The fifth EY Climate Risk Barometer has recently highlighted a significant trend in corporate climate reporting.
Companies are increasingly disclosing their climate-related activities, yet there’s a noticeable gap between these disclosures and the actual achievement of carbon reduction ambitions. This discrepancy points to a deeper issue within the corporate response to climate change.
Over the past decade, disclosures have evolved under tighter regulations. However, the focus is now shifting from merely making commitments and setting targets to achieving tangible, measurable results. The urgency for real action has intensified, as it’s no longer sufficient to stay abreast of the latest climate-related standards or to propose vague, long-term goals without concrete plans for achievement.
Government regulators, stakeholders, and the public are demanding more substantial action from companies in combating climate change. The EY Climate Risk Barometer is a tool designed to identify trends, opportunities, and challenges that businesses face in relation to climate change, helping them navigate regulatory requirements and global benchmarking. The need for an economy-wide transformation to maintain global warming below a 2°C increase is clear, and businesses play a crucial role in this transition.
The 2023 Barometer indicates that companies are improving their climate disclosures, with the quality score of these disclosures increasing from 44% to 50%. This suggests that companies are dedicating more resources to enhancing transparency with stakeholders. Additionally, there are signs of improved governance worldwide, with many companies adopting International Sustainability Standards Board (ISSB) disclosure requirements. This includes reporting on the necessary skills at board level to oversee climate-related strategies and considering Scope 3 greenhouse gas emissions across all material categories.
However, these improvements are marginal. Given that it has been eight years since the launch of the Taskforce on Climate-Related Financial Disclosures (TCFD), a quality score of just 50% raises concerns. Effective reporting is vital for understanding whether the economy, sectors, and individual companies are truly transitioning towards more sustainable practices.
EY Global Vice Chair – Sustainability, Steve Varley said, ‘The reality is that government regulators, stakeholders, and the public are demanding far more from companies in the battle to arrest climate change.'”
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