Global firms could face penalties as net-zero goals fall short
Only 41% have an official transition plan in place—a figure alarmingly low given the accelerating climate crisis.
The race toward a net-zero economy is stalling, with most companies failing to develop concrete transition plans to curb their emissions, according to the EY Global Climate Action Barometer 2024.
The report, which surveyed 1,400 companies across 51 countries, reveals that only 41% have an official transition plan in place—a figure alarmingly low given the accelerating climate crisis.
Whilst governments and global organisations ramp up pressure to meet the 2015 Paris Agreement targets, businesses across sectors remain hesitant to commit to concrete actions.
The world's top emitters, the United States and China, are particularly lagging, with only 32% and 8% of companies, respectively, having disclosed transition strategies.
The slow adoption of transition plans is compounded by a reluctance to disclose financial investments in climate action.
The report found only 4% of companies have shared details on operational expenditures related to climate initiatives, whilst just 17% have disclosed capital expenditures (capex) for decarbonization.
Despite mounting scientific evidence linking climate risk to economic instability, the majority of companies fail to integrate climate-related financial risks into their reporting.
The report found that just 36% of companies referenced climate-related financial impacts in their financial statements, and only 32% acknowledged at least one climate risk with a high financial impact.
Despite the slow global pace, some sectors and markets show improvement in climate disclosure and planning. The mining industry led sectoral improvements, increasing its disclosure quality by 7% YoY.
Europe is leading in transition planning, largely due to regulatory mandates such as the Corporate Sustainability Reporting Directive in the EU and the UK's Transition Plan Taskforce.
The financial sector, including banks and insurers, lags behind other industries in transition planning, largely due to their dependence on client data and evolving policy frameworks.
As regulators push for stricter climate reporting, the International Financial Reporting Standards Sustainability Disclosure Standards have been gaining traction, with jurisdictions such as Australia, Canada, Japan, and China moving toward implementation.
However, without a rapid shift toward concrete transition planning, many businesses risk falling behind investor and consumer expectations, as well as facing potential financial penalties from tightening regulations.
