A sizable proportion of businesses have yet to produce an emissions reduction plan and have no plans to do so, even as global temperatures have reached a record high this year, according to a new report.
The report, released Thursday by the Association of Chartered Accountants, the International Federation of Accountants and PricewaterhouseCoopers in conjunction with the start of the United Nations COP28 climate change conference in Dubai, includes the results of a survey of nearly 1,000 senior finance professionals around the world. It found that nearly half the respondents (46%) indicated their organizations have yet to produce a plan for reducing their carbon emissions, while 70% of those without an emissions plan say they currently have no intention of developing one.
Involving CFOs and finance teams in emissions reduction planning can help accelerate progress, according to the report. While they may not always be seen as the “owner” of the sustainability agenda, CFOs can include climate transition priorities within their business planning and resource allocations, and allow sustainability reporting internally and externally.
‘The accountancy and finance profession can enable organizations to achieve their net-zero ambitions in a fair and inclusive way,” said ACCA chief executive Helen Brand in a statement. “They can also support the just transition to a low-carbon economy by helping their organizations to seize the associated business benefits. As COP28 begins, this report is a call to action for professional accountants everywhere to play their part in helping their organizations to reduce their carbon emissions and support the climate transition.”
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Even for those organizations that do have a plan underway, nearly half don’t expect to develop and approve an initial plan in the next 12 months and see it as a longer-term initiative. For those organizations that are making progress on their emission plans, a number of challenges are obvious. Survey respondents expressed concern about poor alignment with organization strategy and objectives and a lack of clarity as to which functions have primary accountability for the emissions reduction agenda.
The report recommends finance teams develop the right skills and expertise to increase their organization’s contribution to improving the climate. Balancing the short-term operational priorities of the finance team while upskilling and equipping them to support the larger organization’s net zero initiatives longer term must now be a critical imperative for CFOs.
“The expertise of accounting and finance professionals in combating climate change is absolutely essential if we are to make the progress the planet so desperately needs,” said IFAC president Asmaa Resmoukiin a statement. “This report corroborates IFAC’s prior research into corporate disclosures on emissions targets and transition plans for achieving them. Companies need to improve the decision-usefulness of their transition plans and how they communicate them to stakeholders.”
While many survey respondents cited clear benefits to their organization from transitioning to net-zero, a minority of the respondents were less convinced. Some were unsure about the business benefits for developing plans, while there was also a sense of a general lack of awareness of emissions planning and what emissions planning entails for some respondents. This may also be causing concerns for some organizations where it isn’t a priority, or they don’t have the necessary skills and capabilities to address the issue effectively.
“This report highlights a critical gap where some businesses lack a clear roadmap to meet their emissions targets and the ability to measure and report progress against their goals,” said PwC finance transformation leader David Russell in a statement. “It’s imperative for finance leaders not just to drive the change toward sustainability but also to build trust in the reporting of progress toward sustainability goals. CFOs can play a pivotal role in integrating environmental considerations into strategy, planning and reporting — ensuring that businesses not only contribute positively to the climate agenda but also adapt and thrive in a rapidly changing economic landscape.”
Boards have an important role in articulating the broader business case for sustainability and as a component of this is the transition to net-zero, as well as establishing the right organizational
incentives for delivering an enterprise sustainability strategy linked to transition plans, targets and communication protocols so plans can be implemented successfully. In the survey two-thirds of the organizations polled had a sustainability committee on the board. Compared to organizations without such a committee, these organizations were much more proactive in implementing their emissions plans. Over half (57%) are reviewing their emissions plans quarterly, compared to 22% of organizations without a sustainability committee. Nearly half (48%) had implemented non-financial internal controls to better support the achievement of the plan, compared with 7% without a sustainability committee. Nearly two-thirds (63%) had grown their finance function to support the setting, achievement and reporting of their emissions plans, compared with 11% without a sustainability committee.
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