UK businesses lead way with climate transition planning and disclosures

• EY reveals that 66% of UK businesses have developed transition plans to manage climate risks – higher than the global (41%) and European (59%) average

• The average quality score of UK firms’ climate-related financial disclosures sits at 69% – the highest record of all countries and regions 

• Report shows the world’s biggest emitters are the worst offenders, with a lack of action posing a major threat to the achievement of global climate targets

UK companies have made better progress than their European and global competitors in climate transition planning and disclosures, according to EY’s latest Global Climate Action Barometer.   
 
Now in its sixth year, the Barometer examines the extent to which organisations 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 and across 13 sectors, including 76 companies in the UK, by assessing their climate-related disclosures and transition plans. The information they publish is based on the 11 recommendations set by the Task Force on Climate-related Financial Disclosures (TCFD), which was established to increase and enhance financial reporting of climate-related risks and opportunities. 
 
The 2024 edition reveals that two-thirds (66%) of UK companies report they have a transition plan in place to help them mitigate the risks of climate change, putting UK firms ahead of the global (41%) and European (59%) business average. More than a fifth of UK businesses (22%) report they intend to develop a transition plan in the future, while only 12% say they currently have no intention to do so, compared to 38% globally. 
 
The findings indicate that regulatory and stakeholder pressure are acting as key levers for action. The UK was the first G20 country to mandate TCFD-aligned climate disclosures for certain companies, and the first country to establish transition planning guidelines as part of broader efforts to achieve 2050 net zero targets. Many UK companies that are not already in scope for these regulations are reporting voluntarily to meet investor and other stakeholder expectations, and to ensure they are well-positioned to thrive in a low-carbon economy. 

UK businesses are outpacing global peers in climate disclosures

The Barometer also scores companies on the number of recommended climate disclosures that they make (coverage) and the detail they provide for each one (quality). UK companies achieved a coverage score of 100%, and a quality score of 69%, the highest average quality score of all surveyed countries and regions. This is followed by South Korea (62%), Japan (61%) and Europe (61%). The Middle East (29%) currently has the lowest average quality score worldwide. 
 
With many UK companies now in their second or third year of TCFD-aligned reporting, and private companies now beginning to disclose under the UK Companies Act’s mandatory climate-related financial disclosures (CFD) requirement, more focus is being placed on improving the quantity and quality of data used in their assessment of climate risks and opportunities. 

Nearly nine in 10 UK companies (86%) now perform both a qualitative and quantitative scenario analysis to assess the scale and timings of possible climate risks, and the same percentage integrate these findings into their financial statements. 

Globally, just over a third of companies (36%) carry scenario findings through to their financial reports – indicating that most companies outside of the UK are still hesitant to share detailed information with customers, investors and other stakeholders. 
 
The study also reveals that companies located in countries with the highest emissions are among the least likely to have adopted a transition plan. Less than a third (32%) of US businesses reporting they currently have a plan in place, and only 8% of companies in China. 
 
Dr Michael Green, UK Climate and Nature Lead at EY, said: “We know from working with some of the UK's leading businesses that what may have started as a compliance exercise has quickly turned into a powerful mechanism to enhance corporate strategy, enabling companies to differentiate their proposition and position sustainable products and services. Sustainability leaders that have been able to take a more nuanced and strategic view of climate-related risks and opportunities across their operations and value chain, and proactively work with their customers and suppliers to shape and communicate their transition plans, are already seeing that pay back.  
 
“As new regulatory requirements emerge and are formally adopted, UK businesses will need to further their understanding of their financial exposure to climate change impacts – both risks and potential opportunities – and demonstrate progress and action through transition planning. With global convergence of ESG reporting standards, particularly in Europe, in response to growing corporate ESG reporting apathy, companies will also need to be prepared to think more strategically and focus their efforts on the most material matters for their business and society. Climate change represents the single largest issue connecting business and society, but it also demands collective action and agreement.”

The global picture, and how the UK stacks up 

EY’s Climate Action Barometer shows that 9% of UK businesses (compared to just 4% of companies globally) have made clear financial commitments to support their transition plans by disclosing operational expenditure (expenses arising from day-to-day business operations). 28% (17% globally) have reported capital expenditure, money invested in a business’ assets for future gains.  
 
The results also expose a clear and widespread tendency towards short-term thinking, which could hinder progress towards net zero. More than eight in 10 businesses (83%) – 99% in the UK – have set short-term targets for a reduction in greenhouse gas emissions stretching to 2030, but only just over half (51%) – 67% in the UK – have set goals for the longer term; and of those, less than a quarter (24%) – 79% in the UK – have had their targets validated by the Science Based Targets initiative (SBTi), the organisation charged with developing the standards to help businesses reduce emissions. UK companies are more likely to get their climate targets validated by the SBTi because of strong regulatory frameworks, with TCFD guidance and the Transition Plan Taskforce (TPT) encouraging reporting companies to develop credible targets that are aligned to recognised standards.

In addition, businesses seem to be neglecting the full range of emissions in their transition planning. Just over half of companies’ decarbonisation initiatives (55%) target Scope 2 emissions (indirect emissions from purchased energy), perhaps because these are within the organisation’s control and therefore easier to reduce. Only a slightly more than a third (34%) however, included any Scope 1 emissions – those that come directly from sources controlled by the company in question – and just slightly more than one in 10 (11%) covered Scope 3 emissions, which include all indirect emissions through the value chain, such as those from suppliers of raw materials. By contrast, 84% of UK firms’ initiatives target Scope 1, 2 and 3 emissions, with the remaining 16% targeting Scopes 1 and 2.

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.