A new study by the Transition Pathway Initiative Centre (TPI Centre) has found that only 5% of companies have somewhat adequate transition plans in place to meet their long-term decarbonisation targets.
The study, which covers over 1,000 large companies in the highest-emitting sectors, such as oil and gas, steel, and coal mining, found that despite almost all companies acknowledging climate change, only a small minority have quantified how they plan to meet their emissions reduction goals.
TPI Centre’s research score scored companies on a six-level scale, with zero representing those who do not recognise climate change as a significant issue for the business, and five for those who are in the planning and implementation phases of their decarbonisation strategy.
The new level five, which was introduced for this year’s report, assessed whether companies have transition plans that include defined, quantified, and financed actions to get to net zero, suggesting them as more credible.
While over 99% of businesses recognise climate change as a significant issue, and more than four in five companies (84%) now have at least some form of GHG emission reduction target (Scope 1, 2, and 3), no more than 5% of companies satisfy any level five credibility indicator, and no company satisfies them all.
The report suggests that while many companies are integrating climate change into decision-making and may be thinking about it strategically, credible transition planning and implementation remain scarce.
No clear relationship between how difficult it is to decarbonise a sector and its scoring level was found by the report. For example, paper companies scored poorly on average, whereas airlines and oil & gas companies scored much better, even though the paper sector seemingly faces fewer barriers to decarbonisation.
It appears that geography also plays a part, with Australasian, European, and Japanese firms scoring higher on both average level and against the new Level 5 indicators than those headquartered in other regions.
Airlines and Oil & Gas were two of the best performing sectors in the research, despite being considered ‘difficult to decarbonise’. The former being the only sector in which a quantified emission reduction strategy is somewhat common, with more than 10% of companies having quantified the impacts of their key actions in achieving their emission reduction targets.
The news comes just a day after Net Zero Tracker (NZT) found that a ‘significant’ number of businesses are covered by net zero targets, but that only 4% of commitments met the minimal ‘starting line criteria’ requirements.
The report also echoes findings earlier in the year from emission disclosure platform CDP which found that only a few disclosing companies, accounting for 5% of emissions, are on track to meet their targets. The same report found that of those companies, less than 1% have developed transition plans that are considered credible by the CDP.
The findings of these studies underscore the urgent need for businesses to take more aggressive action to decarbonise their operations. With the window of opportunity to avert the worst impacts of climate change rapidly closing, businesses that fail to act now risk being left behind.
About Transition Pathway Initiative Centre
The Transition Pathway Initiative Centre (TPI Centre) is housed at the London School of Economics and Political Science (LSE). The centre serves as an independent source of research and data on the progress of the financial and corporate sectors towards a low-carbon economy.
