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Report: Over 5,906 firms reported having climate transition plans in place last year through CDP
A report uncovered that over 5,906 companies (1 in 4) reported having climate transition plans in place last year through CDP, which runs the world’s only independent environmental disclosure system, marking a 44% rise.
Staying within 1.5°C remains a key business goal according to data released today by CDP which shows the number of companies disclosing that they have 1.5°C-aligned climate transition plans has jumped nearly 50% in a year.
A further 36% (8,200) disclosed that they expected to create one by 2025.
The data suggests that progress on transition planning is no longer a nice-to-have for showing climate credibility, and is critical for businesses accessing capital, driving efficiency, and complying with market and regulatory demands.
Climate transition plans are time-bound action plans that outline how a company’s assets, operations and entire business model will transition to a 1.5°C-aligned decarbonization pathway.
CDP’s questionnaire – used by companies representing over 66% of market capitalization last year – includes 21 indicators that support companies to disclose a plan, covering key climate elements like governance, emissions reporting, strategy, target-setting, financial planning, and value chain engagement.
The new CDP analysis also shows that companies can develop and disclose a ‘credible plan’ in under two years. Twenty-five of the companies assessed by CDP to cover all indicators were those signaling an intention to draft a plan two years ago. Overall, 39% of companies (2,329) that reported having a plan are already disclosing data on most of these indicators needed to fully judge credibility; a clear sign that they are well on the way to developing robust plans.
With disclosure on plans required by environmental standards being applied in mandatory reporting regulation around the world, including the International Sustainability Standards Board (ISSB) and the European Sustainability Reporting Standards (ESRS), outperformance on credible transition plans will be an indicator of the companies set to thrive in a net-zero economy.
Assessing disclosures by over 23,200 companies last year, the report shows that businesses listed on Europe’s FTSEurofirst 300 Index and Korea’s KOSPI 200 collectively outperformed their listed peers in the G20 considerably: with 77% and 75% respectively covering most key indicators in their disclosures.
The S&P/TSX60 (Canada) and CSI 300 (China) were the poorest performing indices among G20 countries, with only 28% and 29% of companies disclosing data on most key indicators.
Sherry Madera, CEO of CDP said “With nearly 50% more companies reporting climate transition plans through CDP in 2023, it’s evident that data on forward-looking commitments are becoming crucial tools for companies to build and maintain confidence with market stakeholders. This momentum is unmistakable, with a further 8,000 businesses looking to have their transition plans in place by 2025. This is encouraging and a smart business move, as climate transition plans are an essential tool needed for credible businesses as they shift to net-zero.”
Having robust plans is becoming more important for accessing capital, driving business efficiencies, and for complying with regulatory and market demands. Our data shows that companies consistently disclosing climate information through CDP are raising their ambition, and are more likely to be developing detailed, credible, and effective transition plans. This year, CDP is a better partner to these companies, making it easier to disclose the robust data the world needs through our alignment with IFRS S2 and a single streamlined questionnaire for climate and nature.”
Overall, less than 1% (140) of all companies disclosing through CDP reported to all 21 indicators required to judge a plan’s credibility. But almost all of these companies have reported data through CDP year-on-year, demonstrating that consistent climate transparency helps businesses to build credible climate transition plans.
CDP has also worked closely with the UK Transition Plan Taskforce to launch its ‘Disclosure Framework’ to support companies in their development of credible transition plans. Last year, the FTSE 100 was the third-best performing index in CDP’s analysis, with 70 companies disclosing at least two-thirds of the 21 key indicators and we expect to see a continued increase in credible disclosure across the UK as companies begin to align with the newly released guidance. Companies can disclose TPT-compliant plans through CDP from 2024.
Kate Levick, Co-Head, UK Transition Plan Taskforce, and Associate Director, Finance & Resilience, E3G, said:
“It’s good news to see the strong increase in the number of businesses disclosing transition plans and the further growth in intention to create a transition plan in 2025. Transition plans are now an essential part of any organization’s forward-looking strategy. CDP’s data points to the increased value of using the Transition Plan Taskforce’s best practice disclosure framework to ensure their reporting is comprehensive, robust and credible. I would urge all companies to get started on their transition plan in order to stay ahead of the curve, and continue to disclose those plans year on year to ensure they continue to align with best practice.”
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