Major public companies around the world have increasingly made pledges and promises to reach net zero, but barely any of them are prepared to act on that, a report Wednesday from CDP found.
Among more than 18,600 businesses that last year made disclosures through Carbon Disclosure Project (CDP), more than 4,000 indicated they have a climate transition plan, the group said. However, only 81 companies, or 0.4%, showed practices that demonstrate credible transition plans, according to CDP.
The firms disclosed according to 21 indicators that in aggregate show companies are ready to act, the group stated. An additional 2,300 companies make climate-related disclosures in 14 to 20 of those key indicators, showing that they are making progress on credible transition plans, according to CDP.
“Increasingly, stakeholders are expecting companies to provide credible transition plans that provide the roadmap for achieving ambitious climate goals,” said Simon Fischweicher, Head of Corporations and Supply Chains for CDP North America, in the group’s announcement. “Credible plans are not only setting targets to reduce emissions, but also should include aspects of governance, financial planning, full value-chain considerations, scenario analysis and policy engagement to build a supportive ecosystem.”
Some of the key indicators for disclosure involve board oversight, scenario analysis, financial planning and policy engagement, the group stated.
CDP defined climate transition plan as “a time-bound action plan that outlines how a company will achieve its strategy to align its assets, operations and entire business model with the latest and most ambitious climate science recommendations.”
The US led on the total number of companies making any disclosures at all, but those businesses lagged others globally in terms of the indicators they addressed. Of the 3,718 US companies for which CDP has disclosure data, 335 of them, or 9%, made disclosures in at least 14 of the 21 categories, the group noted.
That low rate could be addressed at least in part by a forthcoming climate-disclosure rule from the Securities and Exchange Commission (SEC), which is expected to be finalized this year. It would not immediately take effect, however, and it is unclear if the SEC will require the biggest companies to disclose Scope 3 emissions – a level of reporting that big business has increasingly fought.
“Companies are behind in climate action as well as preparedness and are underprepared for the wave of incoming regulation from the European Union and bodies such as the UK Transition Plan Taskforce (UK TPT) and SEC,” the group said in its announcement. “This lack of preparedness could open companies up to multiple risks including litigation.”