Less than 1% of businesses have credible climate transition plans, CDP warns

Transition plans support top-level climate and emissions targets from businesses with tangible plans to change their business models to achieve them. CDP lists eight core elements of a credible transition plan, including good governance, financial planning, engagement across the value chain on low-carbon activities and robust emissions accounting across all scopes.

CDP has today (8 February) published a new report analysing the climate disclosures of 18,600 companies across the world, assessing the state of transition plan development. The report reveals that more than 4,000 of these businesses claimed that they had a transition plan, but that just 81 had demonstrated best practice by disclosing against all 21 key indicators that denote a credible climate transition plan.

Of these 81 businesses, the power generation and infrastructure industries were the best represented. The apparel, fossil fuel, and hospitality industries had the poorest disclosure with only one organisation in each disclosing to all key indicators of a credible climate transition through CDP.

When CDP looked at the split on geography, Japan and New Zealand were found to be the best-represented markets, with 16 and 13 organisations respectively meeting all 21 key indicators.

In the UK, 404 out of 1448 companies reported having developed a climate transition plan but only six disclosed to all key indicators. This is concerning, given that large businesses in some high-emission sectors are set to be subjected to a mandate on transition plan publication in the coming months.

The mandate was first announced by then-Chancellor Rishi Sunak at COP26 in November 2021. The UK Government subsequently convened a new Transition Plan Task Force to shape a ‘gold standard’ for these plans, of which CDP is a member.

At COP27 in Egypt last November, the UK Transition Plan Taskforce unveiled its first draft disclosure framework and opened a consultation with the intention of fine-tuning it. The consultation will close in February and the aim is to finalise the framework and implementation guidance this summer.  More detailed, sector-specific guidance will then follow in the second half of 2023.

Disclosure gaps

As well as looking at which sectors and geographies leading and lagging companies were operating in, CDP looked at which transition plan indicators were most frequently met – and which most organisations are falling short on.

More than one-third of all the companies covered in CDP’s report were classed as providing sufficient information on the risks and opportunities of the net-zero transition. This is likely, in part, due to the proliferation of the Taskforce on Climate-related Disclosures’ (TCFD) framework, which enables organisations to measure and report on climate-related risks and opportunities.

CDP also found that almost one-quarter (24%) of companies provided a high level of information on governance structures relating to climate, making this another of the stronger fields.

However, CDP found that only 7% of the businesses were supporting their long-term climate goals with interim targets appropriate in scope and ambition.

Moreover, just 3% provided relevant, forward-looking financial details to support a climate transition.

The report does note that more rapid progress in some of these fields may be on the horizon, with 35% of all companies covered reporting that they will develop a transition plan within two years. But it does caution that progress to date has been slow in the main.

“Whilst overall disclosure of credible climate transition plans is low it is encouraging to see more companies recognising the relevance of a climate transition plan and start their journey towards developing one,” said CDP’s global director of climate Amir Sokolowski.

Sokolowski added: “The need for companies to develop a credible climate transition plan is not an additional element but an essential part of any future planning. Companies must evidence they are forward planning in order for us to avert the worst impacts of climate change and to send the correct signals to capital markets, that they will remain profitable.”

Hear more from CDP at edie 23

Taking place in London on 1-2 March 2023, edie’s biggest annual event has undergone a major revamp to become edie 23, with a new name, new venue, multiple new content streams and myriad innovative event features and networking opportunities.

edie 23 will take place at the state-of-the-art 133 Houndsditch conference venue in central London. Held over two floors, the event will offer up two full days of keynotes, panels, best-practice case studies and audience-led discussions across three themed stages – Strategy, Net-Zero and Action.

Click here for full information and to book your ticket.

CDP’s senior climate change analyst Sylvester Bamkole will be appearing at 4.20pm on 1 March as part of a seminar on ‘how to create a winning sustainability report’, chaired by former International Integrated Reporting Council (IIRC) chief executive Richard Howitt. The session will include information on developing a robust climate transition plan.