Quarter of Companies Align with 1.5°C Pathway
CDP’s latest assessment of climate transition plan disclosures shows a “significant and much needed stride” towards corporate accountability.
Corporates are increasingly on the right track towards enhanced transparency and accountability on climate transition plans, a new industry survey has shown.
In its latest analysis, environmental disclosure platform CDP found that one in four (5,909) of the 23,200 companies using its framework claimed to have 1.5°C-aligned climate transition plans – representing a 44% increase over last year. An additional 36% said they would do so by 2025.
This progress is particularly critical at a time when businesses will soon need to comply with new regulations, such as the EU’s Corporate Sustainability Reporting Directive, as well as align with International Sustainability Standards Board (ISSB) standards and recommendations from the UK Transition Plan Taskforce (TPT), CDP said.
The group has worked with the taskforce to develop guidance to support UK companies in developing and disclosing credible climate transition plans.
“[Our latest] data suggests that progress on transition planning is no longer a nice-to-have for showing climate credibility, and critical for businesses accessing capital, driving efficiency, and complying with market and regulatory demands,” CDP said in a statement.
Kate Levick, Co-head of the TPT and Associate Director for Finance and Resilience at climate think tank E3G, said the findings pointed to the value of using the TPT’s best-practice disclosure framework to ensure comprehensive and credible reporting.
The analysis follows an earlier report in which CDP suggested mixed quality of corporate disclosures, with fewer than 400 companies aligned with its highest benchmark, despite increased reporting of climate and nature impacts.
“With nearly 50% more companies reporting climate transition plans through CDP in 2023, it’s evident that data on forward-looking commitments are becoming crucial tools to build and maintain confidence with market stakeholders,” said Sherry Madera, CEO of CDP. “This momentum is unmistakable. This is encouraging, and a smart business move, as climate transition plans are an essential tool needed for credible businesses as they shift to net zero.”
CDP defines climate transition plans as “time-bound action plans that outline how a company’s assets, operations and entire business model will transition to a 1.5°C-aligned decarbonisation pathway”. It launched its new disclosure platform earlier this year, aiming to streamline and remove barriers to high-quality reporting on climate and nature.
The platform includes a streamlined questionnaire combining CDP’s existing climate, forests, water, biodiversity and plastics disclosure requirements. Now used by companies representing over 66% of global market capitalisation, the questionnaire includes 21 indicators that cover key climate elements like governance, emissions reporting, strategy, target-setting, financial planning, and value-chain engagement.
“Through [its] alignment with IFRS S2 and a single streamlined questionnaire for climate and nature, CDP makes it easier to disclose the robust data the world needs,” Madera added.
Mixed picture
Just under 40% (2329) of the 1.5°C-aligned companies provided data on a majority of key indicators (14) required by CDP to evaluate the credibility of their plans – a sign that they are “well on the way” to developing those, the group said. Of the companies that had committed in 2021 to developing plans within two years, 44% had done so, and 25 of them disclosed them credibly.
“Having robust plans is becoming increasingly important,” said Madera. “Our data shows that companies consistently disclosing climate information through CDP are raising their ambition, and are more likely to be developing detailed, credible, and effective transition plans.”
Despite positive progress overall, some of the results in CDP’s analysis showed unequal performance across regions. Companies listed on Europe’s FTSEurofirst 300 and Japan’s KOSPI 200 indices, for instance, outperformed listed peers in other Group of 20 (G20) countries considerably on making comprehensive disclosures – with 77% and 75% respectively covering most key indicators.
Meanwhile, Canada’s S&P/TSX60 and China’s CSI 300 were the poorest-performing indices among G20 countries, with only 28% and 29% of companies respectively disclosing data on most key indicators.
“With disclosure on plans required by environmental standards being applied in mandatory reporting regulation around the world, including the International Sustainability Standards Board and the European Sustainability Reporting Standards, outperformance on credible transition plans will be an indicator of the companies set to thrive in a net zero economy,” CDP said in a statement.
In addition, only 1% (140) of companies fully disclosed data on all 21 indicators, underscoring the ongoing challenge in achieving complete transparency. However, almost all of them reported data through CDP year-on-year – demonstrating that consistent climate transparency helps businesses build credible climate transition plans, the group suggested.
“It’s good news to see the strong increase in the number of businesses disclosing transition plans and the further growth in intention to create a transition plan in 2025,” said E3G’s Levick. “Transition plans are now an essential part of any organisation’s forward-looking strategy. I would urge all companies to get started on [building those] to stay ahead of the curve, and to disclose them year-on-year to ensure they continue to align with best practice.”
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