The latest data released by CDP indicates that maintaining alignment with the 1.5°C target is increasingly becoming a pivotal objective for businesses. The report highlights a significant surge of nearly 50% in the number of companies disclosing their adoption of the Paris Agreement’s 1.5°C-aligned climate transition plans over the past year.
Over 5,906 companies (1 in 4) reported implementing climate transition plans through CDP, which operates the world’s sole independent environmental disclosure system. This is a 44% increase from last year.
Additionally, 36% of companies (8,200) disclosed their intention to establish such plans by 2025.
These findings underscore the evolving landscape where transition planning is no longer just a gesture for demonstrating climate consciousness; it has become indispensable for businesses seeking capital, enhancing operational efficiency, and meeting market and regulatory expectations.
Climate transition plans are structured action blueprints that define a company’s roadmap for transitioning its assets, operations, and overall business model toward a decarbonisation pathway aligned with the 1.5°C target.
CDP’s questionnaire, utilised by companies accounting for over 66% of market capitalisation last year, comprises 21 indicators aiding companies in disclosing their plans. These indicators cover critical climate aspects such as governance, emissions reporting, strategic direction, goal setting, financial strategies, and engagement across the value chain.
Further analysis from CDP reveals that companies can formulate and disclose a ‘credible plan’ within a span of under two years. Overall, 39% of companies (2,329) reporting the presence of a plan are already sharing data on most key indicators, indicating substantial progress toward developing robust plans.
Considering the increasing focus on plan disclosure mandated by environmental standards integrated into mandatory reporting regulations worldwide, including the International Sustainability Standards Board (ISSB) and the European Sustainability Reporting Standards (ESRS), excelling in credible transition plans will serve as a benchmark for companies poised to thrive in a net-zero economy.
Assessment of disclosures from over 23,200 companies last year reveals that businesses listed on Europe’s FTSEurofirst 300 Index and Korea’s KOSPI 200 significantly outperformed their G20 counterparts, with 77% and 75% respectively covering most key indicators in their disclosures. Meanwhile, 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.
