The Carbon Disclosure Project (CDP) published data that shows European businesses are already implementing key elements of the Corporate Sustainability Due Diligence Directive. Other key updates discuss the data on climate transition plan disclosures, a study on analysis of companies developing credible climate transition plans, and a report on the Non-Disclosure Campaign (NDC).
The Corporate Sustainability Due Diligence Directive in the European Union aims to provide a regulatory framework on corporate sustainability governance. Among key provisions of the Directive, Article 15 requires EU companies with 500+ employees and EUR 150 million+ in net worldwide turnover to have transition plans aligning their strategy and business models with a global warming limit of 1.5°C. The Directive also obliges member states to monitor companies’ operations and emission reduction plans and how the variable remuneration of executive directors is linked to the achievement of sustainability objectives. The CDP data show that more than a third of companies in Europe (37%) reported having a climate transition plan in place and only 2% of those companies report on all relevant transition plan indicators. The data also reveals that just one third of companies (34%) assess the impact of their value chains on biodiversity and only 17% assess both their upstream and downstream impacts. Therefore, the proposal of an extension of Article 15 to include biodiversity would lay the foundation for nature transition planning by companies, thus delivering on the goals of the Paris Agreement, the EU Biodiversity Strategy 2030, and the Global Biodiversity Framework.
Following are the additional key highlights of the remaining updates, as part of which CDP:
- published new data that show companies are recognizing the need for climate transition plans but are not moving fast enough amidst incoming mandatory disclosure. The report assesses climate transition plan disclosure against 21 key indicators within CDP’s climate change questionnaire and found that only 81 companies (0.4%) disclosed to all relevant indicators. A climate transition plan is a time-bound action plan that outlines how a company will achieve its strategy to align its assets, operations, and entire business model with the latest and most ambitious climate science recommendations.
- published a study, in collaboration with the global management consulting firm Oliver Wyman, that analyzes companies representing ~75% of the European stock markets and found that European companies are falling far short of developing credible climate transition plans to align with a 1.5°C, nature-positive future. The study highlights that most transition plans may lack ambition and transparency in key areas necessary to show serious action, such as in governance, financial planning, and value chain engagement.
- published a report on the Non-Disclosure Campaign (NDC), which is a collaborative initiative for CDP Capital Markets signatories to directly engage with companies that have failed to respond to either the climate change, forests, and/or water security questionnaire. The results of the 2022 NDC highlight the impact of direct engagement on companies’ environmental actions, in this case disclosure through CDP.
Keywords: International, Banking, Securities, Corporate Sustainability, ESG, Climate Change Risk, Reporting, Disclosures, Climate Transition Plan, Paris Agreement, Global Biodiversity Framework, CDP
Hasan leads Moody’s Analytics ESG methodology development. He is expert on carbon transition, nature related risks and is a guest lecturer at ESSEC Business school on sustainable finance.
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