Majority of Firms Unprepared for Climate Change Risks, EY Study Reveals
A study by EY shows that only 41% of businesses have transition plans to address climate change risks, with 38% having no intention to adopt such plans at all. Major emitters like China and the U.S. are lagging, with only 8% and 32% implementing plans respectively. The report stresses the need for regulatory support and strategic opportunism in climate action.
A recent analysis conducted by EY reveals that a significant number of firms are unprepared for the risks posed by climate change. According to the 2024 Global Climate Action Barometer, only 41% of over 1,400 businesses surveyed across 51 countries have implemented transition plans to combat climate change. Alarmingly, 38% of these companies have no intention of making such plans, while merely 21% plan to develop them in the future. The study highlighted that rates of adopted transition plans are notably low among major emitters, with only 8% of Chinese firms and 32% of U.S. businesses having made such commitments. In contrast, the United Kingdom and Europe reported higher adoption rates of 66% and 59%, respectively, a discrepancy attributed to effective regulatory frameworks that encourage climate action. Moreover, the financial backing for these plans remains limited; only 4% of companies disclosed operational expenditures, and 17% reported capital expenditures dedicated to implementing their plans. Dr. Matthew Bell, EY’s global climate change and sustainability services leader, emphasized that organizations must recognize climate change not just as a risk but as a strategic opportunity to innovate and gain market advantages. He noted that many companies fail to understand their supply chain emissions adequately, which may become a regulatory requirement as nations ramp up their climate efforts. Additionally, he encourages businesses to engage their leadership teams in the planning process, arguing that it is invaluable for fostering a climate-conscious culture and behavior within organizations. His insights point to the crucial role of collaborative dialogue in developing effective transition strategies, which can significantly benefit organizations by clarifying their future outlook and strategic plans. Furthermore, he highlighted the necessity for national governments to partner with businesses to create conducive policy environments to facilitate successful transformations. Christophe Lumsden, EY’s global climate and decarbonization leader, stated that while short-term targets can be helpful, they must serve as milestones on the path to achieving net zero by 2050, not endpoints in themselves.
Climate change poses a significant risk to businesses globally, requiring firms to develop transition plans to minimize potential impacts. This analysis by EY aimed to assess the preparedness of various companies in responding to these challenges. With increasing regulatory demands and shifting market dynamics, understanding climate risk is not only crucial for compliance but also for fostering resilience and competitiveness in emerging markets. The report underscores the importance of recognizing climate change as a strategic factor for long-term success.
The EY report underscores a pressing need for businesses to embrace climate change challenges proactively. With less than half of surveyed companies having transition plans in place, the risk of inaction grows, particularly among significant global polluters. Strong regulatory frameworks in regions like the UK and Europe exemplify effective methods for driving corporate climate action. Dr. Matthew Bell’s insights advocate for a strategic rethinking among businesses regarding climate change, emphasizing that purposeful investment and leadership engagement can transform potential risks into innovative opportunities.
Original Source: www.forbes.com
