Comment: It's time for companies and investors to spell out plans to turn climate goals into action
May 17 - This year, two simple words that pack a punch are going mainstream among the business community: transition plans.
Transition plans are the blueprints organisations are adopting to show how they are averting the material financial risks of the climate crisis. And they are key to harnessing the massive economic opportunities in adopting responsible investment and business practices.
We and our global partners are working with investors and companies across the economy to provide them with the guidance they need to develop and roll out robust and transparent climate transition plans. More than 4,000 companies (out of 18,600), disclosed to CDP last year that they had a climate transition plan.
But what we see is that most need to make those plans as mission-critical as their other strategic business and investment plans, on a par with driving sales, recruiting talent and investing in research and development. They need to clearly spell out the bold actions they are taking ‒ and when ‒ to make their transition plans a reality.
Developing plans for climate transitions are no different than finalising plans for any corporate goals. Goals are merely words without tangible, specific and accountable targets to deliver them.
Our latest benchmark of the 50 highest-emitting companies in the food industry found that while companies are making strides in setting and raising the ambition of their disclosure and targets, there’s a lot of room for progress on transition planning.
In just two years, the number of food companies that include Scope 3 emissions from their supply chains, which make of the bulk of their emissions, in their targets jumped to well over half of the 50 focus companies. This is great progress, but we also need targeted climate actions.
And while 27 of these companies, including Aramark, General Mills, and Mondelez, have disclosed elements of a transition plan for hitting those goals, none of their plans has all four elements ‒ growth strategy, procurement, operations and customer engagement ‒ needed to address climate change throughout their businesses.
The pressure from investors for plans that will deliver on climate action is ramping up dramatically. A push for transition plans is this proxy season’s dominant trend, according to a recent study we did of 2023 shareholder resolutions. Investors filed 58 resolutions seeking climate transition plans, with a sharp focus on banks. These plans help shareholders better understand the progress investors and companies are making toward their goals and hold them accountable.
In April, a significant number of shareholders ‒ 31.1% at Wells Fargo, 30% Goldman Sachs, and 28.5% at Bank of America ‒ voted in support of resolutions for detailed climate transition action plans, with similar proposals in the wings for JPMorgan Chase and Morgan Stanley this month. A study by BlackRock shows that 75% of proposals that garnered at least 30% of votes resulted in companies taking action. Of the six largest U.S. banks, only Citi has a transition plan that meets Ceres’ criteria for comprehensiveness.
This lack of a robust plan that drives real change matters. An analysis we did this spring of these banks’ targets for reducing emissions from oil and gas investments and lending in their portfolios found that none were on track to meet global climate goals, though Citi and Bank of America, especially, have made some encouraging progress.
All transition plans share basic elements. They outline the quantifiable, concrete actions a company or financial firm plans to take in the next one to five years to address climate risks and the shift to a clean economy throughout its operations, portfolio, and supply chains.
They may include plans to invest in renewable energy projects or develop more sustainable products, or actions to advocate for the climate-smart or just-transition policies that help them achieve their goals. Straightforward guidance exists for any company to get started, in addition to tailored support for different sectors.
The Investor Agenda, for instance, has published Investor Climate Action Plans (ICAPs) Expectations Ladder and Guidance for how investors can implement transition plans, along with case studies that highlight how major financial institutions, including Allianz, California State Teachers’ Retirement System (CalSTRS), and New York State Common Retirement Fund use that framework. Ceres Food Emissions 50 initiative released similar guidance for food sector companies, while Ceres Ambition 2030 initiative is rolling out guidance for banking, another high-emitting sector.
It is through General Mills’ transition plan, for instance, that the food company is working with farmers in its supply chain to adopt practices for regenerative agriculture on 1 million acres of farmland.
With the world rapidly globally shifting to a clean economy, and the window for averting the worst risks to corporate supply chains, water resources, and biodiversity closing, more investors and companies have set climate goals than ever before.
Every investor and company knows that delivering on any goal takes a plan. It’s basic business sense, and it’s why 2023 will be the year of turning transition plans into action.