The FCA’s Sustainability Disclosure Requirements (”SDR”) regime has brought rigour to an area which was too loose for too long. But read the FCA’s rules and guidance and a bigger picture emerges. SDR is a detailed articulation of the FCA’s expectation of governance in general.

It runs something like this:

1. Set a meaningful goal (in SDR speak: ”a clear, specific and measurable sustainability objective”)
2. Figure out a credible route from here to there (“specify a theory of change”)
3. Tell whoever needs to know (”labels” and ”disclosures”)
4. Know how to measure your progress towards it (”have KPIs that demonstrate progress”), and
5. Know what you’ll do if it isn’t working (”set out an escalation plan”).

Of course, I ALWAYS agree with the FCA… but in this case, I really do agree with the FCA. So, let’s explore their general theory of governance through those five steps in SDR.

1) Set a meaningful goal

A proper objective does two things at once:

• It tells people what success looks like, ideally clearly, without corporate guff, and without being a 40-slide deck, and
• It makes it easier to say “no” to distractions (and investments) which dilute effort.

That’s why the FCA says “clear, specific and measurable”; if the objective’s fuzzy, everything which stems from it will suffer from uncertainty and drift. In financial services, that doesn’t just waste effort, it creates risk, and reputational harm.

A quick clarity test: could an intelligent outsider explain your objective back to you accurately, in different words, having only heard it once?

If it’s specific and measurable, the next step should be straightforward…

2) Figure out how to get from here to there

This is where a lot of governance starts to fall apart. I’ve written in detail about this before so I won’t rehash all that now. Suffice to say, you need a roadmap built on logic or everything will drift into magical thinking.

A “theory of change” forces you to lay out the causal chain, revealing the assumptions on which everything else rests. Not “we will do good things”, but “if we do X, it should cause Y, because Z, and here’s what would make us revise that belief”. A useable theory of change needs:

• A clear definition of the problem (what is broken, for whom, and why)
• Mechanisms, not just activities (how the intervention creates change)
• Explicit assumptions (what must be true for this to work)
• Proof points (what would confirm or contradict the logic)
• Failure flags (how might this go wrong, and how we’d notice early)

If you can’t articulate those, you can’t credibly claim you’re intervening in a way which drives positive change.

3) Tell whoever needs to know

Within SDR, this step is easy to dismiss as dry compliance, creating artefacts you wonder if anybody reads. Labels. Disclosures. Statements. Reports.

But think of it in governance terms. Communication creates commitment and brings necessary stakeholders along on your journey. It also:

• sharpens your thinking (because vague ideas don’t survive articulation),
• aligns everyone (because the goal is expressed in black and white), and
• builds in accountability (I know it’s comfortable to keep it to yourself, but it’s not effective!).

4) Know how to measure progress

Most organisations can produce KPIs. The question is whether the KPIs are meaningfully reflective of the objective and the theory of change. Again, I’ve written before about KPI setting (or ”watching what you’re watching”) so I’ll keep it brief here.

For a KPI to have MEANING, it must:

• represent something in the real world
• be strategically-aligned and move your plan along
• not just be something which happens to be easily measured

For it to inform ACTION, you must know:

• what to do with it (otherwise it’s just data)
• how noisy, volatile, uncertain, or signal-rich you expect it to be

Also:

• don’t let your KPIs replicate your biases
• don’t neglect what you can’t measure
• use counter-metrics to detect unintended consequences
• keep refining your approach

If you can’t reliably measure progress, your promises, whether sustainability objectives, or anything else, are empty hopes.

5) Know what you’ll do if it isn’t working

Every organisation has management information, particularly regulated ones, far fewer have a credible escalation and course-correction mechanism. A good plan normally defines:

• Thresholds: what counts as underperformance (not just “we’ll keep an eye on it” as it slides into oblivion)
• Timeframes: how long you tolerate drift before intervening
• Decision rights: who can pause, change scope, reallocate resources, or revise the approach
• Actions: what interventions look like in meaningful detail (not just “we will engage”)
• Governance route: when and how issues move from management to committee to board
• Learning loop: how evidence updates the strategy or theory of change, rather than just being explained away

If escalation relies on bravery, it won’t happen. If it relies on process, it will. The right plan makes escalation feel safe, boring, and routine, it’s about good decisions with minimal drama.

Let’s Talk

I’d usually do a summary at the end, but in this case, it’s right there at the top!

Whether it’s SDR-related, broader regulated governance, or just trying to turn a strategy into a win, let’s talk about breaking it down and making it happen.