Only 1% of companies are fully disclosing their climate action plans

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The Carbon Disclosure Project (CDP) recently published the results of its 2021 Climate Change Questionnaire. This survey, which aims to assess the presence and quality of companies’ climate transition plans, includes questions about 24 indicators in 8 areas. Full disclosure was exceedingly rare; only 135 companies—just 1% of the over 13,100 surveyed—reported on all 24 key indicators.

On its face, such a paltry rate of completed questionnaires should worry both those concerned about companies’ commitment to climate action as well as those who hope data-gathering organizations like CDP are paving the way to a more transparent, standardized perspective. After all, what good is a survey that virtually nobody completes?

To be fair, things aren’t quite so bleak. While it’s true that few companies answered every question, most answered some. In fact, over 90% of respondents answered questions about their policy-related actions, and over three-quarters responded to those about corporate governance. It seems that there are plenty of companies willing to share some information about their climate challenges and ambitions.

The real cause for concern is how few companies specifically reported on their scope 1, 2, and 3 emissions (barely over 20% reporting on all 3), the climate related risks and opportunities they face (just under 20% reporting on both), or their intensity and net-zero targets (only 6% reporting both).

Why the steep drop-off? Reporting complexity and redundancy likely plays at least some role; CDP is just one of several reporting standards, including SASB[1], TCFD[2], and GRI[3]. Each standard has a different focus (e.g., ESG[4] vs. CSR[5]) and caters to a different audience (e.g., investors vs. a broader set of multiple stakeholders). What’s more, these frameworks are not mutually exclusive. Though many companies use only one framework, some report to multiple and others even select components of one platform against another. The lack of standardization often creates confusion over which framework(s) a company should utilize. It may well be that some companies are disclosing elsewhere, but not to CDP.

But the deeper issue is that questions about emissions and targets are simply harder to answer. They’re certainly more challenging from a technical standpoint. Consider the exact language of two different questions from the CDP questionnaire:

“On what issues have you been engaging directly with policy makers?”

vs.

“Account for your organization’s gross global Scope 3 emissions, disclosing and explaining any exclusions”.

It’s not hard to imagine which one of those would take more time to answer—or indeed may not be answerable at all given current data sources and definitions.

Concrete questions are also harder in terms of willpower. A company likely has few qualms about publicizing its policy preferences, but committing to concrete targets and honestly disclosing progress toward them—or lack thereof—is a different story. There’s little incentive to publicize unimpressive numbers.

What needs to change for next year’s perspective on corporate climate action to be clearer than this year’s?

  1. Platforms should work together to streamline, if not standardize, reporting processes :
    A single reporting standard is probably far away, and may not even be the right answer. But enhanced collaboration among sustainability disclosure organizations would ease the reporting process and ultimately increase the number of companies that adequately submit data.

  2. Companies should emphasize reporting capacity-building and skill-building efforts :
    As part of the climate planning process, companies should identify their obstacles to completely and accurately reporting on targets and progress. The removal of those obstacles, be they technical, political, or otherwise, is in itself a valuable step toward ultimate goals. Solutions may be internally sourced or vendor-driven, but any inability or unwillingness to report must be addressed.

  3. Failure to report should be worse than reporting failure :
    Investors, B2B customers, and individual consumers must signal ever more clearly their interest in full, honest disclosure, and should emphasize that real money is at stake. The market can set an expectation that all companies are open participants in the climate conversation, and then work proactively to help even laggards accelerate progress. But to do that, stakeholders must not tolerate silence.

[1] Sustainability Accounting Standards Board

[2] Taskforce on Climate-Related Financial Disclosures

[3] Global Reporting Initiative

[4] Environmental, social, and governance

[5] Corporate social responsibility

Do you have an idea for a Stat of the Week? Is your company doing work that The Climate Board (and the world) should know about? Or would you just like to learn more about how we’re helping others accelerate business action on climate change? We’d love to hear from you! Contact us at info@theclimateboard.com.

Which governance structures drive climate action?

Since the 2015 creation of the Task Force on Climate-Related Financial Disclosures (TCFD), business leaders have begun to understand climate change as a material financial risk and a growing threat that requires rapid and decisive action. Climate disasters, stakeholder activism, public pressure, and regulatory changes are showing managers and executives that they must integrate sustainability throughout all levels of their organizations.

Company organizational structures and allocations of authority and accountability play a crucial role in how a company and its leaders respond to climate and broader ESG concerns. Effective practices in Corporate Governance – the systems of rules, practices, and processes determining how a company is directed and managed – have been proven to improve public faith and confidence in times of crisis and at flash points in social and environmental movements.

The Climate Board did a round-up of different models for governance and oversight of ESG. We surveyed the practices and structures of companies known for strong corporate governance, ambitious sustainability programs, and bold climate action. Crucially, we found that governance structures were not uniform across these leaders – structures were tailored to the industry, history, and capabilities of each organization, but all achieve the same objective of strong ESG and climate performance.

Some companies used an ESG-focused Board committee to drive top-down action, while others leveraged the power of Presidents and CEOs to affect change. One company leveraged a steering committee of leaders across its global business functions to ensure that accountability for ESG performance was spread throughout all divisions of the organization. Many introduced remuneration policies tying performance on ESG goals to executive and manager compensation.

Within the hard-to-abate infrastructure space, governance can play an especially crucial role in effective climate action. Given the long lifespans of infrastructure projects and strict performance requirements around durability and safety, the long-term horizons of Board decision-making can ease tensions between immediate profits and investment in sustainability.

An example of ESG-minded governance practices within the infrastructure space comes from Jacobs. As a component of their PlanBeyond climate action plan, they made extensive changes to their governance practices to help formalize accountability and advance their climate and decarbonization goals. As a part of their focus on sustainability, they introduced a standing ESG & Risk Committee to their Board. They developed a climate steering committee of executives across business functions to ensure diverse perspectives within the decision-making and oversight around their climate action. Throughout the organization, they’ve embedded Sustainability Leads to drive continued progress on climate and ESG goals.

Our research has shown that while governance practices play an important role in a company’s approach and progress on climate action, changes to corporate governance must be custom fit to each organization’s goals, structure, and culture. Other models in addition to these four have proven effective – each has its own advantages and risks.

To access our research, including more in-depth reviews of these and other governance structures, the advantages and risks of each, and profiles of organizations that have deployed them effectively to drive climate action, contact us info@theclimateboard.com.

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Press Release: Friction Points in Fashion & Textiles

New study from The Climate Board and Textile Exchange reveals friction points and sustainability solutions for Fashion & Textile companies

Washington, DC:
The Climate Board, in partnership with Textile Exchange, announces the release of its climate change study Friction Points in Fashion and Textiles: Removing Barriers and Accelerating Climate Action. Working with 40 leading, global retailers, brands, and suppliers, the new study highlights critical industry findings and successful practices in the fashion industry to address climate change.

“The study is filled with timely recommendations for Fashion and Textile companies worldwide to accelerate their journey to net-zero. Taking us beyond ‘analysis paralysis,’ it gives context and best practices to create clear actions. This is really powerful,” says La Rhea Pepper, CEO at Textile Exchange.

Friction Points dives into the climate reduction activities of some of the world’s most advanced fashion retailers and suppliers.

Friction Points pinpoints the barriers retailers, brands, and suppliers face and highlights sustainability practices that move the needle,” says Ken Bruder, Co-founder and Head of Research at The Climate Board. “The industry is still nascent, and most companies are just beginning to look at the more difficult reductions in Scope 3.”

Findings include:

  • More than 90% of emissions from Fashion & Textiles comes from indirect (Scope 3) sources. Fiber and materials offer the biggest lever to reduce Scope 3 emissions.
  • The industry is not on track to achieve Scope 3 emissions goals. Early evidence indicates as many as 2/3 of brands and retailers that have announced Scope 3 targets are not on track to achieve absolute Scope 3 emission reductions.
  • Announcing bold climate goals does not correlate with actual carbon reductions. While companies are under pressure from stakeholders to commit publicly to aggressive climate goals, the data does not demonstrate a strong correlation to GHG reductions.
  • Nuanced fiber strategies do correlate with improved carbon reductions. Those that incorporate a more sophisticated definition of sustainability linked to GHG emissions achieve better results.
  • Companies are experimenting with a wide range of methods to reduce fiber- and material-related emissions, acting as a broad, multi-faceted climate solutions laboratory. The study explores 12 of these practices.

Download the Executive Summary at www.theclimateboard.com/frictionpoints

About The Climate Board:

The Climate Board accelerates business action on climate change by empowering corporate executives with practical, cost-effective solutions to climate and sustainability challenges. The organization leverages the experience and insights of industry practitioners, then adds research and analytical expertise to provide implementable best practices, decision-support tools, and actionable data. This work helps leaders absorb and synthesize the torrent of climate information and act swiftly and decisively. The result is authoritative and timely guidance that produces superior climate outcomes.

About Textile Exchange:

Textile Exchange is a global nonprofit that creates leaders in the sustainable fiber and materials industry. The organization develops, manages, and promotes a suite of leading industry standards as well as collects and publishes vital industry data and insights that enable brands and retailers to measure, manage, and track their use of preferred fiber and materials.

To learn more, visit TextileExchange.org.

Media Contact: info@theclimateboard.com

Friction Points in Fashion & Textiles: Transform the Supply Chain

Reducing Scope 3 GHG emissions requires fundamentally transforming existing supply chain relationships and potentially developing new ones. The nascent sustainability ecosystem requires working hand in hand with suppliers in all tiers to drive toward carbon footprint reduction. The Climate Board observes the following friction points that slow progress in reducing GHG emissions in the supply chain.

Supplier goals, practices, and constraints are opaque to their purchasers. Often brands and retailers work with thousands of suppliers, many of whom are too small to disclose publicly or routinely report on their carbon-related activities, targets, and challenges. At the same time, there is an increasing desire to impose carbon-reduction mandates upstream in the supply chain as companies seek to tackle the Scope 3 challenge. For larger purchasing organizations, mandates often come with the hope that their outsized influence is enough to make change happen. What can be missing is an effort to understand the specific practices and barriers that need to be addressed in the supplier’s organization. These might affect the levels, sequencing, and prioritization of goals and create opportunities for purchasing organizations to help address the barriers to broader transitions.

Supplier relationships have traditionally focused on cost and quality rather than sustainability. Sustainability is a relative newcomer among vendor assessment criteria. Often sustainability teams report to the sourcing/procurement function. This placement in the organization can help introduce sustainability criteria into supply chain management and vendor selection processes, but ecological concerns can continue to be drowned out by cost and quality imperatives. Low-carbon fibers usually cost more to produce, and less sustainable virgin fibers often have an edge in quality and performance. There is no easy solution here – easing the friction requires processes and tools to make holistic evaluations and balance the competing imperatives of price, quality, and sustainability.

Large-scale, transformational transitions require large-scale investments. These types of investments are often beyond the ability of individual companies to finance and execute. While government infrastructure, subsidy, and transitional programs can support some, those programs remain in short supply versus the demand. In response, we see the seeds of more collective action among organizations to address transformational needs upstream and accelerate industry-wide progress to net-zero.

Have these friction points affected your organization? The Climate Board provides best practices and practical insights to address challenges like these. Contact us for more information about joining, and subscribe to our mailing list to be alerted when we release new content.

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