Despite a UK government pledge to require large listed companies to disclose decarbonization plans this year, and over 80% of FTSE 100 companies committing to net zero by 2050, 95% of these companies have yet to publish “credible” or sufficiently detailed plans, according to a new study by professional services firm EY.
The UK initially committed to introduce mandatory disclosure of transition plans from financial institutions and listed companies during the COP26 conference in 2021, with an expectation for reporting to start in 2023, and subsequently formed a Transition Plan Taskforce (TPT), composed of industry and academic leaders, regulators, and civil society groups, to develop a “gold standard” for transition plan
The TPT launched its draft framework in November 2022, and is expected to publish it and its implementation guidance for transition plans in the summer of 2023. Following the anticipated publication, the government committed to consult on the introduction of requirements for climate transition plan disclosure in late 2023.
In its study of the net zero transition material published publicly by FTSE 100 businesses as of January 31, 2023, however, only 5% have disclosed plans that meet the draft TPT Framework guidance and started putting the plans into action.
Rob Doepel, EY UK&I Managing Partner for Sustainability, said:
“Businesses should now be clear about what credible, detailed plans need to look like, and should have a good idea about the direction regulation is moving in. There can be no excuse for being unprepared and the UK’s largest businesses need to push ahead with developing detailed, actionable plans that enable their organisations to transition and reap the benefits of Net Zero.”
Of the elements outlined by the TPT Framework required to create a credible Net Zero transition plan – Foundation, Implementation Strategy, Engagement Strategy, Metrics & Targets, and Governance – the study found the strongest performance by FTSE 100 companies on the “Foundation” stage, which encompasses describing the plan’s objectives, priorities, interim targets and milestones, and a summary of how the business will embed the strategic ambition of its transition plan in its business model, with 78% adherence by the companies.
The weakest element for the FTSE 100 companies was the “Implementation Strategy” stage, with only 11% publishing some of the required elements, which include more detailed disclosure of short-, medium- and long-term actions to deliver on the transition plan, planned changes to products and services, internal policies to align strategy with the plan, a description of the financial implications of the planned strategic changes, and the sensitivity analysis.
Even among the 5% assessed to have provided sufficiently detailed plans, the study found gaps in areas including financial planning and the definition of financial metrics and targets, indicating more work to be done in order to be considered fully TPT-aligned.
“While the Government has previously said that listed companies will be expected to publish their transition plans this year, a final date hasn’t been disclosed. By setting a deadline, the Government would give much-needed certainty to the UK’s largest businesses and would send a clear message that inaction is not an option.”