Businesses falling short on climate strategy despite advances in reporting

Organisations are showing incremental developments in the quality of climate reporting but the rate of improvement is not enough to fully support climate commitments, according to the latest EY global climate risk barometer.

Despite agreeing to climate commitments, nearly half (47%) of businesses surveyed do not disclose a transition plan to back these. The report found that 74% of respondent companies do not include the quantitative impacts of climate risk in their disclosures, implying that climate change is not being considered in the same way as other material impacts and reflective of a broader trend for climate strategy to remain separate from corporate reporting.

Despite improvement in the coverage of and quality of disclosures – both by 6% year on year – notably in the developing economies, EY says the pace of corporate change remains too slow as organisations reach a point of no return where improvements in disclosures are not enough, and transformative corporate action is required at scale.

The report examined more than 1,500 businesses in 51 countries to assess performance disclosure against standards set by the Task Force on Climate-Related Financial Disclosures. The barometer measures companies on the number of recommended disclosures that they make and the extent and detail of each disclosure.

The report reveals that the companies that have understood the links between climate risk and business growth strategy are well positioned to address the new climate-related disclosure requirements such as the IFRS S2, but those who continue to simply take a compliance driven approach are more likely to struggle to meet the new climate-related reporting requirements.

Dr. Matthew Bell, EY global climate change and sustainability services leader, said: “At a time when we should significantly ramp up our transitioning to a net-zero economy if we are to meet our climate commitments, this year’s EY global climate risk barometer indicates that there is a concerning disconnect between the stated climate ambitions and the corporate actions to achieve them.”

“Climate risk disclosure should not be viewed as a separate tick box exercise, but as an opportunity to inform wider commercial strategy and gain competitive advantage. Business should shift from a commitment mindset to one of action, where their decarbonization strategy is not only embedded, but executed across their operations.”



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