The number of companies reporting through research provider and environmental disclosure system CDP disclosing that they have a 1.5°C-aligned climate transition plan in place jumped by more than 40% over the past year, and more than 60% of reporting companies indicated that they have or plan to have such a plan in place within the next two years, according to a new report released by CDP.

CDP runs a global environmental disclosure system, enabling investors and other stakeholders to measure and track organization’s performance in key environmental sustainability areas including climate change, deforestation, water security, and plastic-related impact. In 2023, a record of more than 23,000 companies disclosed through CDP, up 24% over the prior year, and representing companies worth $67 trillion, or more than 66% of global market capitalization.

The organization’s annual questionnaire includes 21 key indicators of credible climate transition plans, covering a wide range of elements including governance, scenario analysis, risk & opportunities, strategy, financial planning, targets, Scope 1, 2 and 3 accounting with verification, policy engagement, and value chain engagement. The new report assessed the disclosure of reporting organizations in the 2023 questionnaire against the 21 indicators.

According to the report, more than 5,900 companies responded “Yes” when asked if their organization’s strategy includes a transition plan that aligns with a 1.5°C world, up 44% from approximately 4,100 companies in the prior year.

Overall, 26% of companies responded that their organizations a 1.5°C-aligned plan in place, and a further 36%, or 8,200 companies, reported that they plan to create one by 2025, according to CDP.

Sherry Madera, CEO of CDP said:

With nearly 50% more companies reporting climate transition plans through CDP in 2023, it’s evident that data on forward-looking commitments are becoming crucial tools for companies to build and maintain confidence with market stakeholders. This momentum is unmistakable, with a further 8,000 businesses looking to have their transition plans in place by 2025. This is encouraging and a smart business move, as climate transition plans are an essential tool needed for credible businesses as they shift to net-zero.”

The study also indicated that companies with 1.5°C-aligned plans in place were farther along in their climate-related disclosure capabilities, with 39% of these companies disclosing data on at least two-thirds of the 21 key indicators, compared to only around 10% of all disclosing companies. “Repeat” disclosers, or companies that report year-on-year were also found to be farther along, with 15% reporting on at least two-thirds of the indicators, and 41% reporting on at least 7 indicators, compared to only 30% of all companies on the latter metric.

While the number of reporting companies continues to grow rapidly, the study found that only a very small minority – less than 1% – of companies are reporting across all of the key climate transition plan indicators, although the actual number has increased to 140 in 2023 from only 81 in the prior year.

By sector, CDP noted that industries characterized by long-term planning demonstrated high rates of disclosure, with the power generation, financial services and infrastructure sectors leading in the proportion of companies reporting on at least 14 indicators, at 32%, 30% and 24%, respectively, while the fossil fuel sector lagged across all indicators.

The report also assessed organizations’ reporting across the key indicators, with the elements seeing the highest proportion of companies disclosing sufficient details for credible climate transition plans including risks & opportunities, at 32%, followed by scenario analysis at 20%, and policy engagement at 13%. The elements with the lowest reporting rates included financial planning and governance at 5% each, and targets at only 4%. Notably, the ‘governance’ element fell sharply from 2^nd place at 24% last year, due to changes in CDP’s assessment criteria in the 2023 questionnaire.

Madera added:

“Having robust plans is becoming more important for accessing capital, driving business efficiencies, and for complying with regulatory and market demands. Our data shows that companies consistently disclosing climate information through CDP are raising their ambition, and are more likely to be developing detailed, credible, and effective transition plans.”

Click here to access the report.