climate catastrophes such as droughts, floods and rising sea levels [United Nations (UN), 2022]. Extreme weather events are already affecting the Earth, reminding us of the need to adopt immediate measures to ensure a sustainable future for the next generations [United Nations (UN), 2023]. In this regard, the Intergovernmental Panel on Climate Change (IPCC) labels climate change as humanity’s code red warning, with impacts on biodiversity, populations, agriculture, oceans and the health of the planet (IPCC, 2023); without an effective plan, global warming could exceed the critical level of 1.5°C by 2035 [United Nations (UN), 2023].
The World Economic Forum also ranks climate and environmental risks as the top four global risks in severity for the next decade [World Economic Forum (WEF), 2024], strengthening the urgency of climate actions. Notably, extreme weather events and critical changes to Earth systems are the core of the ranking, pointing out that such issues require greater attention. The European Union is working in this direction [European Commission (EC), 2019a], also supporting environmentally sustainable investments that are most needed to achieve climate neutrality by 2050 (i.e. investments related to climate change mitigation and adaptation) and including climate change mitigation and adaptation among the six environmental objectives of the EU taxonomy (EC, 2020). The latest developments concerning frameworks and standard setters emphasise the need and immediacy for companies to report on their actions to reduce the negative environmental impacts of their business [European Commission (EC), 2019b; European Financial Reporting Advisory Group (EFRAG), 2022a; IFRS Foundation, 2023a]. Furthermore, the new Corporate Sustainability Reporting Directive (CSRD) stresses the relevance of disclosing climate-related information (i.e. climate change mitigation and adaptation actions) in sustainability reporting to support investors in assessing the financial risks and opportunities associated with climate change and to ensure reliable and comparable information [European Commission (EC), 2022]. To this end, the CSRD establishes a set of European Sustainability Reporting Standards for companies covered by the Directive and developed by the European Financial Reporting Advisory Group (EFRAG). In this regard, EFRAG’s ESRS E1 thematic standard aligns with the CSRD and the Paris Agreement on keeping global warming below 1.5°C above pre-industrial levels [European Financial Reporting Advisory Group (EFRAG), 2022a]. Notably, it aims to support understanding organisations’ impact on climate change and the risks and opportunities in the short, medium and long term [European Financial Reporting Advisory Group (EFRAG), 2022]. It should be noted, however, that back in 2017, the Financial Stability Board launched the Task Force on Climate-related Financial Disclosures (TCFD) to develop “voluntary, consistent climate-related financial disclosures” to provide decision-useful information “to investors, lenders, and insurance underwriters” to understand material risks [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. To this end, the Task Force developed a set of four recommendations on climate-related financial disclosure that apply to organisations across all industries and focus on the risks and opportunities related to the transition to a low-carbon economy [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. These recommendations address increasing investors’ demand for better carbon reporting, disclosure of climate-related risks and opportunities, useful climate information for investment decisions and transparency [Task Force on Climate-related Financial Disclosures (TCFD), 2017; SASB, 2021; Gebhardt et al., 2024]. Indeed, the availability of complete information supports investors and stakeholders in assessing, pricing and managing risks, opportunities and other climate issues (Laine, Tregidga and Unerman, 2022); conversely, underestimating climate risks could lead to weak disclosure (Arian and Sands, 2024). Eccles and Krzus (2018) explored the motivations underlying the implementation of the TCFD recommendations, highlighting investor pressure and the adoption of climate change adaptation strategies as the main drivers. In this regard, the authors suggest that investors may be less prone to invest in organisations that do not adopt the TCFD framework (Eccles and Krzus, 2018). Therefore, climate issues are becoming increasingly significant for the financial industry and more reporting is needed.
TCFD recommendations cover the following four thematic areas: governance, strategy, risk management and metrics and targets, which are further detailed in the recommended disclosures, which provide companies with guidance on the specific information they need to disclose and support investors and other stakeholders in assessing climate-related risks and opportunities [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. Moreover, the Task Force requires organisations to describe the categories of climate-related risks and opportunities identified in the short, medium and long term and the resilience of the organisation’s strategy to different climate scenarios [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. Six years later, this framework has become the foundation for the recently approved IFRS S2 on Climate-related Disclosures [IFRS Foundation, 2023b), the ESRS E1 on Climate Change [European Financial Reporting Advisory Group (EFRAG), 2022a] and the US SEC disclosure requirements. Notably, the TCFD recommendations are integrated into the climate change questionnaire developed by the CDP (formerly the Carbon Disclosure Project), and an alignment is observed between the Task Force and EFRAG, as all disclosure requirements of the core recommendations are covered in ESRS E1 [European Financial Reporting Advisory Group (EFRAG), 2022b]. Similarly, IFRS S2 is founded on the recommendations thus the disclosures are broadly consistent and aligned; the few differences relate to the use of different terminology, some requirements for more detailed and additional information required by IFRS S2 and not by the TCFD recommendations [IFRS Foundation, 2023c). In addition, several surveys highlighted the continuous growth in the number of companies disclosing TCFD-aligned information [Task Force on Climate-related Financial Disclosures (TCFD), 2023; KPMG, 2022], so much so to consider the TCFD Recommendations as “one of the most broadly used sustainability reporting frameworks” [Financial Stability Board (FSB), 2023, p. 10]. In this regard, the latest TCFD Status Report 2023 emphasises the increased number of companies reporting on climate-related risks, opportunities and targets and the greater disclosure of all 11 TCFD recommendations by European companies compared to other regions (i.e. Asia Pacific, North America, Latin America, Middle East and Africa) [Task Force on Climate-related Financial Disclosures (TCFD), 2023]. The widespread adoption of these recommendations signals the substantial need for climate-related information in the financial markets (Ooi et al., 2024), often considered “the most powerful stakeholder” (Laine, Tregidga and Unerman, 2022, p. 136) and therefore capable of influencing accounting and accountability models (Andrew and Cortese, 2013).
Given the increasing interest in the topic, this study aims to investigate the dissemination of TCFD-based reports of a sample of companies belonging to different sectors and the level of disclosure compliance with the TCFD framework. Our analysis is focused on two Mediterranean countries (Italy and Spain) with similar geographic conditions and climate change vulnerability (Bednar-Friedl et al., 2022) and characterised by similarities in socio-cultural environment and accounting system culture, stakeholder orientation, legal systems and governmental structures (Rodriguez-Dominguez et al., 2009; Lazzeretti et al., 2012; Posadas et al., 2023).
Specifically, we perform content and comparative analysis of the climate-related information disclosed by Italian and Spanish companies through TCFD-based reports to answer the following two research questions:
How many companies draw up a TCFD report, and how is climate-related information disclosed in TCFD reports?
How compliant are Italian and Spanish companies with the TCFD framework?
Our findings reveal that both samples of companies comply with the TCFD recommendations, disclosing narrative and quantitative information with different levels of disclosure depth. The governance section is disclosed in narrative form, whereas the strategy recommendations are communicated through narrative and quantitative information. Risk management is disclosed narratively by Italian companies and both narratively and quantitatively by Spanish companies. The metrics and targets recommendation is the most detailed, as information is provided in a qualitative, quantitative and comparable form through indicators and data trend analysis. Therefore, our results reveal an overall alignment between the disclosure of the two countries; however, some issues are disclosed differently, such as governance-related aspects and risk management and might deserve more in-depth reporting.
This research strengthens both the theoretical and empirical literature on climate change information. This is the only study carrying out a cross-country content analysis of TCFD reports by assessing, through the Consolidated Narrative Interrogation (CONI) method, the compliance of company reports with the TCFD framework. Previous research has not focused on comparing the TCFD reporting practices of Italian and Spanish companies or other countries. In today’s reporting landscape, companies need to develop reliable climate transition plans to align corporate emissions reduction targets, climate risk management and strategic planning with ambitious climate science recommendations (CDP, 2024). CDP underlines that the key elements of a transition plan align with the TCFD framework, thus the four recommendations need to be addressed in these documents. Moreover, EFRAG supports companies within the scope of the ESRS to disclose a climate transition plan. Notably, the ESRS E1 topic standard on climate change requires disclosure of a transition plan for climate change mitigation consistent with limiting global warming to 1.5°C [European Commission (EC), 2023]. Hence, to support the development of climate transition plans, it is important to understand what has been done so far in terms of climate reporting; therefore, this study provides a first step toward acknowledging the necessity of disclosing climate information. The results highlight the strengths and weaknesses of climate disclosure, enrich the literature on the adoption of this framework and constitute an excellent starting point for assessing the future evolution of these reports, considering the ongoing evolution of the adoption of sustainability standards in general and climate change standards in particular. Our insights can inform companies’ approach to reporting, mainly given increasing reporting obligations and investors’ information requests.
The remainder of the paper is organised as follows: Section 2 reviews the literature on climate change and TCFD reporting. Section 3 describes the methodology adopted and Section 4 presents and discusses the results. Section 5 provides the conclusions and suggests new avenues for future research.
2. Literature review
In recent years, companies have experienced increased reporting of climate-related information and a concurrent growth in stakeholder pressure to communicate environmental performance, climate change mitigation and adaptation actions and climate risk management. A review by Zhou (2022) underlines an increase in climate change reporting practices and the need to ensure useful and relevant information for users. Previous literature (e.g. Ben‐Amar and McIlkenny, 2015; Comyns, 2016; Kılıç and Kuzey, 2019; Chithambo et al., 2022; Desai, 2022) has broadly investigated climate change reporting. However, to date, the research has not carried out cross-country content analysis of TCFD reports. The literature that has explored the topic of climate change reporting can be grouped into three main streams of research: studies on the different drivers of voluntary carbon disclosure, analysis of climate-related information provided in sustainability reports, annual reports or nonfinancial statements (NFSs) and few studies on the content of the TCFD framework.
Many authors have focused on the determinants of voluntary climate change disclosure and GHG emissions using quantitative approaches. Several research documented that profitability, leverage, company size, bank age, market value and industry are determinants of climate and GHG emissions disclosure (Ben‐Amar and McIlkenny, 2015; Faisal et al., 2018; Kılıç and Kuzey, 2019; Desai, 2022). Concurrently, better environmental performance, governmental ownership and independent verification of environmental data positively affect climate change disclosure (Giannarakis et al., 2018). Other authors (Comyns, 2016; Chithambo et al., 2022) have observed that carbon disclosure is also shaped by institutional, regulatory and stakeholder pressures, such as shareholders, investors, the community, the media and competitors, which impact managers’ GHG emissions decisions. A positive relationship is further highlighted between the quality of climate change disclosure and the board of directors (Ben‐Amar and McIlkenny, 2015), institutional ownership and women’s participation on corporate boards (Gebhardt et al., 2024).
The second stream of research refers to studies examining climate-related information in sustainability reports, annual reports or NFSs. In particular, in their research, Principale and Pizzi (2023) investigate the determinants of voluntary adoption of the TCFD recommendations by analysing the NFSs of a sample of Italian companies. They emphasise that company size positively influences managers’ decision to adopt the TCFD recommendations, while board size and the integration of ESG risks into risk-management systems contribute negatively. Other studies (David and Giordano-Spring, 2022) explore the compliance of the air transport sector with the TCFD framework in different corporate reports, highlighting poor reporting compliance, particularly for the strategy recommendations. Andersson and Arvidsson (2022) focus on the reporting of climate-related risks by Swedish-listed companies in annual reports, sustainability reports and websites, showing that risk disclosure differs between companies according to their mapping practices.
Although some research has analysed the TCFD framework (Eccles and Krzus, 2018; Demaria and Rigot, 2021; Maji and Kalita, 2022; Moreno and Caminero, 2022; Braasch and Velte, 2023; Ehalaiye et al., 2024), no previous studies focused on the comparison between reports drawn up by companies from different countries. In their research, Eccles and Krzus (2018) identify the main reasons motivating companies to adopt the TCFD framework, such as investor pressure and the possibility of having better strategies to adapt to climate change. Demaria and Rigot (2021) assess the environmental and climate information disclosed by French firms according to the TCFD recommendations; they point out an increase in climate compliance, especially for firms belonging to polluting sectors. Other authors (Braasch and Velte, 2023) focus on a German sample conducting a content analysis of climate reporting complying with the TCFD framework; this study highlights different levels of reporting quality for more and less carbon-sensitive firms. Maji and Kalita (2022) investigate the climate-related disclosures of Indian firms and the impact on performance, finding a positive relation between climate-related financial disclosure and performance, thus stressing that companies can disclose more climate information to improve their financial performance. Moreno and Caminero (2022) explore the climate disclosure of Spanish financial institutions and companies, highlighting an increase in disclosure over the years. Other authors (Ehalaiye et al., 2024) investigate the alignment with the TCFD recommendations of voluntary climate-related disclosure practices of New Zealand container seaports, highlighting that the governance section is the most highly disclosed, while strategy, risk management and metrics and targets recommendations are underdeveloped. More recently, Ding et al. (2023) have documented a positive relationship between firms’ carbon emissions and climate disclosure, especially for carbon-intensive companies, while Di Marco et al. (2023) highlight some firm characteristics that are positively related to TCFD compliance, such as purchasing assurance services and being in the insurance industry. Other authors (Morrison et al., 2024) suggest that companies that adopt and align their targets with the TCFD recommendations are more prone to achieve and disclose GHG emission reduction targets.
All the above highlights that although climate change reporting has attracted the interest of several researchers, a lack of targeted studies on the adoption and content of the TCFD recommendations can be detected and further contributions are needed to enrich the literature on TCFD disclosure. Therefore, this study aims to fill this literature gap by performing a content analysis of TCFD reports issued by companies of two different countries.
3. Methodology
This study performs a content analysis following the CONI model developed by Beck et al. (2010) for environmental reporting research. Several content analysis approaches can be used as a research method in the accounting literature to study disclosure, mainly mechanistic and interpretative. The former measures the volume and frequency of disclosure, such as word or sentence count, while the interpretive approach disaggregates the narrative into its components by analysing the content of each of them to study the communication of information (Beck et al., 2010). However, these approaches have limitations that the CONI model overcomes. Mechanistic approaches only capture the volume of reporting and not what is disclosed; therefore, this methodology has a reliability problem in terms of findings and quality of content analysis. Interpretative analysis is oriented towards the quality of the narrative and, thus, more on understanding the text. The CONI model overcomes these weaknesses by combining quantitative and qualitative content analysis and adopting an information scale to assess the level of information detail in the disclosure (Beck et al., 2010); it thus extends traditional content analysis to capture the variability of disclosure. In this study, the CONI model has been adapted to investigate the level of disclosure compliance with the TCFD framework in a sample of Italian and Spanish companies, and the NVivo software was used to perform the content analysis. It is a qualitative data analysis software (QDAS) that allows the analysis of large amounts of text and information (O’Neill et al., 2018). Previous studies (e.g. Leech and Onwuegbuzie, 2011; Kaefer et al., 2015) have recognised several benefits in software-assisted analysis compared to manual analysis. The use of QDAS, such as NVivo, enhances the flexibility, transparency and trustworthiness of the research process and, therefore, the quality of the analysis.
3.1 Sample selection
In this analysis, we have considered all the 40 companies listed on the Italian FTSE MIB and the 35 companies listed on the Spanish IBEX-35, updated to May 2023. FTSE MIB and IBEX-35 are the main benchmarks of the Italian and Spanish stock markets, comprising the most liquid and capitalised stocks. Therefore, this analysis is based on TCFD reports published by the most representative Italian and Spanish companies. The decision to focus on Italy and Spain is based on several considerations. Both countries have had a high rate of sustainability reporting over time (KPMG, 2011, 2020, 2022), so it is interesting to analyse how companies in these two countries have also approached the disclosure of a specific variable, namely, climate-related disclosure. Previous research (Posadas and Tarquinio, 2021; Posadas et al., 2023) has compared Italy and Spain as regards non-financial reporting as these two Mediterranean countries share similarities in terms of geographical conditions, social and economic dimensions, culture, stakeholder orientation and legal systems. However, few studies have analysed the content of TCFD reports, and none have compared the approach to carbon disclosure by Italian and Spanish companies.
The starting sample consisted of 35 Spanish and 40 Italian companies. The institutional website of each listed company was then visited, and the latest available TCFD report was downloaded. However, as 42 companies did not publish a TCFD report, they were excluded from the final sample; 2 further companies were omitted as they belong to the same corporate group and, therefore, share the same TCFD report. Consequently, the final sample consists of 31 reports, 16 for Italy and 15 for Spain, as shown in Table 1. The Spanish sample includes one report for 2020, five for 2021 and nine for 2022. The Italian sample comprises four reports for 2021, 11 reports for 2022 and 1 document for 2023. It should be noted that only one report was analysed for 2023, as only one company had published a TCFD report for that year at the time of the sample selection. The downloaded reports are all in English, except for one company listed on the FTSE MIB whose report is in Italian.
Sample overview
| Sample | No. | |
|---|---|---|
| Italy | Spain | |
| Initial sample | 40 | 35 |
| Companies excluded for not publishing a TCFD report | 23 | 19 |
| Companies belonging to the same corporate group | 1 | 1 |
| Final sample | 16 | 15 |
| 31 TCFD reports | ||
| Year | Italy | Spain |
| 2020 | 0 | 1 |
| 2021 | 4 | 5 |
| 2022 | 11 | 9 |
| 2023 | 1 | 0 |
| Final sample | 16 | 15 |
| 31 TCFD reports | ||
Figure 1 shows the industry sectors of Italian and Spanish companies, which have been standardised according to the Global Industry Classification Standard (GICS), as the FTSE MIB and IBEX-35 do not equally outline the sectors. GICS is a common global classification standard supporting the need for a complete and transparent classification of industries in the investment process, ranging from general sectors to the most specialised sub-industry groups (MSCI, 2023). Most Italian and Spanish sample companies belong to the financial sector, mainly banks, followed by the industrial sector in Spain and the energy sector in Italy.
3.2 Data analysis
Performing the content analysis using the CONI model supports the investigation of the diversity and depth of the disclosure content; thus, it involves coding the text sections that are useful for the research to capture the level of information detail of each coded piece of text (Beck et al., 2010). Therefore, it extends traditional content analysis, enabling a more detailed examination of disclosed information.
The model is applied in a two-step process to capture the depth of information and answer the research questions. Step 1 is the coding of content diversity, resulting in identifying categories and sub-categories of analysis to be coded. This study develops the categories and sub-categories according to the four sections of the TCFD recommendations for all sectors: governance, strategy, risk management and metrics and targets. Hence, Table 2 shows the four categories and their further classification into sub-categories adopted for the CONI model. Additional information on the reports was coded to provide descriptive insights within the general (GEN) category. NVivo software has been employed as a research tool to perform the content analysis and code the information of the TCFD reports according to the categories and sub-categories developed in this stage (O’Neill et al., 2018).
Categories and sub-categories used in the CONI model
| Category | Description | Sub-categories |
|---|---|---|
| GOV | Disclose the organisation’s governance around climate-related risks and opportunities |
|
| STRA | Disclose the actual and potential impacts of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning where such information is material |
|
| RISKMAN | Disclose how the organisation identifies, assesses and manages climate-related risks |
|
| MET&TAR | Disclose the metrics and targets used to assess and manage relevant climate-related risks and opportunities where such information is material |
|
Step 2 in using the CONI model is coding on the information content scale, focusing on coding for quality. This process results in analysing the in-depth level of the report content according to the TCFD framework. To this end, six different levels of disclosure content are identified, ranging from 0 to 5.
This examination phase was carried out by two researchers with previous experience in evaluating the content of nonfinancial reports. They assessed the quality of the information presented in the identified sections of each TCFD report and assigned a corresponding score for each disclosure. The following coding was established based on the two researchers’ analysis and continuous interaction.
Type 0 refers to the non-disclosure of a specific category or sub-category. Type 1 is a narrative and general disclosure only, addressing the category definition without providing details and insights. Further narrative detail is provided in the Type 2 level, while numerical and quantitative analysis with possible year-on-year comparisons is associated with Type 3. Type 4 refers to information disclosed in both narrative and quantitative form without year-to-year comparisons. Type 5 is the most comprehensive level of disclosure as it relates to narrative, quantitative and comparative information. Table 3 describes the six levels of disclosure and provides examples selected from the TCFD reports analysed.
Types of disclosure 0–5
| Disclosure level | Definition | Examples |
|---|---|---|
| Type 0 | Category and sub-categories not disclosed | |
| Type 1 | Disclosure addresses issues related to category definition at a general level, without details and insights → pure narrative (general) | “The climate change strategy is one of the priorities of the Board of Directors”. (Telefónica, 2022, p. 44). “Mediobanca has integrated Climate risks in its risk management processes”. (Mediobanca, 2022, p. 66). “The Enterprise Risk Assessment process also integrates the identification and monitoring of climate-related risks”. (Nexi, 2022, p. 7) |
| Type 2 | Disclosure addresses issues related to the category and provides details → pure narrative (detailed) | “The decisions on how to integrate the assessment and effective management of climate change impacts into the different business processes are guided by the Sustainability Committee at top management level, which can rely on adequate responsibilities and a cross-functional vision across multiple Groups’ functions and geographies. This Committee, sponsored by the Group CEO, consists of the heads of both the GHO functions and business units”. (Generali, 2022, p. 5). “In the management of operations Leonardo monitors and increases the eco-efficiency of its sites through specific projects, also in collaboration with third-party partners in the energy sector, and the adoption and gradual extension of the ISO 14001 and ISO 50001 environmental management systems”. (Leonardo, 2022, p.6). “At company level, climate-related risks are identified and assessed (i.e., for the Group and subsidiaries) by integrating them into multi-disciplinary company-wide risk identification, assessment, and management processes, called Enterprise Risk Management (ERM). The ERM Model, developed in accordance with the COSO Framework1, provides an assessment of the strategic, external and operational risk events at Corporate, Sector and Subsidiaries level and the monitoring of the Top Risks, supplying an update of the risk profile for Saipem in relation to strategic and management objectives”. (Saipem, 2021, p. 8) |
| Type 3 | Disclosure addresses issues related to numerically category with possible comparisons over the years → purely quantitative | “Variable Bonuses of the CEO and the Managing Director of airports (maximum of 60% of base salary) depend on compliance with company objectives […] for the CEO will be weighted at 25% above 100% of company objectives (20% above 100% in 2021), and for the Managing Director of the Airport, at 25% above 50% of the company objectives (10% above 50% in 2021). […] Regarding remuneration for Senior Management, variable bonuses will depend on compliance with company objectives […] will be weighted at 25% above between 50% and 40% of weighted company objectives for Senior Management”. (Aena, 2022, p. 19). “20% of the short-term variable remuneration includes sustainability targets, including GHG emission reductions. Furthermore, 10% of the long-term incentive of executive directors is linked to the offsetting/neutralisation of GHG emissions in order to meet Telefónica’s interim target by 2025, establishing a minimum threshold of 90% compliance”. (Telefónica, 2022, p. 45). “In 2021, Eni’s methane emissions were 1.37 MtCO2 eq, stable compared to 2020 and essentially concentrated in Upstream activities (95% of the total)”. (Eni, 2021, p. 42) |
| Type 4 | Disclosure addresses issues related to numerically category, including qualitative explanations, but does not provide a comparison across the years → narrative and quantitative | “During the 2021 financial year, the Board of Directors met fifteen times and the rate of Director participation in the meetings was 97%”. (Italgas, 2021, pp. 29–30). “Acciona has had a Sustainability Committee on the Board of Directors since 2009 […] The sustainability committee meets quarterly […]” (Acciona, 2020, p. 11). “Based on current objectives, this scenario would have an estimated financial impact of € 13.6 and 51.2 million by 2040, assuming a carbon price between € 20 and 75 per ton emitted”. (Grifols, 2022, p. 16) |
| Type 5 | Any numerical disclosure to the category including qualitative statements and demonstrating year comparisons → narrative, quantitative and comparable | “In 2020 alone, the measures implemented resulted in a saving of 26,700 tonnes of CO2 eq, measured against Saipem’s 2018 emissions baseline. It is estimated that, thanks to the GHG Strategic Plan, Saipem will not emit 255,000 tonnes of CO2 eq into the atmosphere over the 2019–2024 timeframe”. (Saipem, 2021, p. 26). “Eni’s GHG Scope 1 emissions in 2021 amounted to 40.1 million tons of CO2 eq, up 6% compared to 2020, mainly due to the resumption of activities in the upstream and gas transport, power and chemicals sectors”. (Eni, 2021, p. 40). “In 2022, Snam’s total energy consumption amounted to 17,641 TJ, almost entirely attributable to natural gas (96.4%) used mainly for the operation of transportation, storage and regasification plants, for heating buildings and for automotive use. The regulated business accounts for 94% of the total (+18% compared to 2021) while the unregulated and energy transition business accounts for 6% (tenfold compared to 2021)”. (Snam, 2022, p. 54) |
Applying the CONI model in this study allows us to compare the TCFD reporting practices of a sample of Italian and Spanish companies. The following sections outline and discuss the findings of this study.
4. Results
This paper sheds light on the diffusion of TCFD-based reports concerning a sample of Italian and Spanish companies and on similarities and differences in their alignment with the TCFD framework.
As shown, only 31 companies out of the 75 in the initial sample draw up a TCFD report; most belong to the financial sector. This result is not surprising considering the significant attention that the financial sector itself has been giving to the topic of climate change and especially climate risks over the years. (Banca d’Italia, 2022; Banco de Espagna, 2020; European Central Bank, 2020). The following figures show the comparison according to the categories and sub-categories described in Table 2 and outlined in the TCFD framework.
As regards the governance section, Figure 2 shows that Italian companies disclose more in Type 2 both the required recommendations. In contrast, the Spanish ones are mainly associated with Type 1 for sub-category a) and equally represented in Types 1 and 2 for sub-category b). Therefore, Italian companies provide more details on the board’s oversight and management’s role in assessing and managing climate-related risks and opportunities. An example of the different approach to reporting on this issue is offered below, highlighting the differences in disclosure for sub-category a):
The Board of Directors (BoD) represents the highest governing body for climate-related issues and for overseeing the definition of the Group's response to climate change. The BoD is the body responsible for developing strategies and policies, setting sustainability objectives and commitments, overseeing the application of the Sustainability Policy, and assessing the results and the adequacy of sustainability guidelines. The Board defines the path of progressive integration of the Top Management and Executive Directors' strategic objectives with sustainability aspects, for climate change. In addition, the Board approves and supervises the involvement in external initiatives and formalises reporting obligations and action plans. [Nexi, 2022 – Italy]
The energy and climate change strategy is part of the Company's Responsible Business Plan, led by the Board of Directors. The Sustainability and Quality Board Committee, which meets monthly, oversees its execution, reviews risks and monitors targets. [Telefónica, 2022 – Spain]
The analysis of the strategy section highlights a higher depth of narrative and quantitative disclosure (Type 4) for sub-categories b) and c) in Italian companies and sub-category c) in the Spanish sample. Sub-categories a) in Italy and a) and b) in Spain are associated with Type 2, i.e. narrative and detailed disclosure. As outlined in Figure 3, the Type 3 level is not coded as the information to be included in the strategy section is mainly qualitative and not purely quantitative. Below are two examples from Italian and Spanish TCFD reports on the strategy section, as regards the sub-category b):
For the next four-year period 2022-25, Eni has planned investments in decarbonisation, circular economy, renewables and retail portfolio development for around €9.7 billion, including supporting scientific and technological research activities. The evolution towards a fully decarbonised product portfolio will be supported by a progressive increase in the share of investments dedicated to the expansion of renewable generation capacity, the growth of biofuels and green chemistry, the scaling up of new energy solutions and carbon capture and storage (CCS) services as well as energy efficiency initiatives and decarbonisation of legacy assets. Therefore, in terms of capital allocation, the share dedicated to new energy solutions and services will reach about 30% of total investments in 2025, about 60% in 2030 and more than 80% in 2040. In ten years, these activities will generate positive Free Cash Flow and reach a 75% contribution to the group’s cash flow starting 2040. The plans and investment decisions are aligned with Eni's decarbonisation strategy towards Net Zero by 2050 [Eni, 2021 – Italy].
The financial impacts of these risks may be affected by lower profitability and real estate value, demand destruction, lower asset performance, increased cost of compliance and legal costs, effects in household wealth among others. […] The transition to a low-carbon economy will require significant investment, generating opportunities. Because Santander Asset Management is exposed to many asset types and sectors, we have a duty to always act in the best long-term interest of our clients, therefore we have included climate change risks in our extra-financial ESG analysis of all sectors [Banco de Santander, 2022 – Spain].
The section related to risk management underlines contrasting results between Italian and Spanish companies (Figure 4). For the former, Type 2 is dominant for sub-categories a) and b) and Type 1 for sub-category c). Spanish companies show a higher disclosure of Type 4 for sub-categories a) and b) and a predominance of Type 1 for the sub-category c). The qualitative characteristics of the information to be disclosed in the risk management section led to the exclusion of Type 3 coding, i.e. purely quantitative. The following are two examples related to the reporting of the risk management recommendation for subcategory a):
Identification, assessment and monitoring of main risks and of related treatment actions in Leonardo are supported by specific methodologies, tools and metrics aimed at their analysis and management. The Enterprise Risk Management (ERM) methodology and process, constantly updated to innovate and spread an effective organizational culture based on risk prevention and management, integrate the analysis of ESG factors and topics, including those related to climate change. […] Risks identified and assessed by the owner functions have been classified according to the categorization of the TCFD recommendations. Notably, each risk has been assessed in terms of probability and impact with the aim of defining the “current” risk level. [Leonardo, 2022 – Italy]
ArcelorMittal identifies, assesses and manages risks – including climate-related risks – on an ongoing basis through a variety of mechanisms. […] In 2020, Group Assurance formalised a quarterly process enabling corporate functions to identify medium and long term risks and opportunities to the business […] and specify mitigation actions. A consolidated report is shared on a quarterly basis with the Executive Office and Audit and Risk Committee. […] Short-term risks within a 12-month timeframe are identified through a bottom-up process by site management teams. […] The company uses a risk management framework based on a blend of a COSO, ISO 31000 and an in-house model. Sites assess risks by assigning them a probability of occurrence and a potential financial impact and/or non-financial consequence such as environmental harm. Climate-related trends, and the risks and opportunities identified as arising from them, are used to inform the company's strategic outlook and planning on climate. […] The company's climate strategy is reviewed regularly by the ARCGS of the board. […] At the same time, all our business segments are required to prepare CO2 reduction plans to reach net zero by 2050 as part of the annual planning cycle. [ArcelorMittal, 2021 – Spain]
The metrics and targets section covers the most comprehensive qualitative and quantitative disclosure for both samples of companies represented by Type 5, i.e. narrative, quantitative and comparable. Thus, this section refers to numerical and qualitative reporting and comparisons of performance and indicators over time. Moreover, the disclosure of quantitative information supports reporting and comparison through tables and graphs. The following are examples of reporting for sub-category c) on the metrics and target recommendation:
In accordance with its Climate Strategy and the targets for reducing emissions set forth in its Sustainability Plan, in 2021 INWIT chose to join the Science Based Targets initiative (SBTi), which promotes the definition of emission reduction targets based on climate science, so as to meet the decarbonisation requirements and achieve the Paris Agreement targets, limiting global warming to 2°C compared to pre-industrial levels and to continue efforts to limit warming to 1.5°C. At the end of December 2021, INWIT submitted its target to SBTi, choosing the more ambitious trajectory aligned with 1.5°C, committing to reduce GHG Scope 1 and 2 emissions by 42% by 2030, compared to 2020 levels, and to calculate and reduce Scope 3 emissions. By setting these targets, INWIT has not only committed to acting in line with achieving its climate strategy, but has also shown its awareness of the issue, increasing its competitive advantage in the transition to a low-carbon-based economy. […] Targets from the Sustainability Plan have been included in the MBO system of the General Manager and in the management's incentive scheme. Specifically, for the General Manager, in the MBO 2022, the sustainability target had a weight of 15% of the total and relates to a CO2 reduction target and a digital divide reduction target. [Inwit, 2022 – Italy]
Cellnex has defined precise and ambitious targets for reducing its emissions aligned with the 1.5°C scenario. The SBT initiative has validated this commitment. […] Cellnex Telecom is committed to: increase the annual sourcing of renewable electricity supply from 0% to 100%; reduce by 21% absolute scope 3 emissions from purchased goods and services and capital goods; reduce by 70% absolute emissions of scope 1 and 2 GHGs and scope 3 emissions from fuel use and energy-related activities [Cellnex, 2022 – Spain].
Figure 5 highlights the differences between Italian and Spanish companies.
A key feature of the TCFD framework is the definition of categories of climate-related risks and opportunities [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. The main aim is to support companies in assessing and reporting on risks and opportunities related to climate change and the transition to a low-carbon economy with financial implications for their business. Notably, climate-related risks are classified as physical – those pertaining to the physical impacts of climate change – and transition risks to a low-carbon economy [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. The formers can be acute or chronic, depending on the climatic event that is occurring, while transition risks may be political and legal, technological, market and reputational [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. Similarly, the framework categorises climate-related opportunities arising from mitigation and adaptation actions into resource efficiency, energy sources, products and services, markets and resilience [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. Based on these considerations, Figure 6 displays the differences in the companies’ compliance with the categories of risks and opportunities. Notably, Italian companies are more consistent than Spanish companies in disclosing the categories recommended by the framework. However, Figure 6 suggests that companies in the sample are more aligned with the TCFD recommendations in terms of disclosure of risk categories compared to opportunity categories. Therefore, these results are particularly valuable for opportunities, which are disclosed broadly in most reports without references to the framework’s sub-categories.
An additional investigated item relates to the reporting of GHG emissions in Scopes 1, 2 and 3, which respectively express all direct GHG emissions, indirect GHG emissions from consumption and other indirect value chain emissions, including upstream and downstream emissions [Task Force on Climate-related Financial Disclosures (TCFD), 2017]. Below are examples of Scope 1, 2 and 3 emissions reporting related to sub-category b), showing the greater detail provided by Spanish companies:
The sum of scope 1 and scope 2 CO2e emissions generated in 2020 was 133.146 tonnes, of which 98.194 tCO2e were scope 1, and 34.952 tCO2e were scope 2 market-based (107.663 tCO2e scope 2 location-based). It has achieved a 38% reduction compared to 2017, making progress towards meeting the 60% reduction by 2030 and 90% reduction by 2040 […] By 2020, ACCIONA set a science-based scope 3 GHG emissions reduction target for 2030 of 47% compared to the 2017 base year for the set of categories “Products, services and raw materials; capital goods; activity related to energy use (non-scope 1 and non-scope 2); upstream transport and distribution; employee commuting and use of sold product”. The scope 3 emissions figure for these 6 categories has decreased by 31% compared to 2017, while the decrease for all scope 3 emissions was 21%. [Acciona, 2020 – Spain]
Total emissions (Million tCO2eq): 8.5. Scope 1 (Million tCO2eq): 2.3. Scope 2 (Million tCO2eq): 0.2. Scope 3 (Million tCO2eq): 6.0”. [Mediobanca, 2021 – Italy]
In this regard, Figure 7 shows that Spain performs better than Italy in reporting all three emission scope levels.
5. Discussion and conclusions
This study investigates the reporting practices of a sample of Italian and Spanish-listed companies drawing up a TCFD-based report framework, providing insights into how the recommendations are applied in corporate reporting. The main purpose of our research is to analyse, through content analysis, the level of climate-related information disclosed, combining the presence of information with the depth or detail provided in the disclosure. Companies can disclose climate-related information in a narrative, quantitative and comparable way. The application of the CONI model shows that Italian and Spanish companies are compliant with the TCFD framework but disclose information with different levels of detail.
The governance section is mainly disclosed using narrative information, whereas the strategy recommendations are communicated using narrative and quantitative approaches. Risk management information is disclosed narratively by Italian companies and both narratively and quantitatively by Spanish companies. The last recommended disclosure, metrics and targets, is the most detailed, as information is provided in a qualitative, quantitative and comparable form through indicators and data trend analysis.
The level of disclosure by companies in the two countries is fairly aligned, confirming the similarities between Italy and Spain; however, the disclosure of some variables shows greater differences. The first relates to reporting governance-related aspects, and the second relates to risk management.
With reference to governance, the board’s oversight and management’s role in assessing and managing climate-related risks and opportunities results analysed in more detail in the Italian TCFD-reports. On the other hand, the topic of risk management is presented in more detail by Spanish companies than Italian ones. The Spanish Law 7/2021 on Climate Change and Energy Transition explains our evidence, as it requires more nonfinancial information and climate risk reporting obligations for Spanish companies in special reports. Notably, it establishes nonfinancial reporting requirements for listed companies to integrate information on the exposure to carbon risks and strategies and targets for their mitigation (BOE, 2021). These specific requirements involve the drawing up of an annual report providing an assessment of the financial impact of climate-related risks, including those related to the transition to a sustainable economy and the measures taken to address them (BOE, 2021; Viscasillas, 2023). Furthermore, other requirements involve the disclosure of the strategic approach adopted to manage climate risks, the current and potential impact of climate-related risks and opportunities on the organisation’s activities and financial planning, and the integration of these risks into overall corporate risk management (BOE, 2021). In this regard, recent studies (Borghei et al., 2024; Christy et al., 2024) underline the critical role of standards and regulations in increasing both the accuracy and transparency of climate disclosure and in supporting companies in meeting targets and certifying their carbon accounting systems. Indeed, previous research (Carlson, 1997; Barlev and Haddad, 2007) has emphasised the importance of comparing accounting information and the key role of the harmonisation process in promoting the comparability of international reporting. To this end, Nobes (1991) and Herciu (2021) describe harmonisation as the process of enhancing the comparability of accounting information; indeed, the heterogeneity of the reporting frameworks leads to challenges of intelligibility for investors and difficulties in comparing information published by organisations located in different socio-economic environments (Herciu, 2021). Other authors (Hummel and Bauernhofer, 2024) highlight that regulatory requirements lead companies to change their reporting to comply with the new regulations; as a result, information transparency increases, allowing stakeholders to assess the company’s sustainability performance better.
A comparison of the two sample reports reveals differences in companies’ compliance with the risk and opportunity categories. In particular, Italian companies are more consistent than Spanish companies in disclosing the categories recommended by the framework. Our analysis documented that Spain performs better than Italy in reporting all three GHG emission scope levels (Scopes 1, 2 and 3). The explanation for this result may be the adoption in Spain in 2021 of the Climate Change and Energy Transition Act, which consolidates its commitment to carbon neutrality and decarbonisation and sets targets for renewables for 2030 (BOE, 2021).
On the other hand, both TCFD-reports samples analysed show limited detail on how processes for identifying, assessing and managing climate-related risks are integrated into risk management. The issue of risks, particularly climate-related risks (e.g. physical and transition risks), represents a real financial risk that can impact the value of corporate assets (Deloitte, 2022; KPMG, 2022; Galeone et al., 2023) and can be relevant and valuable to investors (Cotter and Najah, 2012; Goodell et al., 2024). Therefore, there is a need for companies to focus on how these risks should be integrated into existing risk management, considered in strategies and governance and in the processes of identification, assessment, monitoring and even reporting (Bui and de Villiers, 2017; O’Dwyer and Unerman, 2020). All sampled companies report integrating climate and environmental risks into their overall risk management system, with no significant differences between Italian and Spanish companies.
It is interesting to highlight that the 2020 Research Report (EUKI, 2020), which assesses the climate and environmental disclosures of 300 European companies following the European Non-Financial Reporting Directive, considers Italy and Spain as examples of good practices in climate change reporting. Indeed, both countries disclose more climate-related risks and opportunities than the other countries surveyed, particularly in terms of physical risks, risks of transitioning to a low-carbon economy and the effects of risks and opportunities on the business model. In this regard, greater disclosure of risk categories was found, a result confirmed by previous literature (e.g. Gebhardt et al., 2024), which recognises a better quality of reporting on risks than on opportunities.
Additionally, Italian and Spanish companies are more likely to report on Key Performance Indicators (KPIs) (i.e. Scope 1, 2 and 3 of GHG emissions) and climate targets than other European countries (EUKI, 2020).
Regarding sector affiliation, the companies reporting the most climate information belong to the financial and energy sectors in Italy and the financial sector in Spain. Although the financial sector is not generally considered an environmentally sensitive sector (Chew et al., 2016), previous literature (Buranatrakul and Swierczek, 2018; Kılıç and Kuzey, 2019) has recognised the critical role of the banking industry in promoting sustainable development and increasing accountability on sustainability issues.
The results of this study are valuable for companies, investors and researchers. The increasing orientation towards mandatory climate disclosure will put greater pressure on companies to manage these issues, and the results of our work already highlight which aspects need to be improved to comply with the emerging demands. The reference is certainly to the risk management system on which, as stated before, there is less information in the reports. However, the 2023 Status Report suggests an increase in the number of companies reporting climate-related risks or opportunities between 2020 and 2022, and greater disclosure of TCFD recommendations by European companies compared to other regions [Task Force on Climate-related Financial Disclosures (TCFD), 2023].
It is important to highlight that, as has been largely underlined in literature and practice, inadequate or limited information can affect how investors and markets evaluate companies (Bebbington et al., 2020; KPMG, 2022; Arian and Sands, 2024). In this regard, some consultants and experts in the financial field have expressed their opinions on nonfinancial reporting and its link to investment decisions. Janine Guillot, Special Advisor to the Chairman of the ISSB, says:
Investors are calling for consistent, comparable and reliable sustainability disclosure. Why? Because they need it to price risk and allocate capital, just as they have always done with traditional financial disclosure. High-quality information is the fuel that capital markets run on (KPMG, 2022, p. 31).
Elizabeth M. White, Lead Sustainability in Development Impact Management – International Finance Corporation, World Bank Group, states:
As countries make ambitious commitments to address the pressing challenge of climate change and sustainability more broadly, there are tremendous opportunities to redirect private capital to climate and sustainable finance. Many firms are committing to ambitious decarbonization goals and pathways, while capital markets and financial institutions are setting reporting KPIs for sustainability-linked bonds and loans. (KPMG, 2022, p. 47)
Therefore, greater transparency on the impacts of climate change on companies is needed [Task Force on Climate-related Financial Disclosures (TCFD), 2023], and the importance of developing new climate-change analysis and reporting practices is evident. In this regard, ongoing efforts of standard setters aim to ensure a high degree of interoperability between different frameworks and standards to produce aligned reporting and avoid overlap, multiple reporting venues and double reporting [Financial Stability Board (FSB), 2023; Task Force on Climate-related Financial Disclosures (TCFD), 2023]. The ultimate goal of interoperability is to achieve global comparability of climate-related disclosures and between sustainability reporting frameworks across jurisdictions (FSB, 2023). Previous literature (Christy et al., 2024) recognises that the standardisation of carbon accounting models and the harmonisation of international regulatory frameworks and standards could improve the assessment and management of carbon footprints. Therefore, the proliferation of climate change reporting, the adoption of new standards and the CSRD will bring new skills and expertise in nonfinancial disclosure to scholars, further enhancing reporting practices.
From a research perspective, our analysis strengthens the theoretical and empirical literature on climate change information. It provides opportunities for more in-depth investigations of corporate responses to climate change, more generally in sustainability reports and specifically concerning carbon accounting and reporting.
This study has certain limitations that could be addressed by future research. First, our analysis is limited to comparing Italy and Spain; therefore, new studies could extend the sample to companies from other countries, including non-European ones and the USA, to further deepen climate change reporting. Additionally, it might be worthwhile to integrate this analysis with companies not publishing a TCFD report but disclosing climate-related financial information in other documents (e.g. sustainability report, NFSs, annual report) declaring compliance with the TCFD framework to investigate possible differences between the content of stand-alone climate reports and other financial or nonfinancial documents. Future scholars could further explore the disclosure of climate-related risks and opportunities as investors increasingly demand decision-useful and transparent information on environmental performance and climate risks. In this regard, it may be interesting to submit questionnaires or interviews with members of the sample companies to understand the reasons for not publishing a stand-alone climate report, despite the adoption of the TCFD recommendations in their nonfinancial report. Similarly, interviews could be conducted with investors or other stakeholders to determine their perceptions of the importance and urgency of climate disclosure in their decisions. Further interviews could help scholars explore the benefits of climate reporting and the effects that disclosure according to established guidelines has on business decisions, performance and environmental outcomes, such as climate change mitigation and adaptation. Moreover, considering that the TCFD recommendations set a milestone concerning frameworks as they have been integrated into the latest standards issued by the IFRS, namely, IFRS S1 and IFRS S2, EFRAG and the CDP, future studies may consider investigating the quality of climate-related disclosures using the new standards and the adaptation of companies to new regulatory requirements. Given the complete transposition of TCFD recommendations into IFRS S1 and IFRS S2, the TCFD has fulfilled its remit and disbanded (www.fsb-tcfd.org/). It will be up to the IFRS Foundation to monitor the progress of companies’ climate-related disclosures. This change is interesting considering that the IFRS foundation (and the ISSB) has as its point of observation the impacts of environmental and social matters on the organisations’ financial performance and corporate value (outside-in approach) (Adams et al., 2021; Hummel and Jobst, 2024). Thus, we might effectively observe the diffusion and institutionalisation of carbon disclosure driven by investors’ demands.
