Last updated: 26 Nov 2024 10:00 Posted in:
The failure of businesses across the globe to implement and finance action plans to tackle climate change risks is derailing progress on vital global environmental goals, according to the latest EY 2024 Global Climate Action Barometer.
Now in its sixth year, the Barometer looks at the extent to which organizations across the globe are reporting – and acting to mitigate – risks posed by climate change. It scrutinizes the efforts of more than 1,400 businesses in 51 countries, looking at their transition plans and the information they publish based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD), which was established to improve and increase reporting of climate-related financial data.
The Barometer scores companies on the number of recommended disclosures that they make (coverage) and the detail they provide for each one (quality). It shows 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. A score of 100% means information is being disclosed on all recommendations, and this year’s average score is 94% – an improvement from 90% in 2023.
However, the quality of disclosures remains worryingly low, the Barometer says. The average quality score sits at 54% – edging up just slightly from 50% last year, indicating that many companies are avoiding sharing detailed information with customers, investors and other stakeholders. A score of 100% indicates that all the details needed are being disclosed.
Countries and regions with the highest quality disclosure records are the UK (69%), South Korea (62%), Japan (61%), Southern Europe (61%) and Western/Northern Europe (61%), while the Middle East (29%) sits at the bottom of the pack.
This latest Barometer throws into sharp relief companies’ lack of readiness to meet the crucial goals of the 2015 Paris Agreement – including targets to limit emissions and temperature increases and to strengthen their ability to adapt to the impacts of climate change. Only slightly more than two-fifths of companies (41%) report they have a transition plan in place to help them mitigate the risks of climate change, and while a little more than a fifth (21%) report they do intend to develop one in the future, 38% do not have any intention of doing so.
Among the world’s biggest emitters adoption of transition plans is even lower – only 8% in China and just 32% in the US. By way of contrast, adoption of these plans in UK and Europe is 66% and 59% respectively – largely the result of successful regulatory regimes, underlying the importance of regulation as a means to drive action.
Compounding this problem, even fewer companies have made clear financial commitments to support their transition plans. Just 4% have disclosed operational expenditure (expenses arising from day-to-day business operations) and 17% have reported capital expenditure (money invested in a business’ assets for future gains) – a sign that, even where companies have action plans, they are not ready to execute them.
Dr. Matthew Bell, EY Global Climate Change and Sustainability Services Leader, says: “Ambition without action is meaningless at the best of times, but in the face of a global climate emergency, it is perilous. 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.”
“Ambition without action is meaningless at the best of times, but in the face of a global climate emergency, it is perilous."
Dr. Matthew Bell, EY Global Climate Change & Sustainability Services Leader