Report Finds Challenges and Gaps in Emissions Target and Transition Plans
Today, the International Federation of Accountants (IFAC) released a new report providing insight into climate-related disclosure. Getting to Net Zero: A Global Review of Corporate Disclosures focuses on corporate emissions reduction reporting. It finds that inconsistency and incomparability of target disclosures may pose challenges for investors, regulators, and other stakeholders who require actionable information. The report’s findings strongly support the movement in global policy towards rapidly enhancing the usefulness of disclosures on climate-related targets and transition plans.
Getting to Net Zero is based on 2020 corporate reporting and provides a useful benchmark for climate disclosures which are under development by the International Sustainability Standards Board (ISSB), the U.S. Securities and Exchange Commission (SEC), and the European Financial Reporting Advisory Group (EFRAG), among other initiatives. The report also comes during the COP27 conference in Sharm El-Sheikh, Egypt, where delegates from over 190 countries, many of which have proposed or set net-zero targets for around mid-century, gather to discuss and progress climate actions.
“With COP27, this is perfect time to dig into what is being disclosed and explore how emissions disclosures need to become more decision-useful,” said IFAC CEO Kevin Dancey. “The accountancy profession is well positioned to drive improvements in climate reporting, ensuring information is trusted and decision-useful for management and boards, investors, and all stakeholders.”
Some key takeaways from Getting to Net Zero include:
- 66% of the large, exchange-traded companies IFAC reviewed included some type of emissions reduction target in their corporate disclosures.
- These emissions targets used a variety of terminology and only 39% incorporated Scope 3 emissions.
- Most companies (90%) who disclose emissions targets also provide a disclosure about how they plan to reach their target.
- Only 24% of companies with a plan include some past expenditure or future estimate of expenditures to implement plan actions.
IFAC is the global organization for the accountancy profession dedicated to serving the public interest by strengthening the profession and contributing to the development of strong international economies. IFAC is comprised of 180 members and associates in 135 countries and jurisdictions, representing more than 3 million accountants in public practice, education, government service, industry, and commerce.