- Fewer than 35% of companies’ emission reductions targets are credible[1] and only 1,164 organizations have set SBTs validated by SBTi.
- Only 6% (741) of all reporting organizations, disclosed claims of having a net-zero target.
- No companies disclosing from G20 countries had more than 4% disclosure against the 24 key indicators in the CDP questionnaire that related to climate transition plans
- Only 1% (135) of companies disclosed against all 24 indicators.
- Only 0.3% of organizations in the transportation and apparel industries disclosed on the 24 key indicators of a climate transition plan.
(London, 3rd March 2022), Companies are off track on setting climate transition plans, undermining the deluge of net-zero pledges agreed around COP26. Transition plans are a fundamental part of what is needed from corporate governance to decarbonize the economy and allow investors and other stakeholders to assess a company’s progress in reaching ambitious climate goals.
CDP’s latest analysis finds that out of the 13,000+ companies that disclosed in 2021 worth 64% of global market capital ($64tn) just one third are developing a low-carbon transition plan (4002/13,100+). Moreover, a paltry 1% (135) of companies reported through the total 24 key indicators associated with a credible climate transition plan[2].
These indicators were picked as they align with the eight key elements that CDP argue are core components of a climate transition plan, these elements are aligned to frameworks such as TCFD.
As AGM season gets underway, it is vital companies see commit to taking action on their pledges and develop clear and credible climate transition plans, underpinned by science-based targets.
Nicolette Bartlett, Chief Impact Officer, CDP, said:
“Currently one third of organizations disclosing through CDP reported developing a low carbon transition plan. This does not match the appetite from investors, customers and employees and governments who are pushing for more scrutiny since COP26.
“Critically, these plans also need to be assessed to ensure they meet stakeholder expectations and are actually delivering against climate needs. Are they science-based? Are they effectively tracked in a manner that would allow stakeholders to assess progress? How do they compare to the progress of their peers? All of these enable a vital accountability mechanism”.
The report, ‘Are companies being transparent about their transition’, shines a spotlight on the best and worst-performing industries when it comes to creating climate transition plans. Transportation and apparel were the worst performing sectors, with less than 0.3% disclosing against the 24 key indicators which legitimize a climate transition plan.
Those industries arguably facing the most scrutiny – namely financial services, power and fossil fuels – have the highest rates of climate transition plan disclosure, even though only 5% of organizations in each of these sectors reported against the 24 key indicators.
The report also highlights investment trends, revealing that only 45% of companies disclose all details of their investment in low-carbon R&D. Power and infrastructure had strong disclosure against this average, with 66% and 59% of companies disclosing, respectively.
Notable sectors with weak disclosure were transportation services (41%) and manufacturing (37%), inferring that companies are not investing in enough innovation to tackle the climate crisis.
According to The Climate Transparency 2021 report the G20 is responsible for approximately 75% of GHG emissions, but more work is needed as only 4% of organizations in these countries are disclosing to all the key indicators.
Of the 117 countries whose companies disclosed in 2021, Spain, France and Japan had the highest proportion of organizations disclosing to all the key indicators, yet at only 4%, 3% and 2% respectively. Indonesia, Saudi Arabia, Argentina and China had the lowest numbers of disclosing companies.
Whilst the overall number of companies with credible transition plan has increased from 2020, this report shows that corporates have much further to go. To help, CDP has produced a discussion paper outlining six guiding principles for developing a climate transition plan.
CDP has also produced a technical note to help companies respond to the 2022 questionnaire in relation to climate transition plans.
-Ends-
Notes to editor
For more information, or exclusive interviews, please contact:
- Maddy Bravery, CDP, email: [email protected]
- Josh Hoppen, ESG, email: [email protected]
Definition of credible transition plan:
CDP recognises a credible climate transition plan to be one that succinctly outlines how an organization will pivot its existing business model towards a 1.5C aligned trajectory, based on the latest climate science recommendations. Importantly, credibility of the plan is governed by the guiding principles and key elements (outlined in CDPs discussion paper) which companies need to disclose on in a comparable and consistent manner to enable stakeholders to assess the ambition of the plan and progress made over time.
Total industry disclosure (and threshold breakdown) - by sector:
| Industry | > 80% threshold (Responding to 80+% of indicators) | 79 - 20% threshold (Responding to 79-20% of indicators) | <20% threshold (Responding to <20% of indicators) | Total count |
| Apparel | 42 | 258 | 75 | 375 |
| Biotech, health care & pharma | 65 | 200 | 52 | 317 |
| Financial services | 254 | 232 | 18 | 504 |
| Food, beverage & agriculture | 124 | 689 | 196 | 1009 |
| Fossil Fuels | 59 | 93 | 18 | 170 |
| Hospitality | 16 | 50 | 8 | 74 |
| Infrastructure | 148 | 280 | 75 | 503 |
| Manufacturing | 581 | 3471 | 1053 | 5105 |
| Materials | 266 | 806 | 154 | 1226 |
| Power | 81 | 108 | 27 | 216 |
| Retail | 125 | 378 | 108 | 611 |
| Services | 282 | 1490 | 588 | 2360 |
| Transportation services | 85 | 418 | 141 | 644 |
| Grand Total | 2128 | 8473 | 2513 | 13114[3] |
Total regional disclosure (and threshold breakdown) – by country:
| Country | >80% threshold | 79 - 20% threshold | < 20% threshold | Total |
| Afghanistan | 1 | 1 | ||
| Åland Islands | 1 | 1 | ||
| Argentina | 1 | 37 | 24 | 62 |
| Australia | 26 | 99 | 27 | 152 |
| Austria | 19 | 51 | 10 | 80 |
| Bahamas | 1 | 1 | ||
| Bahrain | 1 | 1 | ||
| Bangladesh | 16 | 16 | ||
| Belarus | 1 | 1 | ||
| Belgium | 20 | 53 | 17 | 90 |
| Bermuda | 3 | 5 | 1 | 9 |
| Bolivia (Plurinational State of) | 2 | 2 | ||
| Brazil | 59 | 607 | 320 | 986 |
| British Virgin Islands | 1 | 1 | ||
| Bulgaria | 3 | 2 | 5 | |
| Cambodia | 4 | 4 | ||
| Cameroon | 1 | 1 | ||
| Canada | 43 | 211 | 47 | 301 |
| Cayman Islands | 4 | 2 | 6 | |
| Chile | 8 | 34 | 13 | 55 |
| China | 116 | 1051 | 240 | 1407 |
| China, Hong Kong Special Administrative Region | 14 | 96 | 24 | 134 |
| China, Macao Special Administrative Region | 6 | 4 | 10 | |
| Colombia | 8 | 31 | 10 | 49 |
| Costa Rica | 1 | 13 | 5 | 19 |
| Croatia | 3 | 1 | 4 | |
| Cyprus | 1 | 2 | 3 | |
| Czechia | 2 | 12 | 9 | 23 |
| Denmark | 20 | 57 | 15 | 92 |
| Dominican Republic | 2 | 2 | 4 | |
| Ecuador | 17 | 2 | 19 | |
| Egypt | 16 | 5 | 21 | |
| El Salvador | 3 | 3 | ||
| Estonia | 2 | 1 | 3 | |
| Fiji | 1 | 1 | ||
| Finland | 30 | 74 | 13 | 117 |
| France | 112 | 205 | 63 | 380 |
| Germany | 92 | 402 | 87 | 581 |
| Greece | 4 | 16 | 3 | 23 |
| Guam | 1 | 1 | ||
| Guatemala | 8 | 3 | 11 | |
| Guernsey | 1 | 1 | 2 | |
| Guyana | 2 | 2 | ||
| Honduras | 3 | 3 | ||
| Hungary | 1 | 18 | 10 | 29 |
| Iceland | 1 | 3 | 4 | |
| India | 50 | 168 | 49 | 267 |
| Indonesia | 4 | 49 | 21 | 74 |
| Ireland | 30 | 38 | 10 | 78 |
| Isle of Man | 1 | 1 | ||
| Israel | 2 | 17 | 4 | 23 |
| Italy | 49 | 237 | 84 | 370 |
| Jamaica | 1 | 1 | ||
| Japan | 333 | 475 | 68 | 876 |
| Jersey | 1 | 1 | ||
| Jordan | 1 | 4 | 5 | |
| Kazakhstan | 2 | 2 | ||
| Kenya | 5 | 2 | 7 | |
| Kuwait | 1 | 3 | 4 | |
| Latvia | 1 | 1 | ||
| Lebanon | 1 | 1 | ||
| Liberia | 1 | 1 | ||
| Lithuania | 2 | 9 | 11 | |
| Luxembourg | 5 | 12 | 3 | 20 |
| Madagascar | 2 | 2 | ||
| Malaysia | 2 | 54 | 19 | 75 |
| Malta | 1 | 2 | 3 | |
| Marshall Islands | 1 | 1 | ||
| Mauritius | 3 | 1 | 4 | |
| Mexico | 16 | 264 | 64 | 344 |
| Monaco | 1 | 1 | ||
| Mongolia | 1 | 1 | ||
| Morocco | 1 | 1 | 2 | 4 |
| Mozambique | 1 | 1 | 2 | |
| Netherlands | 26 | 96 | 14 | 136 |
| New Zealand | 12 | 17 | 29 | |
| Nigeria | 10 | 2 | 12 | |
| Norway | 35 | 35 | 5 | 75 |
| Oman | 2 | 1 | 3 | |
| Pakistan | 16 | 6 | 22 | |
| Panama | 5 | 3 | 8 | |
| Peru | 1 | 13 | 7 | 21 |
| Philippines | 1 | 16 | 6 | 23 |
| Poland | 2 | 79 | 28 | 109 |
| Portugal | 15 | 15 | 6 | 36 |
| Puerto Rico | 3 | 3 | ||
| Qatar | 1 | 1 | ||
| Republic of Korea | 72 | 132 | 38 | 242 |
| Romania | 2 | 16 | 11 | 29 |
| Russian Federation | 15 | 31 | 5 | 51 |
| San Marino | 1 | 1 | ||
| Saudi Arabia | 1 | 7 | 1 | 9 |
| Serbia | 3 | 1 | 4 | |
| Singapore | 8 | 48 | 15 | 71 |
| Slovakia | 1 | 4 | 3 | 8 |
| Slovenia | 1 | 11 | 4 | 16 |
| South Africa | 36 | 34 | 3 | 73 |
| Spain | 53 | 177 | 45 | 275 |
| Sri Lanka | 6 | 6 | ||
| Sweden | 42 | 123 | 33 | 198 |
| Switzerland | 33 | 95 | 17 | 145 |
| Taiwan, China | 123 | 209 | 51 | 383 |
| Thailand | 15 | 40 | 9 | 64 |
| Trinidad and Tobago | 1 | 3 | 4 | |
| Tunisia | 2 | 2 | ||
| Turkey | 39 | 56 | 23 | 118 |
| Tuvalu | 1 | 1 | ||
| Uganda | 2 | 2 | ||
| Ukraine | 5 | 5 | ||
| United Arab Emirates | 3 | 18 | 3 | 24 |
| United Kingdom of Great Britain and Northern Ireland | 188 | 708 | 157 | 1053 |
| United Republic of Tanzania | 1 | 1 | ||
| United States Minor Outlying Islands | 3 | 4 | 7 | |
| United States of America | 327 | 1889 | 701 | 2917 |
| Uruguay | 4 | 6 | 10 | |
| Venezuela (Bolivarian Republic of) | 1 | 1 | ||
| Viet Nam | 15 | 7 | 22 | |
| Grand Total | 2130 | 8476 | 2514 | 13120 |
24 Key indicators
Key transition-focused indicators in the 2021 climate change questionnaire:
| Climate Transition Plan Element | CDP 2021 Climate Change Question and Question Code | Relevance to Climate Transition Plans |
| Governance | (C1.1b) Provide further details on the board’s oversight of climate-related issues. | An organization should have board-level oversight of its transition plan with defined governance mechanisms in place to ensure delivery of the plan. Climate issues should be a scheduled item at all or some board meetings. |
| (C1.3a) Provide further details on the incentives provided for the management of climate-related issues. | To incentivize conscious action and commitment in realizing the plan’s goals, it is recommended that executive remuneration is aligned with the organization’s transition plan goals. | |
| Targets | (C4.1a) Provide details of your absolute emissions targets and progress made against those targets. | A transition plan should be underpinned by ambitious near- and long-term science-based targets which are in line with the latest climate science to achieve a 1.5 degree world. |
| (C4.1b) Provide details of your emissions intensity target(s) and progress made against those target(s). | ||
| (C4.2c) Provide details of your net-zero target(s). | A transition plan should aim to achieve science-based net zero targets in line with the latest climate science to achieve a 1.5-degree world by 2050 at the latest. | |
| Scenario Analysis | (C3.2a) Provide details of your organization's use of climate-related scenario analysis | Robust scenario analysis is an important strategic planning tool that can be used to inform the development of a climate transition plan. |
| Risks and Opportunities | (C2.3a) Provide details of risks identified with the potential to have a substantive financial or strategic impact on your business. | Disclosing details of material climate risks posed to an organization, including the potential financial impact and the cost to respond to these risks, indicates a robust transition plan is in place. |
| (C2.4a) Provide details of opportunities identified with the potential to have a substantive financial or strategic impact on your business. | Disclosing details of material climate opportunities posed to an organization, including the potential financial impact and the cost to realize these opportunities, indicates a robust transition plan is in place. | |
| Strategy to Achieve Net Zero | (C3.1) Have climate-related risks and opportunities influenced your organization’s strategy and/or financial planning? | This question gives the clearest indication if a organization reports that they have a transition plan in place |
| (C3.1a) Is your organization’s low-carbon transition plan a scheduled resolution item at Annual General Meetings (AGMs)? | An organization should have a defined shareholder feedback mechanism in place for regular feedback on the plan and progress against it. In some jurisdictions or for some organizations, AGMs are not a possible route for this shareholder feedback. In 2022, this question will ask more broadly about feedback mechanisms, not limited to AGMs. | |
| (C3.3) Describe where and how climate-related risks and opportunities have influenced your strategy. | A transition plan should outline how an organization will achieve its strategy to pivot its products and services, supply/value chain, investment in R&D, and operations to a 1.5-degree world. | |
| Financial Planning | (C3.4) Describe where and how climate-related risks and opportunities have influenced your financial planning. | Transition plans should include a description of the financial planning for existing assets, operations, and the entire business model to transition to a 1.5-degree world. The most indicative areas are revenue, capital expenditures, and operational expenditures. |
| (C-EU9.5a) Break down, by source, your total planned CAPEX in your current CAPEX plan for power generation. | Understanding total planned CAPEX for power generation and products & services in the next 5 years reflects the ambition of the disclosing organization to align its business trajectory towards a 1.5°C aligned path. This also signals its flexibility to continue the current technology/product portfolio at lower financial returns in a transition period to low-carbon technologies | |
| (C-EU9.5b) Break down, by source, your total planned CAPEX and your current CAPEX plan for products and services | ||
| (C-CE9.6a/C-CG9.6a/C-CH9.6a/C-CN9.6a/C-CO9.6a/C-EU9.6a/C-MM9.6a/C-OG9.6a/C-RE9.6a/C-ST9.6a/C-TO9.6a/C-TS9.6a) Provide details of your organization’s investments in low-carbon R&D for your sector activities over the last three years. | Actions being taken by high intensity sectors are key in the transition to a low-carbon economy. Specifically, the level of investments in low-carbon R&D provides an indication to which future earning capacity of core business might be affected, and the extent to which future resilience to climate-related issues can be incorporated in businesses | |
| Scope 1,2,3 Accounting with Verification | (C6.1) What were your organization’s gross global Scope 1 emissions in indicator tons CO2e? | A climate transition plan should be accompanied by a complete, accurate, transparent, consistent, and relevant inventory of all three scopes of emissions. Organizations should calculate and disclose all material categories of scope 3 and provide an explanation for categories that are not relevant. |
| (C6.3) What were your organization’s gross global Scope 2 emissions in indicator tons CO2e? | ||
| (C6.5) Account for your organization's gross global Scope 3 emissions, disclosing and explaining any exclusions. | ||
| (C10.1) Indicate the verification/assurance status that applies to your reported emissions. | A climate transition plan should be accompanied by a complete annual inventory Scope 1, 2, & 3 emissions that is verified by a third party. | |
| Value Chain Engagement | (C12.1a) Provide details of your climate-related supplier engagement strategy. | Organizations are facing resiliency risks in the value chain that have material environmental and financial implications; hence, value chain engagement plays a significant role in realizing a climate transition plan. Organizations with significant emissions in their supply chain can leverage their buyer power and engage their suppliers towards a 1.5°C aligned transition. A climate transition plan should include time-bound actions to decarbonize business processes within the value chain, including supply chain engagement that covers at least 25% of its suppliers by procurement spend or Scope 3 emissions. |
| (C4.5a) Provide details of your products and/or services that you classify as low-carbon products or that enable a third party to avoid GHG emissions. | A climate transition plan should include time-bound actions to decarbonize business processes, such as growing the revenue earned from its products and services portfolio. | |
| Policy | (C12.3a) On what issues have you been engaging directly with policy makers? | For many organizations, a successful transition will depend on an accommodative policy landscape, thus organizations should advocate for climate-positive policies that impact their relevant sector(s). A climate transition plan should demonstrate that an organization's public policy engagement aligns with its climate ambitions and strategy. |
| (C12.3f) What processes do you have in place to ensure that all of your direct and indirect activities that influence policy are consistent with your overall climate change strategy? | Ensuring that an organization’s internal activities are supported by fully aligned external policy engagement (policy, law, regulation, and trade associations) demonstrates an ambitious effort towards achieving a 1.5°C world. |
About CDP
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 590 investors with over $110 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Over 14,000 organizations around the world disclosed data through CDP in 2021, including more than 13,000 companies worth 64% of global market capitalization, and over 1,100 cities, states and regions. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.
[1] To cover at least 70% of emissions set between 5-15 years, or have been validated by SBTi.
[2] See Notes to editor
[3] The total count does not equal 13,120 – this is because 6 outlier organizations (these organizations were in Corporate Tags and International Bodies sectors) have been removed from the total sample.