Despite all the attention on the need to reduce damage to the planet, the number of companies scoring top marks for making disclosures on key environmental issues has fallen.
An annual survey by the Climate Disclosure Project (CDP) finds that out of more than 900 companies asked to make disclosures on climate change, forests and water security, only 12 could boast the highest score—a Triple A—down from 14 last year.
Research also found that two-thirds of companies awarded a D- to A- failed to improve on last year’s score, data that some will find disturbing.
According to Dexter Galvin, global director of corporations at CDP, disclosures are the “first step” towards a “net-zero and nature-positive future”. High-performing companies are welcome, but they are a minority.
“Most are still not managing all environmental issues holistically and far too many are remaining complacent or failing to respond at all,” he said.
CDP’s survey concluded that 330 companies are “global leaders” for their approach to disclosures across all three categories, out of a total of 15,000 scored.
A further 29,500 companies were scored an “F” for “failing to respond to disclosure requests from their investors and clients or providing insufficient information in their responses”.
CDP highlights Aramco, Tesla, Berkshire Hathaway, Exxon Mobil and Chevron as constituents of the “F” club.
On the case
Among CDP’s 2022 A-listers is luxury brand LVMH, co-founded by Bernard Arnault—recently named the world’s richest man. His son, Antoine Arnault, said: “Measuring and communicating environmental impact across the LVMH value chain on climate, water and biodiversity—including forests—have proved to be powerful tools for fostering actions.”
Telecoms giant BT Group also scored an “A” from CDP. The company’s head of sustainability, Gabrielle Ginér, stressed the importance of reporting. “When it comes to upholding climate commitments, businesses must be transparent about their annual progress and the challenges they face when tackling emissions, otherwise we miss a crucial opportunity to drive collaboration between organisations like ours, our supply chains and partners.”
CDP’s report comes at a time of controversy for the business response to climate change. Research from PwC, a professional services firm, found that more than four-fifths of investors believe there is at least “some” greenwashing in corporate reporting while nearly half believe it happens to a “large” or “very large extent”. PwC says companies need to improve their “data, systems and governance”.
It might help if companies had a globally recognised standard for reporting their environmental performance across different categories. The G20’s TCFD system of reporting helps with climate disclosures but, in most jurisdictions, this remains entirely voluntary and fails to cover wider issues.
Fiery topic
The US is working on new mandatory climate-risk disclosures, although throughout consultations there has been fierce opposition as the debate around ESG becomes ever more divisive.
Brussels is putting together the finishing touches on the Corporate Sustainability Disclosure Directive which will give EU companies a broad set of mandatory reporting rules. The new regime will also use “double materiality”, meaning companies will have to report not only on the climate change risk faced by their organisations, but also their impact on the environment.
Lastly, the International Sustainability Standards Board is working on a system of reporting rules to act as a global baseline.
However, all these projects are still to be concluded. But they will. There is only one way this process is going: rule makers and regulators will demand increasing levels of transparency as the climate crisis becomes ever more urgent. CDP’s report shines a light on those who have to make the greatest improvements.