30% of top emitters set 1.5°C targets but most lack action plans

The biggest corporate emitters have made some progress in aligning their long-term climate targets with the 1.5°C global warming limit, but fewer than 5% have actionable plans in place, a new report has found.

Nearly a third of the world’s largest emitters have now put in place Paris-aligned transition strategies—nearly four times as many as in 2021. This finding is one of the key highlights of the latest "State of the Transition" report produced by the TPI Centre, based at the London School of Economics and Political Science.

However, despite this progress, the credibility of these long-term climate commitments remains questionable, the report finds. Many companies lack intermediate targets and fail to provide clear quantification of key elements in their climate strategies, making it challenging to assess their true commitment to these goals.

Regional differences

The report is based on a Carbon Performance Assessment of 409 companies and the Management Quality progress of over 1,000 of the world’s highest-emitting public companies. These companies, collectively valued at approximately US$39 trillion, are assessed across 23 indicators, ranging from Level 0, representing those ‘unaware’ of climate change, to the newly added Level 5, which indicates ‘transition planning.’

Among sectors, diversified mining, steel, and electricity companies show the highest alignment with 1.5°C or below 2°C targets, at 50%, 46%, and 41%, respectively. In contrast, food producers (8%) and oil & gas companies (6%) are the least aligned sectors.

Regional differences are stark: companies in Europe, Australasia, and Japan have the highest levels of climate target alignment, at 66%, 64%, and 56%, respectively. In contrast, in China, 82% of companies are either not aligned with the targets or lack sufficient disclosure, and this figure stands at 70% for companies based in other Asian countries.

Simon Dietz, TPI Centre Research Director and Professor of Environmental Policy in the Department of Geography at the London School of Economics, emphasises the close link between policy and corporate decarbonisation targets: “The regulatory environment in host countries is likely to influence how well companies manage climate-related risks and opportunities. If regional nuances are not addressed, investors may withdraw capital from high-emitting emerging markets and developing countries.”

Falling short

The report shows that a majority (57%) of companies analysed operate at Level 3 on the Management Quality scale. At this level, companies have acknowledged climate change as a relevant business risk or opportunity, developed a policy commitment to act, set some form of emissions reduction target, and disclosed their Scope 1 and 2 emissions. However, most companies still fall short of reaching Level 4, which indicates a strategic approach to climate issues.

Notably, no company satisfies all Level 5 indicators, indicating that none of the assessed firms have formulated a comprehensive and actionable transition plan that fully aligns their business practices and capital expenditure decisions with decarbonisation goals.

David Russell, Chair of the Transition Pathway Initiative, noted: “TPI’s analysis shows that many companies in high-emitting sectors are failing to implement adequate transition processes and targets. It also identifies a clear interdependency between local climate policy and company states of transition.”

Russell emphasised the need for increased engagement from investors: “Investors need to redouble their efforts to engage with both companies and policymakers to encourage appropriate and urgent responses to the systemic risk that climate change poses.”