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With shareholders and stakeholders pushing for more transparency in corporate climate reporting, wanting to know which companies are the leaders and the laggards in the climate transition, more and more corporations are choosing to disclose their environmental data.
50% of global market capitalization, which equates to approximately 10,000 companies, reported data through the environmental not-for-profit charity, CDP’s global disclosure system in 2020. This is the highest number of environmental disclosures CDP has ever seen, with a 70% increase since 2015. The sectors with the most disclosures were manufacturing, apparel, and transportation services while the lowest response rates came from hospitality, fossil fuels, and biotech. No surprise there.
Disclosures, like those made to CDP, could be a bold step towards corporate adherence to more specific, actionable goals, leaving behind nuanced PR-positive language. “Transparency through comparable, standardized disclosure is vital for a company to be accountable to its stakeholders, and show it is delivering against its targets and acting in line with its brand values. Only with transparent regular disclosure can ambitious corporate commitments like science-based targets, RE100, zero-deforestation, and pollution elimination be robust and trusted by the market,” CDP says.
The Science Based Targets initiative (SBTi) of which CDP is a founding partner, recently announced the 1000th company to join the initiative, nearly five years after the Paris Agreement, and amidst the major disruptions and urgent challenges of COVID-19. “When the SBTi launched in 2015, we set out to mobilize the private sector to take the lead on urgent climate action and to make science-based target setting standard business practice. We aimed to enlist 100 companies by COP 21 in December 2015, and reach 250 no later than 2020,” CDP says.
One Company Per Day
Momentum for science-based targets is reaching a critical mass across a range of industries, including apparel, healthcare, food and beverage, hospitality, information technology, and biotechnology.
Today, 1,009 companies, spanning 60 countries and nearly 50 sectors, and with a combined market capitalization of over $15.4 trillion — including one-fifth of the Global Fortune 500 — are working with the SBTi to reduce their emissions at the pace and scale necessary. And the number of companies working with the SBTi continues to soar. Despite the disruption and uncertainty of COVID-19, 2020 has seen a record rate of companies joining since the initiative’s commencement: an average of one per day. Recent joiners include major global household names such as Facebook, Amazon
AMZN
U.K. Raises Bar On Climate Disclosure
The U.K. Government raised the bar by asking Listed companies to disclose their climate risks according to the TCFD-Task Force on Climate-related Financial Disclosures- framework, creating a precedent for other economies to follow.
“As the first G20 government to do so, this sends a powerful signal to the market and other governments that they should follow the UK’s approach, ahead of 2021 United Nations Climate Change Conference- COP 26-. We look forward to reviewing the scope of these proposed changes: it will be important that they cover all sections of the economy,” CDP CEO Paul Simpson said.
As more economies push for more reporting transparency on climate, there is a growing risk that governments could adopt different reporting standards. This will create inconsistencies in the companies’ climate disclosure reporting, creating confusion in an already convoluted space.
“Markets require information to operate effectively – what gets measured gets managed. This requires an improvement in the quantity, quality, and comparability of reporting” says Mark Carney, COP 26 Finance Adviser, and UN Special Envoy, warning of the necessity of an across-the-board reporting standardization. As regulators and lawmakers get their act together to create policies on climate corporate actionability, reporting standardization should be top of mind.
