Key Impact Points:
- Only 41% of global companies have published transition plans for climate change mitigation, indicating a gap between awareness and action.
- Despite improved climate-related disclosures, just 36% of companies reference climate impacts in financial statements.
- Stronger regulations drive higher disclosure quality, but key emitters like the US, China, and India show limited progress.
Companies Falling Short on Climate Action
The 2024 EY Global Climate Action Barometer reveals that while climate-related disclosures are improving, they fall short of the pace needed to combat the climate crisis. Despite increased coverage (94%) and improved quality (54%) of disclosures, only 41% of large companies have published a transition plan for climate change mitigation. This hesitance persists as global temperatures continue to rise, underscoring the need for more decisive action.
Long-Term Targets Lacking
Many companies avoid setting long-term greenhouse gas (GHG) reduction targets, with only 51% establishing targets beyond 2030. The report highlights that while 67% of companies have conducted scenario analyses to understand potential risks, just 36% include climate-related financial impact in their statements, pointing to a disconnect between awareness and meaningful action.
“Companies may not want to divulge sensitive commercial information or risk allegations of greenwashing,” the report notes. This reluctance can stem from fear of litigation or insufficient actionable strategies.
Global Progress Uneven
Improved disclosure quality is more evident in regions with stringent regulations. The UK (69% quality score) and the EU (60%) lead in quality and coverage, while significant emitters like the US, China, and India lag despite contributing over half of global CO2 emissions. The Middle East and Southeast Asia also trail behind in disclosure metrics, even with gradual improvements.
Spotlight on High-Risk Sectors
The report highlights sector-specific improvements, with the mining and banking sectors showing notable progress. However, the energy sector, despite leading in quality scores (59%), still shows limited commitment, with only 43% disclosing transition plans. In contrast, leaders like Sempra and Lloyds Banking Group demonstrate proactive approaches to sustainability and community support.
Need for Actionable Transition Plans
Transition plans are essential to align with the 2015 Paris Agreement’s 1.5°C target. The report notes, “Targets that have been validated by the Science Based Targets initiative (SBTi) are considered best practice.” Yet only 24% of companies have SBTi-validated targets, though this figure rises to 41% for those with established plans.
Moving Forward: Core Actions for Companies
The report emphasizes six actions for accelerating sustainability:
- Prioritize transition planning: Develop robust, science-based plans for emissions reduction.
- Integrate climate risk in financials: Quantify risks and connect them to financial reporting.
- Leverage data: Use comprehensive data for real-time decision-making and future preparedness.
- Empower sustainability teams: Provide resources and align them with the company’s financial strategy.
- Educate leadership: Equip board members with climate risk knowledge and link executive compensation to sustainability.
- Collaborate across sectors: Engage in partnerships to advance sustainable policies and regulatory alignment.
“Only by taking decisive and meaningful action can businesses accelerate decarbonization and the energy transition necessary to shape a sustainable future,” concludes the report.
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