In a significant development for global climate goals, a new report from CDP shows a nearly 50% increase in the number of companies disclosing 1.5°C-aligned climate transition plans. This surge highlights the growing importance of these plans in the business sector and signals a robust commitment towards mitigating climate change.

Key Highlights from the CDP Report

• Significant Increase in Disclosures: The number of companies disclosing 1.5°C-aligned climate transition plans increased by 44% from 2022, with over 5,906 companies reporting such plans.

• Future Intentions: An additional 8,200 companies (36%) disclosed their intention to create climate transition plans by 2025.

• Indicator Coverage: Only 1% (140 companies) fully disclosed data on all 21 key indicators needed to judge the credibility of their plans.

• Leading Regions: Companies listed on the FTSEurofirst 300 (Europe) and KOSPI 200 (Korea) outperformed their G20 peers, with 77% and 75% covering most key indicators in their disclosures.

• Lowest Performers: The S&P/TSX60 (Canada) and CSI 300 (China) were the poorest performing indices among G20 countries, with only 28% and 29% of companies disclosing data on most key indicators.

• Role of CDP: The CDP questionnaire, used by companies representing over 66% of market capitalization last year, is instrumental in helping companies develop and disclose credible climate transition plans.

• Strategic Importance: Robust climate transition plans are increasingly vital for accessing capital, enhancing business efficiency, and complying with regulatory and market demands.

• Support from UK Transition Plan Taskforce: CDP's collaboration with the UK Transition Plan Taskforce has led to the launch of a ‘Disclosure Framework’ to support companies in developing credible transition plans.

Major Increase in Climate Transition Plans Disclosure

According to the CDP report released on June 19, 2024, over 5,906 companies, representing one in four globally, disclosed a climate transition plan last year. This marks a 44% increase from 2022.

Additionally, 36% of companies (8,200) indicated their intention to create such plans by 2025. This rise signifies a clear trend towards greater transparency and commitment to climate goals within the corporate world.

Climate transition plans are detailed, time-bound action plans outlining how a company will transition its operations and business model to align with a 1.5°C decarbonization pathway. These plans are essential for companies looking to demonstrate their commitment to sustainability, access capital, drive efficiencies, and comply with regulatory requirements.

Credibility and Key Indicators

CDP's questionnaire, used by companies representing over 66% of market capitalization last year, includes 21 indicators to assess these plans. Despite the progress, only 1% (140 companies) fully disclosed data on all 21 indicators, highlighting the challenge of achieving comprehensive reporting. These indicators cover crucial climate elements such as governance, emissions reporting, strategy, target-setting, financial planning, and value chain engagement.

However, 39% of companies (2,329) that reported having a plan are already disclosing data on most of these indicators needed to fully judge credibility. This demonstrates that a significant number of businesses are on the right path to developing robust and credible plans.

Regional Performance and Regulatory Impact

European and Korean companies lead the way in disclosure. Companies listed on the FTSEurofirst 300 (Europe) and KOSPI 200 (Korea) outperformed their G20 peers, with 77% and 75% respectively covering most key indicators in their disclosures. This suggests that businesses in these regions are more proactive in aligning their operations with climate goals and regulatory expectations.

In contrast, companies listed on the S&P/TSX60 (Canada) and CSI 300 (China) were the lowest performers, with only 28% and 29% disclosing most key indicators. This discrepancy indicates a regional disparity in climate commitment and reporting standards, highlighting areas needing significant improvement.

Statements from CDP Leadership

Sherry Madera, CEO of CDP, emphasized the importance of these disclosures:

Regulatory and Market Demands

The CDP analysis underscores that having robust climate transition plans is becoming increasingly vital for accessing capital, enhancing business efficiency, and complying with regulatory and market demands. The implementation of standards by the International Sustainability Standards Board (ISSB) and the European Sustainability Reporting Standards (ESRS) further highlights the importance of credible transition plans.

With disclosure on plans required by environmental standards being applied in mandatory reporting regulations around the world, outperformance on credible transition plans will be an indicator of the companies set to thrive in a net-zero economy. Consistent and transparent reporting is becoming a cornerstone of corporate sustainability strategies.

Encouraging Trends and Future Expectations

The trend towards increased disclosure is expected to continue. CDP’s alignment with the IFRS S2 and the streamlined questionnaire for climate and nature reporting will make it easier for companies to disclose robust data.

Kate Levick, Co-Head of the UK Transition Plan Taskforce, noted,

CDP has also worked closely with the UK Transition Plan Taskforce to launch its ‘Disclosure Framework’ to support companies in developing credible transition plans.

Last year, the FTSE 100 was the third-best performing index in CDP’s analysis, with 70 companies disclosing at least two-thirds of the 21 key indicators. This performance is expected to improve as companies align with the newly released guidance and continue to refine their transition plans.

The Role of Climate Transition Plans in a Sustainable Future

Climate transition plans play a critical role in the global effort to limit temperature rise to 1.5°C. They provide a roadmap for companies to reduce emissions, manage risks, and capitalize on opportunities in the transition to a low-carbon economy. By disclosing these plans, companies not only enhance their sustainability credentials but also build trust with investors, customers, and other stakeholders.

Moreover, the development of these plans fosters innovation and resilience within businesses. As companies work to meet their climate commitments, they are likely to discover new efficiencies, technologies, and business models that can drive growth and competitiveness in a net-zero world.

The surge in companies disclosing climate transition plans represents a significant step towards achieving global climate goals. As businesses strive to align with regulatory standards and market expectations, the emphasis on transparent, credible, and comprehensive transition plans will only grow stronger. This momentum is essential for driving meaningful change and achieving a sustainable future.

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