Less than 1% of businesses have adequate transition plans in place for long-term climate goals

Nokia has submitted its commitment to achieving net-zero emissions by 2040 to the SBTi.

The Transition Pathway Initiative Centre (TPI Centre), based at the London School of Economics and Political Science (LSE), has today (7 November) published the findings on assessments of more than 1,000 corporate transition plans.

The analysis covers large companies in the highest-emitting sectors, such as oil and gas, steel, and coal mining. Collectively, analysed firms account for more than 90% of the total market capitalisation of those high-emitting sectors.

The TPI Centre found that of the 1,000+ assessed companies, only 20 currently quantify how they plan to meet their long-term decarbonisation targets.

While the analysis found that 84% of companies are disclosing emissions targets and 98% have policy commitments to act on climate, just 52% have undertaken climate scenario planning and only 48% have incorporated climate risks and opportunities into their long-term strategies.

The TPI Centre’s research director and professor of environmental policy at LSE, Simon Dietz said: “These results show that, while companies’ management and governance of climate change have in many ways improved, they have yet to come up with the detailed, quantified and costed transition plans needed in this critical decade.”

Transfixed transitions

The research echoes a similar analysis published by CDP at the start of the year, which found that less than half a percent of 18,600 companies that disclosed climate information through its platform last year have a credible climate transition plan to net-zero by mid-century.

CDP looked at which transition plan indicators were most frequently met – and which most organisations are falling short on.

More than one-third of all the companies covered in CDP’s report were classed as providing sufficient information on the risks and opportunities of the net-zero transition. This is likely, in part, due to the proliferation of the Taskforce on Climate-related Disclosures’ (TCFD) framework, which enables organisations to measure and report on climate-related risks and opportunities.

CDP also found that almost one-quarter (24%) of companies provided a high level of information on governance structures relating to climate, making this one of the stronger fields.

More broadly, the latest analysis from the Net Zero Tracker has confirmed that the 1,000th company from the Forbes Global 2000 has now set a net-zero target. However, the Tracker found that only 37% of corporate net zero targets fully cover Scope 3 emissions and just 13% specify quality conditions under which any offsets would be used. The Tracker warns that this signals an overreliance on low-quality offset credits, rather than emissions reductions.

Additionally, only 4% of companies with net-zero targets would comply with the revised ‘Starting Line criteria’, set out in June 2022 by the UN Race to Zero campaign.

The headline trend from the latest Tracker is that corporate net-zero targets are progressing on quantity, but that the integrity of mitigation targets and ambitions regarding Scope 3 should “urgently improve”.