TPI reports progress on global transition to low-carbon economy
Most global companies assessed by the Transition Pathway Initiative (TPI) have basic carbon management practices in place, but most companies are still not taking a truly strategic approach to the issue, the report reveals.
The TPI State of Transition Report 2021 assessed 401 companies, referred to as the TPI universe, representing 16% of global market value and a much larger share of global greenhouse gas emissions from listed companies.
The report shows that despite the lack of strategic approaches implemented to tackle the issue, most companies in the TPI universe have implemented basic carbon management practices such as policy commitment to act on climate change and disclosure of operational greenhouse gas emissions.
The average Management Quality score – assessing companies’ climate governance – of the 401 companies in the TPI universe is 2.6, which is slightly over halfway between ‘building capacity on climate change’ (Level 2) and ‘integrating climate change into operational decision-making’ (Level 3). Strategic carbon governance and management practices are found at Level 4.
TPI states that there has been limited progress among companies scored previously. The average Management Quality score of the TPI universe is marginally lower that last year, when it was 2.7. However, this is partly attributable to the addition of new companies to the universe – companies added over the last year average only 2.0. This is associated with their relatively small size and concentration in emerging markets.
According to the report, 69% of companies have stayed on the same Management Quality level, 17% have moved up at least one level, while 14% have moved down at least one level. Most movement is between Levels 3 and 4 and it goes in both directions.
‘Companies appear to be struggling to maintain their performance against key indicators at the corporate–policy interface, [particularly] in terms of support for climate policy and disclosure of climate lobbying by trade associations,’ the report reads.
In measure of how current and future emissions align with the goals of the Paris Agreement, the report states that for carbon performance, 15% of companies now align with the most ambitious Below 2°C benchmark in 2050, 2% align with 2°C, but 47% do not align with any of the benchmarks and 16% provide insufficient disclosure.
TPI suggests that now they have more data, they can see a clearer, though still imperfect, correlation emerging between Management Quality and carbon performance.
Beata Bienkowska, Research Deputy and Project Lead at TPI, says, ‘The 2021 UN Climate Change Conference (COP26) is an opportunity for companies to accelerate their efforts by setting ambitious emissions reduction targets, both long-term and intermediate, and to implement strategic carbon management and governance practices.
‘Next year we hope to see a much higher share of sectoral leaders – those at Management Quality Level 4 or 4* and aligned with the Below 2°C benchmark in 2050.’
