What's Happening?
A recent study conducted by EY, involving 850 businesses across 50 countries, has highlighted a significant gap between climate-related concerns and strategic actions. The Global Climate Action Barometer
reveals that while over 90% of businesses assess the impacts of physical climate risks, less than half have begun implementing adaptation measures to mitigate disruptions to their business models. Furthermore, only one-third of these businesses are evaluating the financial implications of both the cost of action and the long-term cost of inaction regarding climate-related risks. The study indicates that climate inaction could lead to a 15% reduction in annualized revenue, a fact that many businesses are not disclosing to stakeholders.
Why It's Important?
The findings underscore the urgent need for businesses to adopt more ambitious climate targets and transition plans. Despite the clear financial risks associated with climate inaction, many firms are not responding by strengthening their climate commitments. The study reveals that two-fifths of businesses have weakened their climate targets in recent years, and nearly half lack targets to reduce indirect emissions, which constitute the majority of a company's climate footprint. This reluctance to act decisively on climate issues could have significant economic repercussions, affecting investor relations and long-term business sustainability.
What's Next?
The study suggests that businesses need to develop comprehensive transition plans that go beyond mere target-setting. These plans should include strategies for shifting towards sustainable products and services, as well as addressing impacts on investments and workforce. The research indicates that two-thirds of companies now have such plans, which are crucial for driving real progress towards climate goals. As geopolitical disruptions continue to pose challenges, companies that successfully adapt their business models to meet climate objectives are likely to thrive.
Beyond the Headlines
The ethical and cultural dimensions of climate inaction are profound, as businesses face increasing pressure from consumers and stakeholders to demonstrate environmental responsibility. The reliance on carbon offsetting, particularly in transport and financial services, highlights the need for genuine reductions in emissions rather than superficial measures. The study calls for businesses to embrace science-based targets and robust governance to ensure accountability and transparency in their climate strategies.
