EY warns only 5% of FTSE100 firms have ‘credible’ net zero plans

Only 5% of FTSE 100 have published net zero plans that would be deemed ‘credible’ under the government’s current transition plan guidance, it has been revealed.

While over 80% of UK listed firms say they are committed to becoming net zero by 2050, the majority (95%) have not yet publicly disclosed detailed, actionable transition plans, according to new data shared with Net Zero Investor this morning.

In fact, nearly four in five of FTSE 100 companies have published partially developed plans that don’t yet address key questions on strategy and execution, while 17% remain in the early stages of plan development, according to research by professional services giant EY.

The firm found that, of the 5% that have disclosed detailed plans, many still have work to do to fully align fully with the UK’s Transition Plan Taskforce guidance.

EY analysed Net Zero transition plan material published publicly by FTSE 100 businesses, as of 31 January 2023, and assessed them against the Transition Plan Taskforce’s (TPT) Draft Disclosure Framework. 

The Framework, which is set to be finalised this year following industry consultation, outlines guidance for companies to create decarbonisation plans that can be deemed “credible, useful, and consistent."

Commenting on the findings, Rob Doepel, EY UK&I managing partner for Sustainability, said: “While the Government has previously said that listed companies will be expected to publish their transition plans this year, a final date hasn’t been disclosed."

He stressed that "by setting a deadline, the Government would give much-needed certainty to the UK’s largest businesses and would send a clear message that inaction is not an option.

COP26 pledges

The findings come nearly 18 months after the Government’s COP26 pledge that UK listed businesses would be mandated to publish decarbonisation plans this year.

The Treasury’s TPT was announced in November 2021 at COP26, where it was pledged that all UK listed businesses and financial institutions would be required to publish Net Zero transition plans by 2023, albeit a specific date was not set.

EY’s analysis finds that while 78% of FTSE 100 companies have disclosed partially-developed plans that include public targets to achieve Net Zero emissions by 2050, they have not yet adequately outlined how they will reach these targets, therefore missing key current TPT Framework requirements around strategy and execution. Seventeen per cent of FTSE 100 firms are still in the stage of setting targets and are yet to publicly disclose any actionable plans.

According to the research, just 5% of FTSE 100 businesses have disclosed plans that EY would consider to be sufficiently detailed to meet the TPT Framework guidance and have started to put these plans into action. However, even companies within this group have more work to do before their published plans can be considered fully TPT-aligned, due to gaps across a range of areas such as financial planning or the definition of financial metrics and targets.

Framework

The TPT Framework outlines five key elements* required to create a credible Net Zero transition plan. 

According to the research, FTSE 100 firms scored best (with a 78% adherence) on the initial ‘Foundation’ stage in the TPT Framework, which requires companies to publish transition objectives and priorities, as well as implications for the business modelling.

FTSE 100 businesses scored weakest against the TPT Framework’s ‘Implementation Strategy’ element, which requires companies to disclose how they intend to adapt business planning and operations, as well as outline proposed changes to products and services. Just 11% of companies have published materials that touch on limited elements of this section.

Doepel explained: “The TPT’s draft Framework offers vital guidance around developing detailed, ambitious transition plans, but currently just a handful of the UK’s largest businesses appear to be on track." 

He expects the Framework to be finalised this year following a government consultation, and, given the praise it received in the recent Skidmore Review, it is expected to become mandatory. 

"Businesses should now be clear about what credible, detailed plans need to look like, and should have a good idea about the direction regulation is moving in," Doepel concluded.