Businesses fall short on climate strategy and action, despite advances in reporting
This year’s EY Global Climate Risk Barometer reveals a concerning disconnect between organisations’ climate commitments and their corporate strategy. The report surveyed over 1,500 businesses across 51 countries, including the UK, assessing the progress of climate-related disclosures against the Task Force on Climate-Related Financial Disclosures (TCFD) standards.
Despite nearly half (47 per cent) of respondents agreeing to climate commitments, the majority do not back these with transition plans. Only 26 per cent disclose the quantitative impacts of climate risk, implying it is not considered with the same gravity as other material impacts and reflecting a broader trend of climate strategy remaining separate from corporate reporting.
In the UK, where over 80% of UK listed firms say they are committed to becoming net zero by 2050, just 5% of firms have publicly disclosed detailed, actionable transition plans.
While coverage (+6 per cent year-on-year) and quality (+6 per cent YoY) of disclosures have incrementally improved, especially in developing economies, the pace of change is still considered too slow. The report says that with the point of no return approaching, improvements in reporting are no longer enough – transformative corporate action is urgently required.
Disclosure coverage increased from 84 per cent in 2022 to 90 per cent in 2023, but quality remains low at just 50 per cent, with minimal year-on-year gains.
The top markets for disclosure quality were the UK (66 per cent), Germany (62 per cent), France (59 per cent), Spain (59 per cent), and the US (52 per cent). However, countries like India (36 per cent), China, the Philippines (both 30 per cent), and Indonesia (22 per cent) were cited as needing significant improvements.
While disclosures are moving in the right direction, the pace is far too incremental given the climate crisis, according to the report, which calls for comprehensive, urgent action across the corporate sector.
Dr. Matthew Bell, EY global climate change and sustainability services leader, says:
“This year’s Barometer report shows there are both leaders and laggards when it comes to disclosure, with complexity existing regionally and across sectors. Unsurprisingly, countries with rigorous disclosure regulation and an engaged investor or policy maker community continue to move forwards, drawing on the recent TCFD disclosures and readying themselves for the new ISSB requirements. Markets where there is a lack of any mandatory climate disclosure requirements pull the average down, and until this is addressed, scores will remain low.”
