Streamlining Sustainability: Beta Testing ChatGPT's Guidance with New ISSB Standards for SMEs

Our team evaluated "GPT for a specific purpose," which is presently in its Beta phase within ChatGPT.

We aimed to assess its competence in offering a straightforward template for an SME to utilize, one that aids in pinpointing risks and opportunities and adheres to the freshly introduced ISSB standards IFRS S1 and IFRS S2. 

In under twenty minutes, we configured the necessary prompts - directional sentences - to align with the standards and furnish a template for reporting. 

We conceptualized a hypothetical trucking enterprise and gauged the output with these specifics: “Our company specializes in transporting goods by truck. We boast a fleet of 2,000 trucks. Based in Nova Scotia, we extend our services across the border into the United States. Our primary concerns revolve around emission control and the well-being of our workforce. We strive for greater efficiency and seek out causes that resonate with and matter to our stakeholders. Presently, there is no dialogue with our stakeholders regarding ESG and Sustainability. Our diversity statistics show a 97 percent male workforce. Annually, each truck consumes between 8,000 to 20,000 gallons of diesel fuel.”

Here are the results:

ISSB IFRS S1 Disclosure Structure for ABC Trucking Company

1. Introduction and Overview 

• Company Profile: Introduce your trucking company, highlighting the size of your fleet and your operational regions (Nova Scotia and cross-border operations into the United States). 

• Industry Context: Mention that your company is part of the transportation sector, focusing on product transportation via a large fleet of trucks. 

 2. Sustainability Strategy and Governance 

• Sustainability Focus Areas: Emphasize your commitment to reducing emissions and ensuring employee well-being. 

• Governance Structure: Outline the governance structure overseeing your sustainability efforts (even if it's in a nascent stage). 

 3. Environmental Impact 

• Emissions Data: Disclose the range of diesel fuel usage (8,000 to 20,000 gallons per truck annually) and its implications on greenhouse gas emissions. 

• Emission Reduction Initiatives: Discuss any plans or ambitions to reduce emissions, such as exploring more efficient routes, investing in fuel-efficient technologies, or considering a shift to alternative fuel vehicles. 

 4. Social Impact and Employee Welfare 

• Employee Care: Address how your company ensures the well-being and safety of employees, highlighting any relevant programs or policies. 

• Diversity and Inclusion: Acknowledge the current diversity statistics (97% men) and any steps planned to improve diversity and inclusion within your workforce. 

 5. Efficiency and Innovation 

• Operational Efficiency: Discuss initiatives to improve efficiency in operations, potentially reducing fuel consumption and costs. 

• Innovation in Transportation: Mention any exploration into innovative practices or technologies that could enhance efficiency and sustainability. 

 6. Stakeholder Engagement 

• Current State: Note the current lack of communication with stakeholders about ESG and Sustainability. 

• Future Plans: Outline a plan to start engaging stakeholders in these conversations, identifying key stakeholder groups (employees, clients, local communities, etc.). 

 7. Metrics and Targets 

•  Baseline Data: Present the baseline data of fuel usage and current workforce diversity. 

•  Future Targets: Set clear, measurable targets for emissions reduction, increased diversity, and improved stakeholder engagement. 

 8. Conclusion 

• Summarize your commitment to sustainability and continuous improvement in ESG practices. 

Additional Recommendations: 

• Stakeholder Causes: Research and identify causes that align with your stakeholders' values. This can involve community projects, environmental initiatives, or social causes. 

• Regular Updates: Plan to provide regular updates on your progress in meeting these sustainability goals. 

Remember, the key to effective ESG disclosure is transparency and the willingness to show progress, even if starting from a less advanced stage. It's also important to keep abreast of any regional specific regulations or expectations, especially given your cross-border operations. 

Here are the results for IFRS S2: 

Thank you for providing details about your large transportation company with a fleet of 2,000 trucks. In the context of ISSB IFRS S2, which deals with climate-related disclosures, there are several key risks and considerations for the transportation industry, particularly for companies with substantial vehicle fleets like yours. 

1. Carbon Emissions and Regulation Compliance: One of the primary risks is related to greenhouse gas emissions from your fleet. The transportation sector is a significant contributor to carbon emissions, and there is increasing regulatory pressure to reduce these emissions. Compliance with evolving regulations and potential carbon pricing mechanisms could impact operational costs and necessitate investment in newer, cleaner technologies. 

2. Fuel Dependency and Price Volatility: Given that your fleet likely relies on fossil fuels, there's a risk associated with fuel price volatility. This is further compounded by the global push towards reducing fossil fuel dependency, which might lead to higher fuel taxes or restrictions on fossil fuel use in certain areas. 

3. Transition to Low-Carbon Alternatives: There's a growing market and regulatory push for transitioning to electric vehicles (EVs) or other low-carbon alternatives. This transition requires significant investment in new vehicles and infrastructure, like charging stations. Delay in transitioning could result in competitive disadvantages and non-compliance with future regulations. 

4. Physical Climate Risks: Your operations may be impacted by physical risks from climate change, such as extreme weather events disrupting supply chains and transportation routes, or damaging infrastructure and vehicles. 

5. Reputational Risks: Companies in the transportation sector face increasing scrutiny from consumers, investors, and other stakeholders regarding their environmental impact. Failure to address climate-related risks can lead to reputational damage. 

6. Insurance and Liability Risks: As climate risks intensify, insurance costs for transportation assets may increase. Additionally, companies might face liability risks if they are perceived to contribute significantly to climate change. 

In your ISSB IFRS S2 disclosures, it would be important to address these risks, detailing how your company is managing and mitigating them. This might include strategies for fleet modernization, investment in low-emission vehicles, fuel efficiency improvements, and measures to increase resilience against physical climate risks. Remember, transparency in reporting these aspects will not only comply with disclosure requirements but also enhance trust and relationships with your stakeholders.