Just 5 per cent of the UK’s largest public companies have published climate transition plans that are “credible” or sufficiently detailed under draft British government guidance, despite most businesses saying they are committed to slashing their greenhouse gas emissions.
As part of a raft of green measures announced on last week, the UK government said it would consult later this year on making transition plans — where companies outline how they will cut emissions and the associated costs of doing so — mandatory for all large companies, including private businesses. Companies that fail to do so will have to provide a justification.
But new research by EY found that despite about 80 per cent of FTSE 100 companies having already disclosed some sort of plans that includes public targets to achieve net zero emissions by 2050, only 5 per cent would comply with the Transition Plan Taskforce’s (TPT) draft disclosure framework. The TPT was set up last year after the British government pledged at the UN COP26 climate summit hosted in Glasgow that UK listed businesses would have to publish decarbonisation plans by 2023.
Rob Doepel, EY UK and Ireland managing partner for sustainability, said the research showed the huge amount of work British companies need to do to reach the “gold standard” required under the TPT framework.
“We have a lot of organisations that have made great pledges and statements of intent, and talked about great projects, but in terms of fully aligned, fully exhaustive plans, there aren’t many that are where they need to be,” he added.
Governments, regulators and investors across the world are increasingly focused on the need for corporate transition plans, arguing they are a vital tool to understand how companies will be affected by the shift to a low-carbon economy. Countries around the world committed to limit global temperature rises to 2C, and ideally 1.5C, above pre-industrial levels under the Paris agreement — a target that will require a mammoth overhaul of global economies long dependent on fossil fuels.
Doepel said investors wanted companies to outline how their finances would be affected by the shift to net zero, believing this would enable them to compare how prepared different businesses were. But many companies were worried that public disclosure of such information would impact their access to capital.
The EY research also found that companies scored weakest against the TPT framework’s implementation requirement, which asks companies to disclose how they intend to adapt business planning and operations and change products and services.
Doepel said the COP26 target for companies to publish mandatory transition plans in 2023 would likely be missed, but said “2024 is realistic” in the wake of the autumn consultation announced last week.
But he added that thanks to the draft framework already in place, there was no excuse for companies to be unprepared. “Businesses need to push ahead with developing detailed, actionable plans that enable their organisations to transition,” he said.
A global campaign, initiated by billionaire investor Chris Hohn, has advocated for shareholders to vote on a company’s transition plans, known as a “say on climate”.
Michael Hugman, director of climate finance at The Children’s Investment Fund Foundation, which was co-founded by Hohn, said: “Without credible, short-term transition plans we cannot meet our climate goals or raise the investment needed to drive green growth and jobs.”
Sofia Bartholdy, the net zero lead for the Church Commissioners of England, the endowment fund of the Anglican Church, said it was disappointing that so few companies were publishing adequate plans.
“Even as climate experts continue to warn about the urgency of climate action, we are seeing a disappointing response from companies whose actions would likely help address this crisis. We urge those yet to do so to publish their transition plans as soon as possible,” she said.
In February, the Local Authority Pension Fund Forum, a group made up of 86 of the UK’s public sector pension funds, asset managers CCLA and Sarasin & Partners, and Ethos Foundation, a UK charity, wrote to FTSE 100 companies calling for the introduction of say on climate votes.
“We believe there should be disclosure of robust transition plans, and governance and accountability mechanisms that support their delivery,” said Tessa Younger, ‘better environment’ lead at CCLA, at the time.