Published: 06/05/2024
While many companies say they are committed to becoming Net Zero by 2050, research reports are finding that many have yet to publicly disclose detailed, actionable transition plans. According to CDP, only 0.4% disclose sufficient detail on how they believe they can achieve their respective targets.
CDP (formerly known as the Carbon Disclosure Project) is an international non-profit organisation that runs an environmental disclosure system and helps companies measure and manage their risks and opportunities on climate change, water security and deforestation. In 2022, out of the 18,600+ organisations that participated in their program, 4,100 have developed a 1.5°C-aligned climate transition plan. Of these, only 81 reported sufficient detail to align with a credible climate transition plan.
In the context of Australian companies, a group called Climate Integrity took a deep dive into some of our largest companies (excluding pure fossil fuel companies) and found that while 7 of the 10 large companies outlined how they plan to achieve their net zero pledge, only 3 have had their plan independently verified by the Science Based Targets Initiative as being aligned with a 1.5°C pathway. According to the report, only 4 companies are on-track to achieving their interim emissions reduction target and they are Qantas, AGL, Coles and Telstra - although one could argue the impacts of the Covid-19 pandemic would have helped Qantas’ emissions, as power outages did AGL. It is also worth highlighting that none of these companies have fully committed (publicly) to ending their use of fossil fuels or fully phasing out fossil fuels from their operations. Instead, half the companies have turned to voluntary carbon credits to count towards their emissions reduction targets.
In February this year, 49% of Woodside shareholders voted against the company’s climate plan for reasons that included Woodside’s continuing capital allocation towards developing new oil and gas projects. Richard Goyder, Woodside chairman, defended the company citing that energy transition is a costly exercise and would take decades, even with supportive policy and technological change. However, Ørsted, an energy company based in Denmark has proven this can be done. The company flipped its business model in 2009 from earning 85% of income selling heat and power from coal to becoming the world’s largest producer of offshore-wind energy in 2019. Management then had faced strong local opposition against the development of a new coal fired power plant, despite support from the German federal government. Then CEO, Anders Eldrup, saw the need to change and set out a vision of the green energy transformation. The company endured intense financial pressure and significant write-downs but stayed on course to accelerate its capital investment shift to renewables.
Early this year, legislation has been proposed mandating large Australian corporations and asset managers to make climate-related financial disclosures in their annual reports commencing in January 2025. This will be progressively phased across smaller entities in the following 2 years. The disclosure requirements will include transition plans, climate related targets, progress towards these targets and any mitigation strategies.