Stockholm (NordSIP) – CDP (formerly the Carbon Disclosure Project) has been gathering environmental data from asset owners, companies, regions and municipalities for over two decades. In 2021 the non-profit organisation sought to include a range of forward-looking elements within its questionnaire with a view to evaluating the quality and viability of the CDP membership’s climate transition plans. The latest report shows overall results that are marginally worse than last year’s, but this is largely down to a strengthening of the science-based criteria used to define a credible transition plan.
Poor standards across the board
Nevertheless, the picture remains starkly negative and there is clearly much work to be done by CDP members with respect to the climate transition. 4,100 of the organisations claim to have a transition plan in place that aligns with the 1.5 degree warming goal of the Paris Agreement. Only 81 of the 18,600 reporting companies represented best-practice by reporting against the full range of 21 climate transition indicators specified by CDP. This leaves 99.6% of the peer group below standard. There is a somewhat stronger group of 2,300 companies – or 13% that did report on more than 14 indicators. Unfortunately, 60% of the reporting peer group disclosed against fewer than seven indicators, which CDP considers very poor practice.
CDP’s assessment methodology for transition planning considers indicators focused on governance, scenario analysis, financial planning, value chain engagement and low-carbon initiatives, policy engagement, strategy, risks and opportunities, targets and verified scope 1-2-3 accounting. The framework was constructed with the aim of maximising its alignment with other voluntary or mandatory reporting initiatives such as ACT, TCFD, CA100+ and GFANZ.
Time to draw up plans is running out
There is cause for cautious optimism in certain areas. 6,250 organisations are planning to develop a climate transition plan by 2025. The rate of disclosure was relatively high in the power generation and financial services sectors, both of which are considered critical potential contributors to a successful transition. Companies across the board will need to use the CDP’s report as an impetus for accelerating their transition plans, or they may face falling foul of upcoming mandatory legislation from the European Union, UK Transition Plan Taskforce or US Securities and Exchange Commission. Commenting on the publication of the report, Amir Sokolowski, Global Director of Climate at CDP said: “Tracking corporate disclosure against transition related indicators is essential to ensure companies are kept accountable to the targets and plans they set. Whilst overall disclosure of credible climate transition plans is low it is encouraging to see more companies recognising the relevance of a climate transition plan and starting their journey towards developing one.”