Businesses’ slow crawl on climate action jeopardizing global environmental goals

A worldwide failure of businesses to put action plans and financial commitments in place to tackle climate change risks has derailed progress on vital global environmental goals.

• Latest EY Global Climate Action Barometer shows 62% of SEA respondents (global 41%) have plans in place to manage climate risks; world’s biggest emitters are worst offenders; lack of action posing major threat to achievement of global goals 
• Vast majority of businesses have not made a financial commitment to prepare for net zero – only 0.4% of SEA respondents (global 4%) have disclosed operational expenditure and just 1.3% (global 17%) have reported capital expenditure

A worldwide failure of businesses to put action plans and financial commitments in place to tackle climate change risks has derailed progress on vital global environmental goals, according to the latest EY 2024 Global Climate Action Barometer (Barometer). 

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 scrutinizes the efforts of more than 1,400 businesses in 51 countries (including over 100 from Southeast Asia (SEA) covering Indonesia, Malaysia, Philippines and Singapore), across 13 business sectors, by looking at their 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 Barometer scores companies on the number of recommended disclosures that they make (coverage) and the detail they provide for each one (quality). It shows that the number of businesses providing at least some information on each of the recommended disclosures is at its highest point since the survey began. A score of 100% means information is being disclosed on all recommendations, and the global average score for 2024 is 94% – an improvement in coverage, from 90% in 2023. In SEA, the average coverage score for 2024 is 91%, an improvement from 81% in 2023.  

However, the quality of disclosures remains worryingly low. The average quality score sits at 54% – edging up just slightly from 50% last year, indicating that many companies are avoiding sharing detailed information with customers, investors and other stakeholders. A score of 100% indicates that all the details needed are being disclosed. Countries and regions with the highest quality disclosure records are the UK (69%), South Korea (62%), Japan (61%), Southern Europe (61%) and Western/Northern Europe (61%), while the Middle East (29%) sits at the bottom of the pack. In SEA, the quality in climate disclosures is 43%, up from 34% in 2023. 

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. Only slightly more than two-fifths of companies (SEA 62%, global 41%) report they have a transition plan in place to help them mitigate the risks of climate change. 

Among the world’s biggest emitters adoption of transition plans is even lower – only 8% in China and just 32% in the US. By way of contrast, adoption of these plans in UK and Europe is 66% and 59%, respectively – largely the result of successful regulatory regimes, underlying the importance of regulation as a means to drive action.  

Compounding this problem, even fewer companies have made clear financial commitments to support their transition plans. Just 0.4% of SEA respondents (global 4%) have disclosed operational expenditure (expenses arising from day-to-day business operations) and 1.3% (global 17%) have reported capital expenditure (money invested in a business’ assets for future gains) – a sign that, even where companies have action plans, they are not ready to execute them. 

Praveen Tekchandani, Singapore Climate Change and Sustainability Services Leader and Partner, at Ernst & Young LLP, says:  
“It is heartening to see that the coverage of recommended disclosures among Southeast respondents has improved. However, it appears that many companies may still be considering climate disclosure as a tick-in-the-box exercise than risk management – hence good coverage but poor-quality disclosures. Potentially, businesses may be hindered in making quality disclosures due to the lack of capabilities in climate risk and opportunities quantification, as well as in integrating climate risks and opportunities considerations into overall strategic and financial planning. We are glad to see businesses taking small steps to improve their climate risk reporting. However, more needs to be done as the stakes are high, given Southeast Asia being one of the regions that is most vulnerable to climate change risks.”  

A more upbeat finding in the Barometer is that an increasing number of businesses – 67% in total, rising from 58% last year – are using scenario analysis, as recommended by the TCFD, to assess the scale and timings of possible climate risks, continuing an upward trend from previous years; and almost three-quarters (71%) have used both qualitative and quantitative analysis. In SEA, 45% are using scenario analysis, up from 29% from the previous year. 

However, very few companies – just 14% of SEA respondents (global 36%) – are carrying scenario findings through to their financial reports.   

Nhan Quang, Partner, Climate Change and Sustainability Services at Ernst & Young Solutions LLP, says:  
“Without climate scenario analysis, companies will not have visibility of their vulnerabilities. As extreme weather events become more frequent and severe, the financial loss is very real. Research has shown that climate change accounts for approximately US$600b in insured weather-related losses between 2002 and 2022. Companies often see climate change as a future risk and fail to recognize how it has been impacting the business for some time now. There are no short cuts to effect real change. The decarbonization targets that companies set for the next five years should be seen as steppingstones to achieving 2050 net zero goals, and not an end in itself.” 

Most businesses (SEA 72%, global 84%), according to the report, do indicate that they conduct risk analysis, and they give equal weight to “transition risks” – which stem from changes in the economy resulting from climate change, and “physical risks” that are a direct consequence of climate change. However, as in the case of scenario planning, businesses aren’t reflecting these risks in their financial plans. 

The report sets out six actions businesses can take now to bring about needed change: 

1. Develop a robust action plan rooted in science-based targets, informed by detailed scenarios and backed by financial investment.  
2. Reflect climate risks in financial statements and explore financial opportunities. 
3. Use data to inform decisions and drive action on risks and opportunities.
4. Provide sustainability teams with sufficient resources – the funding, information and people needed achieve stated goals.
5. Equip boards with the skills to provide effective governance on transition strategy.
6. Explore cross-sector collaboration including with governmental and public sector bodies.

Praveen says:  
“The current US administration’s stance toward sustainability will likely have wide-reaching impact that extends to Southeast Asia as well. From a long-term perspective, the impact of climate change, natural resource scarcity and other major sustainability challenges will be felt more severely by businesses. Therefore, regardless of the direction of sustainability regulations in the shorter term, expectations for corporate sustainability action and disclosure are very likely to remain Companies will benefit if they truly consider climate-related risks and opportunities in decision-making as we continue to see climate disruptions intensifying and financially impacting businesses.” 

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