Most (95%) FTSE 100 companies have not published net-zero plans that would be deemed credible or detailed enough under the UK government’s transition plan guidance, according to research by EY.
Even companies within the 5% with full plans have more work to do before their published intention can be considered fully Transition Plan Taskforce (TPT)-aligned, due to gaps across a range of areas such as financial planning or the definition of financial metrics and targets.
EY’s analysis found that while 78% of FTSE 100 companies have disclosed partially-developed plans that include public targets to achieve net zero emissions by 2050, they have not yet adequately outlined how they will reach these targets, and so are missing key current TPT framework requirements around strategy and execution.
Some 17% of FTSE 100 firms are still in the stage of setting targets and are yet to publicly disclose any actionable plans.
The findings come nearly 18 months after the government’s COP26 pledge that UK listed businesses would be mandated to publish decarbonisation plans by 2023.
Elaina Bailes, partner in commercial litigation at Stewarts law firm, said reporting requirements around climate transition plans are only going to get more stringent for large companies, so while they can now publish very high level information, “when this changes they will find themselves exposed to risk of shareholder activism and litigation”.
She added: “Where published information on climate transition plans is misleading or omits material facts, this could affect company share price and result in claims by shareholders. Directors could face actions similar to Client Earth v Shell for breach of directors duties.”
Net zero FTSE 100
EY analysed net-zero transition plan material published publicly by FTSE 100 businesses, as of 31 January 2023, and assessed them against the TPT draft disclosure framework.
The framework, which is set to be finalised this year following industry consultation, outlines guidance for companies to create decarbonisation plans that can be deemed “credible, useful, and consistent”.
The Treasury’s TPT was announced in November 2021 at COP26, where it was pledged that all UK listed businesses and financial institutions would be required to publish net-zero transition plans by 2023, albeit a specific date was not set.
EY found that more than 80% of FTSE 100 firms have made public commitments to reach net-zero carbon emissions by 2050.
The TPT framework outlines five key elements required to create a credible net-zero transition plan.
According to EY’s research, FTSE 100 firms scored best (with a 78% adherence) on the initial ‘foundation’ stage in the TPT framework, which requires companies to publish transition objectives and priorities, as well as implications for the business modelling.
FTSE 100 businesses scored weakest against the TPT framework’s ‘implementation strategy’ element, which requires companies to disclose how they intend to adapt business planning and operations, as well as outline proposed changes to products and services.
Just 11% of companies have published materials that touch on limited elements of this section.
Rob Doepel, EY UK&I managing partner for sustainability, said: “We expect the framework to be finalised this year following a government consultation, and, given the praise it received in the recent Skidmore Review, it’s expected to become mandatory.
“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.”