There is now a consensus in politics and business: a green and sustainable shift is needed, which must be driven forward in all sectors and supported as best as possible by political initiatives. It has also become a consensus that it needs rules and ambitious goals.
As part of this, new standards for sustainability reporting (ESRS) are to come into force in the European Union (EU) on 1 January 2024 through an ESG regulation. These are intended to provide information that helps investors to understand the sustainability impact of companies. For example, precise information must be provided about the workforce, the employees in the value chain, effects on affected communities and consumers.
Companies therefore need far-reaching transition plans related to reporting. But a study now suggests that most companies do not even have any.
Study on Net Zero goals: Only three out of 300 companies have a solid plan
A study by the Position Green Group concludes that the majority of climate goals on the corporate side are not accompanied by credible and sufficient transition plans. According to this, there are “considerable challenges” that “have to be overcome during implementation”. The study examined the 300 largest companies from Norway, Sweden and Denmark. This is a region that usually stands out with their advanced ESG standards and reports.
The authors state that 62% of companies are pursuing Net Zero goals by 2050. However, only 41% of companies are said to have a credible transition plan. Only three of the 300 companies are even said to have a solid plan. These are the Swedish construction giant Skanska, the Danish building technology company FLSmidth and the Danish wind turbine manufacturer Vestas.
On the other hand, the researchers found that executive salaries and bonus payments are increasingly linked to ESG goals. This is the case for 34% of the companies examined. In the study from the previous year, the number was still 25%.
The gap between the reports and the requirements is large
From the information provided by the 300 companies, the study authors of Position Green conclude that the gap between the current reports and plans and the requirements, which are to come into force in January 2024, is a big one. According to this, the companies only report about 54% of the most important ESRS data.
The situation could be even more precarious, as is the case in the study. Finally, the countries in which the assessed companies are located are one of the flagship regions in ESG reporting. The concern about non-compliance with the new standards is heightened by the fact that 10,000 companies with a large presence in the EU are based outside the European Union. More than 3,000 of these are located in the USA, with around 1,000 in the UK.