Net-zero goals stalled by gaps in climate action plans, EY reveals

A recent EY report has unveiled that many of the world’s biggest businesses do not have climate transition plans robust enough to support global efforts towards a better climate.

The big four firm noted that despite some progress having been made towards lowering the earth’s rising temperature, through the activities of big businesses, more needed to be done to “guard against the biggest environmental risks”.

The EY Global Climate Action Barometer examined the views of more than 850 companies across 50 countries and 13 sectors that had been identified as climate leaders.

Dr Velislava Ivanova, EY global strategy and markets leader, climate change and sustainability services, said the science on climate change was clear.

“The world is getting warmer and any reversal of this trend hinges on businesses taking credible action and putting in place transition plans which drive real progress toward climate goals,” she said.

“It is not easy – uncertainty, volatility and disruption abound – but companies that rise to the challenge and adapt their business models to meet climate goals will be the ones that flourish.”

EY said the report looked at the extent to which the companies were taking action and initiative to achieve vital climate goals and if they were disclosing their actions in climate reporting.

It was found that 64 per cent of businesses had net-zero transition plans in place, and 12 per cent had made strong progress in developing or disclosing plans, highlighting significant gaps threatening to undermine progress.

In addition, 48 per cent of organisations had kept their targets in line with scientific guidance on how to mitigate the worst effects of global warming.

Ivanova said of the companies that did have net-zero goals, almost 63 per cent relied on carbon credits, meaning they were simply offsetting their emissions rather than being actively committing to decarbonisation.

In financial services, the use of carbon credits was revealed to be significantly high at 78 per cent, followed by transportation at 69 per cent, which showed the sectors were struggling to decarbonise.

The report also revealed that 34 per cent of businesses interviewed had reinstated their climate targets to account for factors such as reduced funding or regulatory uncertainty, with 44 per cent of these reinstatements having been weakened by being less ambitious or a delay in timelines.

According to Ivanova, 68 per cent of companies had assessed both the transitional risks and physical risks they faced related to climate change, such as decarbonisation and those that arose from climate-related events.

“We know from client work that many businesses are doing much more to tackle climate risks than they are acknowledging in public – and it’s important that these efforts don’t go undisclosed,” she said.

“We must not forget the value of disclosure and reporting – companies that are open about their progress and their challenges are the ones that build trust with their customers, investors and beyond.”

The research uncovered a lack of effective governance across many organisations, which could be undermining their efforts to act on climate change.

“For any business to remain resilient and ensure continuity in the face of climate change, long-term planning is essential,” Ivanova said.

“This means putting in place actionable transition plans that show that businesses are anticipating risks and adapting strategies as we move toward a low carbon economy.”