Wake Up Call
Less than 1% of companies have credible climate transition plans.
Recently, the Carbon Disclosure Project (CDP) released a report analysing the state of climate transition plan development among 18,600 companies globally.
The report evaluated the companies’ climate disclosures against a set of 21 key indicators that denote a credible climate transition plan. The findings showed that while over 4,000 companies claimed to have a transition plan, only 81 companies were found to have demonstrated best practice by disclosing against all 21 key indicators.
Of the 81 companies, the power generation and infrastructure industries were the best represented, with the apparel, fossil fuel, and hospitality industries being the poorest in terms of disclosure. When the report analysed the geographic split, Japan and New Zealand were found to be the best-represented markets with the most companies meeting all 21 indicators. In the United Kingdom, 404 out of 1,448 companies reported having a transition plan, but only six disclosed to all key indicators. This is particularly concerning as large businesses in high-emission sectors in the UK will soon be subject to a mandate on transition plan publication.
The report also looked at the transition plan indicators that companies most frequently met and found that more than one-third of companies provided sufficient information on the risks and opportunities of the net-zero transition. Additionally, almost one-quarter of the companies provided a high level of information on governance structures relating to climate. On the other hand, the report found that only 7% of the companies supported their long-term climate goals with appropriate interim targets and only 3% provided relevant financial details to support a climate transition.
In conclusion, the report highlights that progress on credible climate transition plans has been slow, but it is encouraging to see more companies recognising the importance of having a climate transition plan. Companies must plan for a low-carbon future in order to avoid the worst impacts of climate change and to send the right signals to capital markets that they will remain profitable. With 35% of companies covered in the report indicating that they will develop a transition plan within the next two years, there is hope for more rapid progress in the near future.
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