Progress on vital global environmental goals has been ‘derailed’ by the failure of businesses around the world to put action plans and financial commitments in place to tackle climate change risks, EY has said.
In its EY 2024 Global Climate Action Barometer, which is now in its sixth year, EY examined the extent to which businesses are both scrutinising and seeking to mitigate the risks posed by climate change, assessing the efforts of more than 1,400 firms in 51 countries, across 13 business sectors.
Taking into account their transition plans and the information they publish based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD), the Barometer scores businesses on the number of recommended disclosures that they make (coverage) and the detail they provide for each one (quality).
This year’s Barometer indicates that the number of businesses providing at least some information on each of the recommended disclosures is at its highest point since the survey began, with an average score of 94% this year, up from 90% in 2023.
However, according to EY, the quality of disclosures ‘remains worryingly low’, with the average quality score sitting at 54%, up from 50% in 2023.
This indicates that ‘many companies are avoiding sharing detailed information with customers, investors and other stakeholders’, EY noted, with the highest quality disclosure records seen in the UK (69%), South Korea (62%), Japan (61%), Southern Europe (61%) and Western/Northern Europe (61%), while the Middle East ranks lowest with just 29%.
Transition plans
The Barometer also shows that just two fifths of companies (41%) report having a transition plan in place to help them mitigate the risks of climate change, and worryingly, 38% have no intention of doing so.
Adoption of transition plans stands at 66% in the UK and 59% in Europe, however among the world’s biggest emitters, it is even lower, at just 8% in China and 32% in the US,
Allied to this, even fewer companies have made clear financial commitments to support their transition plans. Just 4% have disclosed operational expenditure and 17% have reported capital expenditure linked to their transition strategies.
‘Perilous’ lack of action
“Ambition without action is meaningless at the best of times, but in the face of a global climate emergency, it is perilous,” commented Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader. “Businesses do seem to be taking small steps to improve their reporting on climate risks, but it’s a slow crawl at a time when they need to sprint, and the stakes could not be any higher.
“Companies that are serious about tackling climate change need to move at break-neck speed to put transition plans in place based on targets that are truly stretching. As it stands, they are falling dangerously short, with potentially devastating consequences for their own future, and that of the entire planet.”
Scenario analysis
Elsewhere, the Barometer shows a growing use of scenario analysis to assess climate risks – 67% of businesses this year, up from 58% in 2023. However, only 36% incorporate these scenarios into financial reporting, and only 32% disclose high-impact climate risks. This indicates a potential blind spot in financial planning for climate impacts, especially in regions like the Americas, where only 17% recognise high climate impacts on business.
Most companies (83%) set short-term emission reduction targets through 2030, but only 51% have long-term goals, and fewer still (24%) have validated these with the Science Based Targets.
“There may be times when short-term targets do the trick, but this is not one of those times,” added Christophe Lumsden, EY Global Climate and Decarbonization Leader. “Without a doubt, businesses see pursuing longer-term goals as a harder slog, and it is – but there are no short cuts for those that want to affect real change, and targets for the next five years should be seen as stepping-stones to 2050 net zero goals, never an end in and of themselves.” Read more here.
