Clemence McNulty, Partner Sustainability and Climate Change at EY Africa Climate Change and Sustainability Services

EY is proud to announce the release of the 2024 edition of the EY Climate Action Barometer which underscores the urgent need for businesses to actively engage in climate action.

“This latest Barometer throws into sharp relief companies’ lack of readiness to meet the crucial goals of the 2015 Paris Agreement – including targets to limit emissions and temperature increases and to strengthen their ability to adapt to the impacts of climate change,” said Clemence McNulty from EY Africa Climate Change and Sustainability Services.

“Only slightly more than two-fifths of companies report they have a transition plan in place to help them mitigate the risks of climate change, and while a little more than a fifth report they do intend to develop one in the future, more than a third do not have any intention of doing so.”

Now in its sixth year, the Barometer looks at the extent to which organizations across the globe are reporting – and acting to mitigate – risks posed by climate change. It scrutinises the efforts of more than 1 400 businesses in 51 countries, across 13 business sectors, by looking at their climate disclosures and transition plans and the information they publish based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD), which was established to improve and increase reporting of climate-related financial data.

The full report can be found here.

Renaming and Focus Shift 

The report emphasises the lack of transition planning, offering critical insights into why many companies are falling short of their climate targets or failing to disclose their strategies altogether, despite overwhelming scientific evidence calling for immediate action.

“Ambition without action is meaningless at the best of times, but in the face of a global climate emergency, it is perilous. Businesses do seem to be taking small steps to improve their reporting on climate risks, but it’s a slow crawl at a time when they need to sprint. The stakes could not be any higher especially for companies operating in South Africa where the physical impacts of climate change are expected to be significant and companies exporting into certain geographies will face potential carbon prices/ taxes.

“Companies have been making more ambitious climate commitments, including to Net Zero, but they need to now put transition plans in place to meet stretching targets and enhance their resilience to the impacts that are coming. As it stands, they are falling dangerously short, with potentially devastating consequences for their own future, and that of the entire planet,” McNulty warned.

Key Findings from the Barometer:

• Quality of Climate Disclosures: Despite some progress, the quality of climate disclosures remains a concern, averaging a mere 54% in quality. This suggests a reluctance among companies to provide stakeholders with comprehensive information.

• Transition Planning: Only 41% of companies have established transition plans to address climate risks. Worryingly, 38% show no intention of developing such plans, significantly hindering global efforts to meet Paris Agreement objectives.

• Global Emission Leaders: The adoption of transition plans among major global emitters is alarmingly low, with only 32% in the US and 8% in China, in stark contrast to higher rates in the UK (66%) and Europe (59%), highlighting the crucial role of regulatory frameworks.

• Financial Commitments: A mere 4% of companies have disclosed operational expenditures for their transition plans, while 17% have reported capital expenditures, indicating a broad unpreparedness for the necessary financial investment in climate transition.

• Scenario Analysis Utilization: While 67% of businesses are employing scenario analysis to evaluate climate risks as per TCFD recommendations, only 36% integrate these findings into their financial reporting, suggesting a gap in translating risk assessment into financial planning.

Engagement and Action

The 2024 Climate Action Barometer is designed not only to inform but also to drive action.

“This is a really important piece of research providing deep insights and the ability to benchmark our clients by region and sector, but that also helps make the case for more urgent action around transition planning,” said McNulty.

Looking Forward

The Climate Action Barometer is a vital tool for fostering dialogue on the urgent need for decarbonisation, energy transition, and sustainable business practices.

“This report provides an opportunity for companies to critically assess their strategies and to engage in meaningful transformation with confidence, “ McNulty concluded.

ENDS