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1、Transform the NormCDP Europe ReportFebruary 2023DISCLOSURE INSIGHT ACTIONStrengthening Europes corporate climate transitionStepping upCDP Europe Report|February 2023 DISCLOSURE INSIGHT ACTION23ContentsThe contents of this report may be used by anyone provided acknowledgment is given to CDP and provi
2、ded that no liability is accepted by CDP or Oliver Wyman as authors.This does not represent a license to repackage or resell any of the data reported to CDP or the contributing authors and presented in this report.If you intend to repackage or resell any of the contents of this report,you need to ob
3、tain express permission from CDP before doing so.CDP and Oliver Wyman have prepared the data and analysis in this report based on responses to the CDP 2022 questionnaires.No representation or warranty(express or implied)is given by CDP as to the accuracy or completeness of the information and opinio
4、ns contained in this report.You should not act upon the information contained in this publication without obtaining specific professional advice.To the extent permitted by law,CDP does not accept or assume any liability,responsibility or duty of care for any consequences of you or anyone else acting
5、,or refraining to act,in reliance on the information contained in this report or for any decision based on it.All information and views expressed herein by CDP and Oliver Wyman are based on their judgment at the time of this report and are subject to change without notice due to economic,political,i
6、ndustry and firm-specific factors.Guest commentaries where included in this report reflect the views of their respective authors;their inclusion is not an endorsement of them.CDP,Oliver Wyman,their affiliated member firms or companies,or their respective shareholders,members,partners,principals,dire
7、ctors,officers and/or employees,may have a position in the securities of the companies discussed herein.The securities of the companies mentioned in this document may not be eligible for sale in some states or countries,nor suitable for all types of investors;their value and the income they produce
8、may fluctuate and/or be adversely affected by exchange rates.CDP refers to CDP Europe(Worldwide)gGmbH,a charitable limited liability company registered under number HRB119156 B at local court of Charlottenburg in Germany.Oliver Wyman refers to Oliver Wyman Limited,a limited liability company registe
9、red in England with company number 02995605 and a place of business at 55 Baker Street,London W1U 8EW.2023 CDP.All rights reservedExecutive summary Targeting transition Transition in progressSector deep-dives ConclusionAppendixOverview of CDP disclosureThe A List Europe 040925395354545654Executive s
10、ummaryEvery company that impacts our environment needs not only clear targets-but clear plans to deliver and evidence they are doing so.EU regulation will soon bite it will be the law for companies to have clear plans that transition their business models onto a 1.5 C footing.And as expectations gro
11、w for companies to include nature in their broader transition planning,this report shows most companies still need to step up,and show investors,lenders and regulators that they are ready to act.We dont have time to waste.Maxfield Weiss,Executive Director CDP EuropeWhile progress in developing clima
12、te transition plans has been impressive,the depth and detail are often less reassuring.Around half of the European companies responding to CDPs questionnaire this year report to have transition plans aligned with the Paris Agreements 1.5C limit.Yet when we analyze the ambition and transparency of th
13、ose plans based on their disclosures to CDP,less than 5%of companies show the advanced transition readiness required to achieve the Paris goal.Most companies also fail to address the economys impact on nature and its inherent connection with rising temperatures.Climate transition plans are critical
14、tools for leadership and Boards directing the initiatives needed to deliver on pledges made.External stakeholders are also demanding to see clear plans that set out concrete steps to drive change over time,and to understand how plans will adapt to shifting dynamics as technology,policy and commercia
15、l trade-offs evolve.Thats why both the substance and disclosure of transition plans matter.Regulators in both the United Kingdom and European Union will be requiring companies to produce public transition plans as soon as next year.Both sets of regulators will also mandate regular disclosures of pla
16、ns as well as on progress being made toward their objectives.Many aspects of companies transition plans today are promising works-in-progress:adoption is still partial,but heading in the right direction.Even in the areas where the most progress has been made,there are important discrepancies between
17、 leaders and laggards.Governance being a good example.To illustrate,while almost all companies(99%)have adopted Board-level climate oversight,only half(54%)have integrated climate KPIs into executive compensation.Progress but missing substance in European climate transition plansThis report explores
18、 how European companies are translating their climate commitments into action by assessing their progress on developing credible climate transition plans and integrating nature into their broader strategy.49%Around half of European companies(49%)now report having a climate transition plan in place t
19、o limit warming to 1.5C54%54%of companies now link exec-level pay toclimate,but under a third do so for climate,forests and water issues.76Executive summary40%Up to 40%of outstanding European corporate loans around 1.8 trillion are financing companies showing limited progress to align with 1.5CAmong
20、 these stories of partial adoption,three more structural gaps emerge in corporate transition strategies today:1.Missing practicalities on how change will be delivered in climate transition plans We assessed key actions across five core areas,based on industry standards and guidance on climate transi
21、tion plans.While progress is strongest in putting in place governance structures and setting targets,it is weakest in setting out the internal and external implementation strategy,on elements such as financial planning and value chain engagement.Internally,though 9 in 10 firms have initiatives in pl
22、ace to cut emissions,only 26%are able to assess the alignment of their spending and their revenue with their low-carbon transition.Externally,fewer than 40%are building climate concerns into supplier contacts.It is hard to execute a plan that is not connected to these critical business levers.2.Negl
23、ecting the impact on nature There is increasing realization that the global effort to combat climate change cannot be effective without addressing the nature crisis simultaneously.To reflect this,going forward transition plans will need to be enhanced to reflect firms dependencies and impacts on nat
24、ure and biodiversity.Companies are starting to realize this:in the first year of disclosure,39%of companies in the CDP questionnaire reported having made any public commitments on protecting biodiversity,though the scope and ambition of the commitments varies significantly.Some companies are limitin
25、g their efforts to respecting already legally protected habitats and locales.Among companies operating in areas that materially impact water and forests,only small percentages had defined objectives and metrics for protecting nature.For instance,only 7%of responding companies had robust targets acro
26、ss water,climate,and forests,and only 5%of companies source at least 90%of their commodities in a certified no-deforestation compliant manner.3.Disclosing insufficiently to secure finance As financial institutions seek to make good on their commitments to net-zero,they will be increasingly scrutiniz
27、ing corporates transition plans.Indeed,80%of financial institutions responding to CDP have begun to assess the transition plans of their clients in at least some sectors.Looking at the banking system,a mismatch is emerging.36 of the top 50 banks in Europe have committed through the Net-Zero Banking
28、Alliance to steeply cut their financed emissions.To hit their targets,they need their corporate clients to cut their emissions steeply or to find new clients.Today,however,up to 20-40%of corporate debt relates to companies with only limited transition planning in place,meaning they either lack decar
29、bonization targets aligned with a 2C limit,or have failed to disclose at least half of the transition plan-related indicators included in the CDP questionnaire.While many financial institutions are keen to engage with corporates in high-emitting sectors to help them transition,it is hard for them to
30、 do so with confidence without these core elements of a plan in place.Companies that do not make progress to address these gaps are likely to find financing harder to access over time.A strategic exercise Although all companies should be disclosing on all elements of a credible climate transition pl
31、an,they are not a one-size-fits-all exercise.Each company will face different commercial trade-offs and decarbonization levers that need to be evaluated as part of its business strategy,and so each will be unique.For instance,a key element of an automobile manufacturers transition is its adoption of
32、 zero emissions vehicles which should be detailed in its transition plan with clear forward-looking sales targets and associated R&D-spend.Meanwhile,a financial institution should detail how it is adapting policies and decision-making to align its portfolio to environmental objectives.Transition pla
33、ns must also reflect the dynamic and uncertain economic environment companies operate in.While plans inevitably need to be revisited as technologies,regulation,and economics shift,investors and financial institutions as well as the public and employees are going to be increasingly less patient with
34、backsliding.Like regulators,these stakeholders are not only going to demand plans that set out a vision of how the company can thrive while generating lower emissions.They are going to want to see clear strategies to deliver that vision.We need to see a step change in the scope and quality of Europe
35、an companies transition plans in the next 2-3 years.Our analysis with CDP shows that,while there is progress in the adoption of transition strategies,a higher sense of urgency is required.Many transition plans still lack important elements,especially when it comes to translating strategic climate ta
36、rgets into concrete implementation and value chain engagement plans.This level of concreteness is necessary if companies want to be able to steer their business through the transition and credibly demonstrate to their stakeholders that they are on track to meet climate targets.Companies with an ambi
37、tion to lead in the transition will need to go beyond climate and incorporate their commitments on biodiversity and nature into their transition agenda.Cornelia NeumannPartner at Oliver WymanAbout the reportThis report uses data from 1,495 companies disclosing to CDP in 2022 on climate change(1,495)
38、,forests(183),and water security(311),headquartered in one of the EU Member States,European Free Trade Association Area countries,and the United Kingdom.It includes companies disclosing to investors,in addition to companies self-selecting to disclose.It excludes companies disclosing only to corporat
39、e customers through CDP supply chain.98Targeting transition1About the report This report uses data from 1,495 companies disclosing to CDP in 2022 on climate change(1,495),forests(183),and water security(311),headquartered in one of the EU Member States,European Free Trade Association Area countries,
40、and the United Kingdom.It includes companies disclosing to investors,in addition to companies self-selecting to disclose.It excludes companies disclosing only to corporate customers through CDP supply chain.See here for a full list of companies1110Targeting transition The push for climate transition
41、 plansFollowing several years of strong growth in climate commitments and target-setting by European businesses,the challenge today revolves around how to turn these pledges into action and real greenhouse gas(GHG)emissions reductions.Doing this will often require companies to make profound changes
42、to their business and operating model.The climate transition plan has emerged as an important tool for corporates to drive such change by setting clear timelines for delivery,as well as manage the decarbonization process with financiers,suppliers,and other stakeholders.Emerging regulations in the Eu
43、ropean Union and the United Kingdom are pushing corporates to provide disclosures with information on their transition plans from 2023/2024 onwards.1,2 The good news is that many companies are already leveraging existing disclosure frameworks and guidance,from such organizations as CDP,Task Force on
44、 Climate-related Financial Disclosures(TCFD),and Glasgow Financial Alliance for Net Zero(GFANZ),to start integrating transition planning in their strategies.3,4,5,6 Around half of the companies disclosing to CDP in 2022 now report having a 1.5C-aligned transition plan.Still,organizations have a long
45、 way to go when it comes to developing and disclosing credible climate transition plans.Stakeholders can judge a companys transition readiness across two different axes.On the one hand,they consider the ambition of a companys emissions reduction targets in terms of timeline and scope.On the other,th
46、ey consider the feasibility of the companys plan to achieve these targets based on the transparency of its transition plan disclosures.These could include,for instance,a vision into how the corporate expects to shift its product and services portfolio over time.Under 5%of European companies show adv
47、anced transition readiness based on our high-level assessment of ambition and transition transparency proxies.These companies have set emissions reduction targets covering Scope 1,2,and 3 emissions(full corporate value chains)which are aligned to a 1.5C pathway.7 They also disclosed data on at least
48、 14 of the 21(67%+)climate transition plan data indicators covered in the CDP climate change questionnaire.8 Only 0.5%of respondents included all 21 data indicators in public transition plan disclosures and committed to targets that align with a 1.5C pathway.Importantly,there is a much larger group
49、of companies in the process of developing transition readiness.A key consideration in assessing their transition readiness is the scope of emissions covered by reduction targets.Some companies have set targets that only cover Scope 1 and 2 emissions those relating to their own operations or purchase
50、d energy,but exclude value chain(Scope 3)emissions,such as those connected to raw materials or components or the end use of sold products.9 Reducing Scope 3 emissions which often represent the majority of emissions for companies is also the most impactful thing many companies can do.Considering Scop
51、e 1 and 2 emissions,45%of companies meet the criteria for our developing group,while including Scope 3 emissions reduces the percentage to 30%.Around half of CDP respondents now report to have a 1.5C-aligned climate transition plan of companies have both a 1.5C ambition and show progress to develop
52、a transition planUnder1 In the United Kingdom,the Companies(Strategic Report)(Climate-related Financial Disclosure)Regulations 2022 requires in-scope companies(e.g.,publicly quoted companies,large private companies and LLPs)to incorporate TCFD-aligned transition planning disclosures in their annual
53、report to reporting for financial years starting on or after 6th April 20222 In the EU,the Corporate Sustainability Reporting Directive(CSRD)will require all large companies to disclosure information on their climate transition planning alongside other social and environmental issues3 CDP formerly k
54、nown as the Carbon Disclosure Project4 CDP(2021)Climate Transition Plans5 Task Force on Climate-related Financial Disclosures(TCFD)(2021)Guidance on Metrics,Targets,and Transition Plans6 Glasgow Financial Alliance for Net Zero(GFANZ)(2022)Expectations for Real-economy Transition Plans7 Based on the
55、CDP temperature rating of these companies.CDP generates this metric by comparing corporate emissions target disclosures with science-based global warming trajectories.For a more extensive discussion of these ratings see CDP-Oliver Wyman(2022)Missing the Mark8 CDP(2021)Climate Transition Plans9 Scope
56、 1 emissions include all direct GHG emissions that occur from sources that are owned or controlled by the company(e.g.,owned process equipment);Scope 2 emissions cover those GHG emissions that result from the generation of purchased electricity consumed by the company;Scope 3 emissions cover 15 cate
57、gories of all other indirect GHG emissions occurring in the value chain(e.g.,transport-related activities such as employee business travel,waste disposal).Source The Greenhouse Gas Protocol(2004)A Corporate Accounting and Reporting Standard:Revised EditionOrganizations still have a long way to go wh
58、en it comes to developing and disclosing credible climate transition plans5%30%15%50%Figure 1Ambition of emissions target and transparency on transition-related indicators%of companiesSource:Oliver Wyman analysis;CDP data;CDP temperature ratings dataset.Transparency%of transition indicators disclose
59、dAdvanced(5%)1.5C CDP temperature rating(Scope 1-3);most(67%+)transition plan-related indicators disclosed;and publicly disclosed transition planLimited(50-65%)Above 2C CDP temperature rating,or limited number(50%)of transition plan-related indicators disclosedAmbitionCDP temperature ratingBelow 50%
60、50-67%Above 67%Above 2CBelow 2C Below 1.5C AdvancedDeveloping(Scope 1-3)Developing(only Scope 1-2)LimitedDeveloping(30-45%)Below 2C CDP temperature rating;and 50%of transition plan-related indicators disclosed5%13Our analysis also shows that corporate transition readiness varies widely across Europe
61、an countries.For instance,companies from Nordic countries(Sweden,Norway,Finland,and Denmark)are around twice as likely to be advanced than the European average.This variation illustrates the difference in pace at which European economies are transitioning.For instance,coal still dominates the Polish
62、 energy system.10 Conversely,Finland has set an ambitious 2035 net-zero goal for its economy,with a large part of its energy mix already from renewable sources.11 Neste is an example of a Finnish company that shows more evidence of transitioning than other companies in its sector(see Neste case stud
63、y).Targeting transitionAdvancedDeveloping(Scope 1-3)Developing(only Scope 1-2)LimitedFigure 2Nordic companies are twice as likely to be transitioning onto a 1.5c path%of companies,by country Nordic companies are over twice as likely to show advanced transition readiness Note,countries with less than
64、 25 respondents(e.g.,Luxembourg,Iceland)have been excluded from this graph;Source:Oliver Wyman analysis;CDP data;CDP temperature ratings dataset 10 International Energy Agency(IEA)(n.d.)Poland country profile 11 International Energy Agency(IEA)(n.d.)Finland country profile PolandIrelandNetherlandsDe
65、nmarkBelgiumSwedenEurope-wide averageItalyUKGermanyFinlandAustriaSpainPortugalFranceNorwaySwitzerland5%50%30%15%10%48%31%11%10%40%28%22%9%29%49%13%8%36%44%12%6%31%38%25%5%52%27%16%44%38%18%60%22%14%4%65%13%19%4%47%21%29%3%43%40%15%2%48%33%17%2%47%25%26%2%37%33%29%1%96%4%56%20%20%4%Neste is investing
66、 in innovation and R&D to explore new scalable raw materials to diversify its product portfolio towards one that is more compatible with a low-carbon economy.Some 25%of its employees work in research,product development and engineering,and around two-thirds of its capital expenditure is invested in
67、renewable products1.The company is now the worlds leading producer of renewable diesel and sustainable aviation fuel(SAF).This demonstrates that refining companies in the oil and gas sector can build a successful low-carbon business.With customer engagement vital,it has a platform for corporate airl
68、ine customers to source SAF to reduce Scope 3 related to business travel.Moving forward,it plans to halve the use phase emission intensity of its sold products and have a nature-positive impact throughout its value chain by 2040.To embed climate within key business decision-making processes,Neste ha
69、s updated its investment framework with explicit climate criteria,including emissions impact and an internal carbon price.Impacts on nature and biodiversity are also part of the decision-making process:the company subjects investments that may impact biodiversity to a thorough analysis e.g.using Wor
70、ld Bank and IFC standards to build a comprehensive questionnaire covering biodiversity,water and soil.Neste is currently developing a systematic approach to building a biodiversity framework and roadmap to achieve a nature positive value chain by 2040.For instance,it is undertaking a materiality ass
71、essment and in-depth site-level impact assessments,and engages with the Science Based Targets Network and NGOs like Fauna&Flora International.Case studyNESTE1 World Benchmarking Alliance(n.d.):“Neste”1514Transition finance needs credible transition plansFinancial institutions will play an important
72、role in the corporate transition journey.36 out of the largest 50 banks in Europe controlling among them 32.4 trillion in total assets have committed through the Net-Zero Banking Alliance(NZBA)to reduce their financed emissions.12,13 Around half have already set initial targets for high-impact secto
73、rs.For instance,66%of European NZBA members that set sector-specific targets have now established targets for the power sector.These typically aim to reduce financed emissions with around 45%to 70%per-kilowatt by 2030.To deliver on these targets,banks are increasingly looking to understand the ambit
74、ion level and quality of their clients transition plans.Around 80%of European financial institutions submitting to CDPstate that they have already started to assess the alignment of their corporate customers with a 1.5C-world in at least some sectors.And,most of them report to have plans to expand t
75、his in the near future.As a result,companies unable to credibly demonstrate their transition readiness are likely to see access to financing become more challenging.Some banks have already committed to stop lending to companies without credible transition plans in key sectors.Based on our high-level
76、 evaluation of corporate transition readiness,we estimate that between 900 billion to 1.8 trillion,or the equivalent of around 20%to 40%,of corporate debt that is financing CDP disclosers is potentially at risk over time.But any company that only shows transition ambition on its Scope 1 and 2 should
77、 recognize the need not to be complacent.Financial institutions are increasingly including Scope 3 emissions in their guidance to borrowers.So even with strong targets on Scope 1 and 2 emissions,and some elements of a credible climate transition plan in place,financing could be at risk eventually.12
78、 An analysis of the balance sheets of these banks shows that typically 10-20%of their total assets consist of corporate lending.Based on their balance sizes that implies 3-6 trillion in corporate lending activity;source:Capital IQ data13 The industry-led Net-Zero Banking Alliance is an industry-led,
79、UN-convened group of global banks,currently representing over 40%of global banking assets,which are committed to aligning their lending and investment portfolios with net-zero emissions by 205080%1.8Tn Around 80%of European financial institutions disclosing to CDP report that they already assess the
80、 alignment of their corporate customers with a 1.5C-worldUp to 1.8 trillion in outstanding corporate debt is financing companies without clear transition progressAdoption of sector-specific targets,by portfolio category%of European NZBA members with sector-specific emissions reduction targetsTypical
81、 reductions targeted by 20303 Yes NoPower2Oil&GasAutoCRE4MortgagesIron&SteelShippingAviationCementCoal66%45%-70%40%-55%20%-50%35%-50%25%-30%30%-50%30%-35%70%-100%35%-50%30%-60%59%50%41%41%28%25%22%22%22%Note,these graphs only show NZBA members that also respond to the CDP Europe questionnaire;1.Russ
82、ian companies do not respond to the CDP Europe questionnaire and thus these figures exclude Russian NZBA members;2.Electric utilities;3.Expressed in the financed emissions intensity;4.Commercial Real EstateSource:Oliver Wyman analysis;Net-Zero Banking Alliance(NZBA)Members(status as of 31 December 2
83、022);Oliver Wyman analysisAdoption of sector-specific targets%of European NZBA members1Sector-specific targets not availableSector-specific targets available36(53%)32(47%)Figure 3Net-zero committed banks are in the process of adopting sector-specific targetsTargeting transitionFigure 4Up to 1.8 tril
84、lion in outstanding corporate debt is financing companies without clear transition progressTotal outstanding debt financing(Tn),by categoryNote:where needed we used the average EUR exchange rate to convert debt figures;Source:Oliver Wyman analysis;CDP data;CDP temperature ratings dataset;Bloomberg;E
85、uropean Central bank:Euro foreign exchange reference ratesTotal outstanding debtPotentially at-risk financing2.7-3.6Tn(55-75%)0.9-1.8Tn (20-40%)4.8Tn0.3Tn(5%)0.9Tn2.7Tn0.9Tn0.9Tn0.9TnAdvancedDeveloping(Scope 1-3)Developing(only Scope 1-2)LimitedThe range represents companies that do not meet the dev
86、eloping criteria for Scope 31716Our evaluation also revealed that larger companies typically demonstrate more transition readiness.These companies tend to be better resourced to build the capabilities required to drive transitions.The fact that half of the companies classified as limited represent o
87、nly about 20%of the total debt illustrates the advantage larger companies have.Significant differences can be noted across sectors.In the electric utilities sector,for instance,where target-setting by banks is most advanced and efforts by the sector have already produced emissions reductions,only be
88、tween 5%and 15%of debt financing is potentially at risk.That compares to more than half(56%to 58%)of the debt in the agricultural commodities sector,where transition pathways to reach 1.5C are less well developed.Ultimately,financial institutions can play a pivotal role in hastening progress in sect
89、ors like agricultural commodities by working closely with corporate clients to help them understand what actions are necessary to improve their transition plans and protect Targeting transitionFigure 5GFANZ transition financing strategies illustrate how financial institutions can finance emissions r
90、eduction Financing or enabling entities and activities that develop and scale climate solutionsThis strategy encourages the expansion of low-emitting technologies and services,including nature-based solutions,to replace high-emitting technologies or services,remove greenhouse gases from the atmosphe
91、re,or otherwise accelerate the net-zero transition in a just manner.Financing or enabling entities that are already aligned to a 1.5C pathwayThis strategy supports climate leaders and signals that the financial sector is seeking transition alignment behaviour from the real-economy companies with whi
92、ch it does business.Financing or enabling entities committed to transitioning in line with 1.5C-aligned pathwaysThis strategy supports both high-emitting and low-emitting firms that have robust net-zero transition plans,set targets aligned to sectoral pathways,and implement changes in their business
93、 to deliver on their net-zero targets.Financing or enabling the accelerated managed phaseout of high-emitting physical assetsThis strategy facilitates significant emissions reduction by the identification and planned early retirement of assets while managing critical issues of service continuity and
94、 community interests.A producer of green hydrogen Regenerative agriculture investments A company with an SBTi-validated target that reports demonstratable progress against the target A company that is implementing energy efficiency and clearenergy projects to reduce its operational emissions Fossil
95、fuel producer with plans for an early decommissioning of carbon-intense assets on a timeframe that is consistent with broader 1.5C pathwaysClimate solutionsAlignedRoughly maps to Advancedtransition maturityRoughly maps to Developingtransition maturityAligningManaged phaseoutsTransition finance strat
96、egyGFANZ descriptionExample financing activitySource:Glasgow Financial Alliance for Net Zero(GFANZ)(2022)Financial Institution Net-zero Transition Plans:Fundamentals,Recommendations,and Guidance;Oliver Wyman analysisTransition finance refers to investment,financing,insurance,and related products and
97、 services that are necessary to support an orderly,real-economy transition to net zero as described by the four key financing strategies below.their financing.The finance sector can also play an important role by highlighting to policymakers the challenges and potential roadblocks facing corporates.
98、None of this is to suggest that financial institutions will or should walk away from financing the highest emitting sectors.GFANZ,the umbrella organization for net-zero initiatives by financial institutions,defines transition finance as not just the financing of“pure green”projects and climate solut
99、ions but also companies of all kinds with clear and credible climate transition plans in place.Indeed,there is a growing recognition that financing needs to grow in some high-emitting sectors where particularly large-scale investments are needed to support the transition;the electrification of trans
100、portation systems and the conversion of carbon-intensive steel plants to green steel are two good examples.Robust,credible plans are a critical tool to allow financial institutions to finance such industries with confidence.Financial institutions can play a pivotal role in hastening progress by work
101、ing closely with corporate clients to help them understand what actions are necessary1918The new nature vanguardA growing area of focus is the need for corporations to recognize their impact on nature,the connection between nature and rising temperatures,and the ultimate importance of integrating ef
102、forts to preserve nature into corporate strategies and transition plans.Limiting warming to 1.5C is unachievable without protecting and restoring nature with forests,wetlands,oceans,and all of Earths natural ecosystems critical for not only the planets survival but for the survival of the global eco
103、nomy,society,and biodiversity.The updated Global Biodiversity Framework(GBF)at COP15 commits countries to protect 30%of the planets land and sea;cut,phase out,and otherwise reform environmentally harmful subsidies;and increase finance flows for protecting and restoring nature.14 Through Target 15,it
104、 also has a requirement to ensure that all large companies assess and disclose their risks,impacts and dependencies on nature by 2030,setting the world on a path to make nature-related disclosures on biodiversity and ecosystems such as water and forest,and eventually protection business norms.14Euro
105、pe is at the vanguard in integrating nature impacts into its regulatory policy framework,for environmental reporting,through an extension of the incoming Corporate Sustainability Due Diligence Directive(CSDDD).15This could lay the foundation to incorporate nature within the transition planning of co
106、mpanies(see Figure 6).More broadly,the European Commissions proposal for a nature restoration law includes legally binding nature-related targets at both national and EU-levels.Targeting transition14 The core of the GBF includes commitments to protecting 30%of the worlds land and sea by 2030,restori
107、ng 30%of the planets degraded ecosystems,and plans for wealthy nations to provide$30 billion for biodiversity by 2030.See also COP 15(2022)Kunming-Montreal Global biodiversity framework15 European Commission(2022)Regulation on nature restorationFigure 6Upcoming key Regulatory climate transition plan
108、 disclosure requirements in Europe1.OJ is an abbreviation for Official Journal n.It is the official gazette of record for the European Union.Only legal acts published here are binding;2.SMEs have a voluntary opt-out until 2028;Source:European Commission,UK TPT,UK Department for Business,Energy&Indus
109、trial Strategy,CDP,Oliver Wyman analysisEuropean UnionTransition plans are specifically called for in the European Sustainability Reporting Standards(ESRS)E1(climate)and E4(biodiversity),as well as in the CSRD.The first delegated act will focus on sector-agnostic criteria,and is expected by 30 June
110、2023;the second DA will cover sector specificities,and is expected in 2024.Double materiality:sustainability risks affecting the company and companies impact on society and the environment.Forward-looking qualitative and quantitative information including targets and progress.Information relating to
111、 intangibles:social,human,and intellectual capital.Reporting in line with SFDR and the EU Taxonomy.Sets out mandatory framework for companies to carry out due diligence throughout their supply chain and to identify and prevent adverse impacts related to human rights and the environment.According to
112、the Commission proposal,Article 15 requires EU companies with over 500 employees and 150 million in net worldwide turnover to have transition plans aligning their strategy and business models with a global warming limit of 1.5C.Obliges Member States to monitor companies operations and emission reduc
113、tion plans and how the variable remuneration of executive directors is linked to the achievement of sustainability objectives.This is a framework law that classifies which economic activities can be classified as green across six environmental objectives.It functions as the underpinning for the enti
114、rety of the EU green finance ecosystem.Companies now have to follow a three-step process 1)substantially contribute to one of the objectives;2)do no significant harm to aforementioned objectives;and 3)comply with minimum safeguards before screening for KPIs.For disclosing companies,the KPIs are dete
115、rmined by the CSRD,and its delegated rules.Undertakings within scope of the CSRD will have to:evaluate what percentage of their turnover,capital expenditure,and operating expense are directed towards sustainable activities.In turn,the CSRD determines which assets financial players will have to discl
116、ose upon under the Sustainable Finance Disclosure Regulation(SFDR).Lastly,the EU TR underpins forthcoming EU green laws in the legislative pipeline,such as the Green Bond Regulation.Corporate Sustainability ReportingDirective(CSRD)and ESRSStatus&applicationPublished in OJ1,ratification period for EU
117、 member statesEuropean Commission to adopt Delegated Acts on ESRSPhased implementation until 2029 depending on company typeCorporate Sustainability Due Diligence Directive(CSDDD)Status&applicationProposed by the European Commission in February 2022Pending agreement between Council,Parliament and Com
118、mission in 2023-24 negotiations could be in May 2023European Union Taxonomy Delegated Act on remaining objectivesStatus&applicationPublication of the standards by European Financial Reporting Advisory Group(EFRAG)in November 2022Adoption of the first set of the ESRS by the European Commission expect
119、ed in June 2023Phased implementation from January 2024 until 2026-20282 depending on company typeLegal requirementLegal requirementDescription of example disclosure requirementsDescription of example disclosure requirements Key areas of overlap Key areas of overlapUnited KingdomLarge firms(e.g.,list
120、ed and large private companies)need to incorporate Taskforce for Climate-related Financial Disclosures(TCFD)-aligned disclosures in their annual reportRecommendation(but currently no legal requirement)to follow the guidance from the TPT Disclosure FrameworkOutline of overall climate-related ambition
121、s and priorities including and an overview of interdependencies with nature and just transitionGHG emissions reduction targets and climate change mitigation actions,including an explanation of how the transition plan will be embedded within the organisation(e.g.,changes to business planning and oper
122、ations,product offerings,policies and conditions,and governance)Quantification of capital requirement and other resource allocation for transition plan delivery,including scenario sensitivity analysis on underlying assumptions and dependencies in transition planPlanned engagement with external share
123、holders,including supply chain,industry peers,and public sectorExplicit statement on carbon credits usage,costs,and quantity to illustrate intent for future use of offsetsMandatory climate-related financial disclosure requirementsStatus&applicationInto effect since April 2022 Phased implementation u
124、ntil January 2023 depending on company typeTransition Plan Taskforce(TPT)Disclosure FrameworkStatus&applicationPublished for consultation in November 2022 until February 2023No legal requirement but FCA encourages companies to consider TPT Disclosure Framework2120Still,many companies do not yet cons
125、ider ambitious nature-related targets in their corporate strategies.While nearly 40%of companies have publicly made some type of commitment on biodiversity protection,the scope and ambition of these pledges vary significantly.Some companies have promised bold steps towards a net-positive nature targ
126、et,while others are limiting their efforts to respecting already legally protected habitats and locales.We see that only 7%of the around 100 companies responding to all three CDP questionnaires on climate,water,and forest have set robust targets to reduce their impacts.Thats up from 5%last year.17 F
127、igure 7Nearly 40%of companies indicated to have made any type of public commitment on biodiversityAdoption of public biodiversity commitments,%of companiesNote,this year,CDP also asked respondents to the climate questionnaire up to six questions on biodiversity.These figures are based on input from
128、1,318 climate questionnaire respondentsSource:Oliver Wyman analysis;CDP dataAdoption of a public biodiversity commitmentNo public biodiversity commitmentMany companies do not yet consider ambitious nature-related targets in their corporate strategies 39%61%Targeting transitionThis is an important gr
129、oup in which to look for improvement as our data suggests that companies that act on multiple environmental areas are more ambitious on climate.For instance,while only 29%of companies responding to the climate questionnaire has set SBTs,81%have set SBTs when looking at those responding to all three
130、questionnaires.18Granted,nature risks are inherently complex reflecting the unique characteristics of specific locations and the interconnections between ecosystems.But initial guidance is now available notably from the Taskforce for Nature-related Financial Disclosures(TNFD)and Science-based Target
131、s for Nature(SBTN)for corporates to use to inform their approach and prioritize areas for action.19,20 With the existence of these guidelines,nature issues are likely to rise in prominence for financial institutions,some of which helped craft them.Albeit complex,companies need to start integrating n
132、ature-related considerations in a phased approach starting simple,refining,and increasing the scope and ambition over the next few years.17 CDP-Oliver Wyman(2022)Now for Nature18 Based on SBTi data(last accessed January 2023)19 Taskforce for Nature-related Financial Disclosures(TNFD)(2022)The TNFD N
133、ature-related Risk and Opportunity Management and Disclosure Framework Beta v0.320 Science-based Targets for Nature(SBTN)(2020)Initial Guidance for Business28%33%28%81%23%71%Figure 8 Only 7%of companies have robust targets across water,climate and forests Adoption of environmental targets,%of compan
134、ies with relevant targetsHas an SBT202220222022202220221Has best practice forest commitmentHas a water withdrawal targetHas all 3 targets7%5%Note:The analysis is based on a sample of 95 companies,which includes the organizations that have answered all three CDP questionnaires;Source:Olive
135、r Wyman analysis;CDP data7%Only 7%of companies responding to all three CDP questionnaires have set robust targets to reduce their impacts2322Targeting transitionFeatured case studyLOralVery early on,LOral decided to address the challenges arising from the global environmental crisis considering that
136、 our performance is both financial and extra-financial.That is why our sustainability program,LOral for the Future,aims for a more radical transformation,to reflect the scale of global challenges and ensure our activities are respectful of the Planets boundaries.On climate change,our overarching obj
137、ective is to align to the 1.5C scenario and we will reduce our CO2 emissions by 50%per finished product(25%in absolute terms)by 2030,and reach net zero emissions in 2050.We have reduced our industrial sites CO2 emissions by 91%in 2022(compared to 2005)while our production volume increased by 45%over
138、 the same period.We already improved energy efficiency across all our facilities(buildings,equipment,etc.),increased local renewable energy use wherever possible and achieved the targets set for our sites without carbon offsetting projects.By 2030,100%of the water used in our industrial processes wi
139、ll be recycled and reused in a loop.We continue to innovate to reduce water consumption from the use phase of our products aiming to a 25%reduction compared to 2016 by 2030(on average and per finished product).By 2030,95%of our ingredients will be biobased,derived from abundant minerals or from circ
140、ular processes.Thanks to Green Sciences,we explore the new frontiers of scientific discovery while creating a beauty which respects the planet throughout the product life cycle,from the sustainable supply of raw materials to the composition of our formulas,while respecting biodiversity,natural resou
141、rces,and the aquatic environment.We are recognized for our role and responsibility in pursuing and scaling up actions to ensure the sustainable use of forest-related materials,along with the protection and restoration of forests and their related ecosystems.We implement action plans to ensure the su
142、stainable supply of soya oil,palm oil and wood-fiber based products(cardboard and paper for packaging)so that none of its products is associated with deforestation.At LOral,we see sustainability as our“license to innovate and operate”.We want to address the challenges facing the world and accelerati
143、ng our efforts on a global scale.Through this in-depth transformation,we hope to be a catalyst of change in our own industry and beyond,and to inspire our consumers to act with us.Barbara LAVERNOS,Deputy Chief Executive Officer of LOral,in charge of Research,Innovation&TechnologyInternational Airlin
144、es Group(IAG)is one of the worlds largest airline groups with 533 aircraft flying to 279 destinations and carrying around 118 million passengers each year(pre-COVID).In 2019,IAG were the first airline group in the world to commit to net-zero emissions by 2050 and is now working to transition its bus
145、iness,using the following levers to decarbonise:-Fleet modernisation:This includes renewing its fleet with modern,more fuel-efficient aircraft as well as longer-term investments in innovative companies such as the hydrogen-aviation venture,ZeroAvia.Together with route planning and efficiency efforts
146、,these initiatives will drive 50%of the expected emissions reductions by 2050.-Investing in sustainable aviation fuel:IAG has committed to using 10%sustainable aviation fuel(SAF)by 2030 and,with the right policy support,they believe that this figure could reach 60%by 2050.To achieve this,IAG is part
147、nering with existing and emerging SAF suppliers to support a rapid ramp-up of SAF production capacity.IAG has already committed$865m to SAF purchases and investments to date,securing 25%of its 2030 target.Use of SAF equates to 30%of the expected emission reductions by 2050.-Carbon offsets and remova
148、ls:IAG has been a strong proponent of the global CORSIA scheme to limit net emissions from aviation through the use of certified,high-quality carbon offsets.As the development of carbon removal technology matures,these solutions will begin to be implemented alongside offsets.Removals will be used to
149、 mitigate any residual emissions in 2050 and contribute 20%of the expected emissions reductions by 2050.Through its memberships in industry associations and stakeholder engagement,IAG advocates for a global climate policy framework for the sector.As testimony to IAG and its peers advocacy efforts,bo
150、th the International Civil Aviation Organisation and International Air Transport Association(IATA)are now committed to a 2050 net-zero target.This makes aviation the only sector where both industry and governments have pledged to meet this goal.Case studyIAG2524Transition in progress25252Featured ca
151、se studyLandsvirkjunLandsvirkjun is an energy company fully owned by the people of Iceland.We generate over 70%of electricity in Iceland,solely from renewable energy sources,hydropower,geothermal power,and wind power.Our emission intensity is among the lowest known in energy generation,or 3,6g CO2-e
152、q/kWh,and we have committed to reaching carbon neutrality by end of year 2025.Our vision is a sustainable world,powered by renewable energy.It is inevitable that more green energy must be harnessed if climate goals are to be met.As a renewable energy company,we seek to contribute to the global energ
153、y transition,prioritizing climate issues in all facets of our operations,and utilising the resources we are entrusted with in a sustainable and efficient manner and with respect for nature.Iceland is in a unique position with electricity and district heating generated almost entirely from renewable
154、energy sources.The Icelandic government has set a target for fossil fuel-free Iceland in 2040.Landsvirkjun will be at the forefront of leading Icelands remaining energy transition,with several renewable energy projects under development and actively supporting the decarbonization of the transport se
155、ctor.Our holistic approach to sustainability is integrated in all our operations and a vital part of how we generate income and focus our expenses.We at Landsvirkjun aim to be at the forefront of environmental and climate issues.Climate and environmental issues have never been more important,and we
156、all have a role to play.Landsvirkjun will continue to set the bar high and take actions towards a sustainable future powered by renewable energy.Jna Bjarnadttir,EVP Community and EnvironmentOur policy and business model reflects our support for Icelands climate obligations,and global action against
157、climate change.We have taken actions to adapt our infrastructure to climate change and develop new power stations to meet increased demand for renewable electricity.We actively engage in development and cooperate with other stakeholders to create opportunities for e-fuel and green industrial activit
158、ies in Iceland.We have launched a climate action plan to reduce emissions caused by our operations and already achieved 65%reduction in carbon intensity since 2005.Our environmental and climate ambitions are integrated into communication with all our stakeholders.2627Objectives&prioritiesAgricultura
159、l commodities ChemicalsElectric utilitiesFinancial servicesFood,beverage&tobaccoGeneral1Metals&miningSteelTransport OEMsOil&gasAreaImplementation StrategyEngagement StrategyMetrics&TargetsGovernanceAverage sector maturityProgress to act in key climate transition-related areasIndicative view of trans
160、ition progress in key example areasLimited transition progressMore transition progressTransition in progressDisclosure,insight and action A climate transition plan is a time-bound action plan that clearly outlines how an organization will achieve its strategy to pivot its existing assets,operations
161、and entire business model towards a trajectory that aligns with the latest and most ambitious climate science recommendations,i.e.,halving greenhouse gas(GHG)emissions by 2030 and reaching net-zero by 2050 at the latest,thereby limiting global warming to 1.5C.Transition planning is a strategic exerc
162、ise.Companies must define a set of objectives,metrics,and governance mechanisms to align their business activities with a 1.5C,and eventually nature positive,economy.A key element in climate transition planning is to bring climate into internal governance.Many companies have made progress in these a
163、reas.For instance,virtually all European companies have board-level oversight of climate topics,and four out of five companies with board-level oversight also indicate to have climate-related board expertise present.Disclosure alone is not enough it needs to lead to accountability and transformation
164、;hence the relevance of climate transition plans as part of a businesss strategy.Put simply:plans must go beyond simply listing goals;they must spell out how these objectives will be achieved.Progress on this front is less consistent.CDP has identified 21 key indicators in its climate change questio
165、nnaire across eight elements against which companies should set objectives and make them public to develop a credible transition plan.21 This report groups these elements across five analysis areas.22 We selected a number of key indicators to assess progress across all of them.Looking at key actions
166、 in these areas shows that between 75%and 80%of companies have key gaps in implementation strategy and engagement strategy,compared with the around 60%for the governance,and objectives and priorities areas.Comparing sectors reveals a wide discrepancy in progress.Take agricultural commodities.Here,we
167、 see only 24%of companies that both report to have 1.5C-aligned transition plans and reported data suggests that they holistically integrated climate risks and opportunities in their strategy.Electric utilities(54%)have made much more progress.It is hard to deliver on emissions reductions in line wi
168、th 1.5C without a clear strategy,and all agricultural commodities companies have a key gap in their implementation strategy,compared to only around 40%of electric utility companies.75%80%of companies have key gaps in their engagement strategyof companies have key gaps in their implementation strateg
169、yFigure 10Sectors are at different stages of advancing transition actionsNote,the average sector maturity row is based on the entire sample and also includes sectors not listed here(e.g.,paper&forestry,coal);1.This includes a broad range of sectors including grocery retail covered in the section 3 d
170、eep-dive;Source:Oliver Wyman analysis;CDP dataNote,The names and descriptions of the various areas are based on widely-used frameworks and guidance such as those used in GFANZ publications.The CDP elements and key data indicators used provide an overview of all data points considered in the report t
171、o illustrate progress in a particular area.As indicated,this excludes scenario analysis from the CDP Credible Transition Plan framework;1.CDP Climate Transition plan element Value chain engagement&low carbon initiatives is split across the engagement strategy and implementation strategy areas;Source
172、:Oliver Wyman analysis,CDP dataFigure 9Many companies have key gaps in their climate transition planningAreaDescriptionCDP elements and key data indicators used60%80%75%70%60%Companies with key gapsObjectives&prioritiesImplementation StrategyEngagement StrategyMetrics&TargetsGovernanceStrategy of th
173、e organization describing its short,medium and long-term reduction ambitions and commitments Strategy:Disclosure of a“1.5C world”aligned transition plan Risks and opportunities:Holistic consideration of climate-related risks and opportunities as part of the organizations strategyDescription of how t
174、he company will transition its business activities and operations(e.g.,product portfolio)to align with its objectives&priorities Financial planning:-Integration of low carbon products and services into commercial offerings-Ability to assess the alignment of spending(e.g.,OPEX,CAPEX)and revenue with
175、their low carbon transition Low carbon initiatives1:participation in low carbon initiativesDescription of how the company will engage across its value chain and on public policy in support of its objectives&priorities Value chain engagement1:-Adoption of holistic value chain engagement (e.g.,involvi
176、ng both up-and downstream stakeholders)-Integration of climate-related KPIs into supplier contracts Policy engagement:Alignment of policy engagement activities with the organizations climate ambition&strategyQuantitative metrics disclosed by the company including targets against to measures its prog
177、ress Targets:CDP temperature ratings of the adopted emissions reduction targets Scope 1,2&3 accounting with verification:Disclosure of key Scope 3 emissions categoriesGovernance mechanisms that are put in place to provide oversight,incentivize,and support the implementation of the transition planGov
178、ernance:Integration climate-related requirements into board-level oversight Presence of board-level climate-related expertise Integration of climate-related KPIs into C-level executive remuneration Integration of climate-related data into mainstream financial reporting21 See CDP(2021)Climate Transit
179、ion Plans22 These analysis areas are also identified in other commonly-used transition plan guidance for real-economy companies and financial institutions see also:Glasgow Financial Alliance for Net Zero(GFANZ)(2022)Expectations for Real-economy Transition Plans and Glasgow Financial Alliance for Ne
180、t Zero(GFANZ)(2022)Financial Institution Net-zero Transition Plans:Fundamentals,Recommendations,and GuidanceIntegration of climate-related KPIs in C-level executive remuneration54%2829Transition in progressSteering the shipEven in the areas where the most progress has been made,there are important d
181、iscrepancies between leaders and laggards.Governance is a good example:42%of companies have established board accountability,built climate expertise at the board level,integrated it as a key performance indicator for determining remuneration of C-level executives,and included climate data in their m
182、ainstream financial reporting.The remaining 58%of the companies have a key gap in at least one of these four elements.Ultimately,the key differentiator across companies is the extent to which climate objectives affect executive pay:Only around 54%of companies have integrated climate KPIs into execut
183、ive compensation.An additional pivotal gap emerges when we look at the integration of nature-related protection strategies into governance.While around two-thirds of companies with specific water and forest-related exposures report to having board-level expertise on those topics,less than half use p
184、rogress on water and forest objectives as key performance indicators for calculating a portion of C-level executive compensation.Figure 11Linking executive pay to climate progress is a key gap in governance for almost half of all respondents58%42%Key gaps in implementation strategy,%of respondents I
185、ntegration of climate-related considerations across key governance aspects%of respondents by governance categorySource:Oliver Wyman analysis;CDP dataAdopted board-level climate oversightIntegration of climate-related information in mainstream reporting99%Presence of board-level climate expertise79%7
186、8%Companies with key gapsCompanies without any key gapsFigure 12Integration of nature aspects into governance is lagging climate across all key categoriesIntegration of nature-related considerations across key governance indicatorAdopted board-level water oversightPresence of board-level water exper
187、tiseIntegration of water-related information in mainstream reportingIntegration of water-related KPIs in C-level executive remunerationAdopted board-level forest oversightPresence of board-level forest expertiseIntegration of forest-related information in mainstream reportingIntegration of forest-re
188、lated KPIs in C-level executive remunerationAdopted board-level biodiversity oversightBiodiversity Water ForestsPresence of board-level biodiversity expertiseIntegration of biodivesity-related information in mainstream reportingIntegration of biodiversity-related KPIs in C-level executive remunerati
189、on39%N/A24%N/A94%66%77%42%93%63%77%46%Note,figures are based on 311 responses in the water questionnaire,153 responses in the forest questionnaire and 1,418 responses in the biodiversity section of the climate questionnaire.The biodiversity questions did not include any questions on the presence of
190、board-level expertise or integration into remuneration.;Source:Oliver Wyman analysis;CDP dataLooking at respondents of all three questionnaires,only 31%of responding companies have integrated environmental KPIs across water,climate,and forests comprehensively in executive remuneration.In CDPs first
191、year of asking companies to disclose efforts on biodiversity,39%of companies reported having board-level oversight on the topic.On a more positive note,71%of companies responding to all questionnaires that they already report holistically environmental data in their mainstream financial reportingwel
192、l in advance of when the European Unions landmark mandatory reporting law,the Corporate Sustainability Reporting Directive(CSRD),takes effect in 2024.On biodiversity alone,however,that percentage drops to less than 25%.31%of companies have integrated environmental KPIs across water,climate,and fores
193、ts comprehensively in executive remuneration3031Transition in progressThe heart of the matterThe true challenge with transition planning is turning company strategy into a concrete implementation and engagement strategy.Detailing how the company will shift its business activities and operations as w
194、ell as engage with its value chain and on public policy to deliver on its transition strategy.Analysis shows significant gaps in implementation strategy for close to four out of five companies.Many companies have not yet integrated climate-related KPIs into their financial planning,for instance.Nor
195、have they started the low-carbon transition of their commercial portfolio.Only around a quarter of leading companies are capable of assessing the alignment of their operating expenses,capital spending,and revenue with a 1.5C pathway.The Enel case study provides an example of a company that has align
196、ed its capital expenditures clearly with its transition goals(see ENEL case study).Measuring progressOn metrics and targets,there is continued momentum in the commitment and adoption of science-based targets(SBTs),but this is still an area of significant divergence.Today,29%of companies have an appr
197、oved SBT,up from 21%the previous year;based on market capitalization,that percentage jumps to 57%.23Nevertheless,many companies still have not adopted sufficiently ambitious targets covering their entire value chain.Using the CDP temperature ratings dataset which gives more weight to Scope 3 emissio
198、ns reduction targets when of higher relevance only 8%are aligned with 1.5C.across all scopes.24 On a Scope 1 and 2 basis alone,54%of companies have emission targets aligned with 2C or lower.This also shows significant differences across sectors illustrating the difficulty of some sectors such as ste
199、el and oil&gas to set ambitious targets to reduce their full value chain emissions.Figure 14Almost 4 in 5 respondents are lagging across at least one key transition implementation areaKey gaps in implementation strategy%of respondents Integration of climate-related considerations across key implemen
200、tation strategy aspects%of respondents by implementation strategy categoryCompanies with key gapsCompanies without any key gaps1.Companies that report to engage in emissions reduction initiatives without providing foundational information such as the targeted/achieved emissions reductions are marked
201、 as no;Source:Oliver Wyman analysis;CDP dataOffering of low carbon products&servicesEngagement in emission reduction initiativesAbility to assess alignment of spending/revenue with a 1.5 degrees C world69%91%26%22%78%28%22%Europe-wide average26%8%20%46%37%11%13%40%29%10%18%43%47%8%13%32%18%32%42%29%
202、27%42%31%46%23%26%26%48%22%75%22%39%29%10%Agricultural commoditiesFood,beverage&tobaccoGeneralElectric utilitiesOil&gasChemicalsSteelTransport OEMsMetals&miningFinancial servicesFigure 13Ambition of emission reduction targets across sectors%of companies,by category 35%18%12%35%29%1/4 By now,29 perce
203、nt of companies have an approved SBT(up with 21%from the previous year)Only around a quarter of leading companies are capable of assessing the alignment of their operating expenses,capital spending,and revenue with a 1.5C pathway1.5C-aligned emissions reduction target(Scope 1-3)1.5C-to 2C-aligned em
204、issions reduction target(Scope 1-3)1.5C-to 2C-aligned emissions reduction target(Scope 1-2)2C+emissions reduction targetNote,the total column is based on the entire sample and also includes sectors not listed here(e.g.,paper&forestry,coal);Source:Oliver Wyman analysis;CDP temperature ratings dataset
205、8%15%30%55%2%3%23 Based on Capital IQ and SBTi data(last accessed January 2023)Transition in progressTurning to engagement strategy,most companies(93%)reported that they engaged with their value chains on climate-related issues in some way.Yet,the scope or depth of that engagement was for most very
206、limited.Furthermore,39%of the companies did not publicly commit to align their policy engagement activities with the Paris Agreement.As a result,we find that 75%of companies have at least one key gap in their engagement strategy.The most common gap emerging from the data is lack of integration of cl
207、imate KPIs into supplier contracts.Many companies have not yet put the tools in place to enforce meaningful transition by their suppliers.On a positive note,at least some of the leading companies,such as Carrefour,have been increasingly integrating climate KPIs with tangible enforcement clauses in t
208、heir supplier contracts(see Carrefour case study in section 3).39%of the companies have not publicly committed to align their policy engagement activities with the Paris Agreement.Figure 15Over 60%CDP respondents have not yet integrated climate-related components in supplier contracts as part of the
209、ir engagement strategyKey gaps in implementation strategy%of respondents Integration of climate-related considerations across key implementation strategy aspects%of respondents by implementation strategy categoryCompanies with key gapsCompanies without any key gaps1:These are companies that engage b
210、oth up-and downstream across their value chain;Source:Oliver Wyman analysis;CDP dataAlignment of policy engagement activities with the Paris AgreementHolistic value chain engagement1Integration of climate-related components into supplier contracts61%73%39%25%75%33While 69%of companies now offering p
211、roducts and services considered to be low-carbon,there were significant differences across sectors.For instance,only 40%of food,beverage,and tobacco producers indicated that they had adopted such low-carbon practices as using bio-based,compostable packaging or offering plant-based meat alternatives,
212、while more than 96%of electric utilities now offer their customers low-carbon energy generated by offshore wind and/or hydropower.32Italian-based Enel is Europes largest electric utility and has a commitment through the Science Based Targets initiative(SBTi)to reach net zero by 2040 across its Scope
213、 1-3 emissions,without the use of carbon capture technologies.Over the next decades,Enel will completely phase out its reliance on fossil sources including completing a coal phase out by 2027-and fully replace this with renewable electricity generation.To achieve this,Enel is investing around 17 bil
214、lion in generation capacity and batteries until 2025,adding around 21 GW of new renewable capacity.The objective is to have 79%of installed capacity from renewable sources and batteries by 2025.Enel is also investing around 15 billion in the grids required to facilitate the transition by 2025,includ
215、ing growing the number of connections,improving quality and resilience,and driving customer digitization through smart grids.The company expects to have digitalized approximately 80%of customers on the grid by 2025.Enel has placed renewable-powered electrification as a key priority of its business s
216、trategy,expanding its range of products and services to electrify other sectors,such as transportation and buildings.In particular,it expects to install 1.4 million electric vehicle charging points by 2025,from around 0.5 million estimated in 2022.To support a systemic impact,the company also regula
217、rly participates in industry associations and consultation groups to push for a Paris-aligned policy framework.Enel has a dedicated policy to guide its wider stakeholder engagement,it challenges unaligned proposals from industry associations and,if needed,will leave associations or exit geographic m
218、arkets that fail to show sufficiently ambitious climate commitment.Case studyEnel34Transition in progress35Figure 17Many companies have not made meaningful progress reducing the nature-related impact of their activities.%of companiesNote,figures are based on 292 responses in the water questionnaire,
219、168 responses in the forest questionnaire and 1,418 responses in the biodiversity section of the climate questionnaire.Some companies reported to be engaging in action to progress on their biodiversity-related commitments but did not report to have made any commitments in a separate CDP question the
220、se are also included here.1.Definition of“low water”is not provided by CDP but according to self-reporting of surveyed companies;2.This includes all companies that report at least some commodity volume as no-deforestation certified but less than 90%2921,41845%49%YesYesNoNo%of companies offering low
221、water products and services1%of companies engaging in any type of action to progress on their biodiversity-related commitments2No commodity volume sourced is certified deforestation freeAt least some commoditiy volume sourced has a no-deforestation certificationAt least 90%of commodity volume is cer
222、tified deforestation-free1685%80%15%of companies sourcing certified no-deforestation compliant commodities,by scopeonly 13%of companies have assessed the impact of their up-and downstream value chain on biodiversity13%We see a similar picture on value-chain engagement on biodiversity,water,and fores
223、t topics.While most companies indicated that they are engaging with their direct suppliers on environmental topics,only leading companies were demonstrating the kind of in-depth engagement that could drive meaningful change.For instance,only 13%had assessed the impact of their up-and downstream valu
224、e chain on biodiversity.An example of a company that is working to enhance the transparency of the nature impact of its value chain is LVMH(see LVMH case study).On water,for instance,almost three-quarters of firms indicated to engage with their suppliers.Yet only 41%requested water-related managemen
225、t information on at least half of their supplier-related spending,indicating a lack of depth in the engagement.Now for natureOne important way in which companies can lower their environmental impact is to set policies guiding action on specific topics such as deforestation,and this is an area where
226、progress is lagging.For instance,only 29%of companies reported a best-practice timebound forests policy in place that includes a zero-deforestation commitment and social and remediation elements,although this is high compared to 14%globally.Among agricultural commodity companies with industrial acti
227、vities that have profound impacts on forests,none has such a policy.Meanwhile,just 21%of companies disclosing to CDP on water security have adopted a best.practice water policy.Based on these numbers,there is room for improvement when it comes to reducing the environmental footprint of product and s
228、ervices portfolios.Currently,fewer than half self-classify any of their current products and services as having a low impact on water resources.When it comes to companies disclosing on forests,the progress is more substantial:(85%)source at least some certified commodities.Yet,this is limited to a s
229、hare of their sourcing volume.Only 5%of companies report that at least 90%of one of their commodities is certified in a in a certification scheme that provides assurance of no-deforestation/no-conversion.More broadly,fewer than half of the responding companies in the climate questionnaire indicated
230、that they had programs in place to help them advance their biodiversity-related commitments.Figure 16A large majority have not adopted best-practice policies to drive action on water and forests%of companies1.CDP defines a best practice water policy as a documented public policy which scope contains
231、 the description of business dependency on water and business impact on water,water target and goals,acknowledgment of the human right to water and sanitation,commitment to align with public policy initiatives,reference to international standards and water initiatives,description of water-related st
232、andards for procurement,commitments beyond regulatory compliance and water-related innovation,recognition of environmental linkages and commitment to water stewardship and/or collective actions;2.CDP defines a best practice no deforestation policy as publicly available general or commodity specific
233、company-wide no-deforestation policy with social and remediation elements that include timebound milestones and targets see also CDP(2022)Understanding CDPs 15 forest-related key performance indicators;Source:Oliver Wyman analysis;CDP data.31118221%29%Adoption of a best-practice water policy1YesNoYe
234、sNoAdoption of a best-practice forests policy236Supply chain engagement on water topics,%of companiesSupply chain engagement on forest topics,%of companiesSupply chain engagement on biodiversity topics,%of companiesFigure 18Supplier engagement on nature topics is widespread-but depth is lackingNote,
235、figures are based on 253 responses in the water questionnaire,168 responses in the forest questionnaire and 1,418 responses in the biodiversity section of the climate questionnaire1.Respondents indicating that they do not know if they request their suppliers about water use are marked as no;2.This r
236、efers to KPI 12 of the CDP Forests Accountability Framework Core Principles:Financial&technical assistance to direct suppliers including supporting suppliers to set their own no deforestation/conversion commitments across their entire commodity operations and develop public time-bound action plans w
237、ith clear milestones;3.These are companies that engage both up-and downstream across their value chain;Engaging with suppliersRequest water-related data from at least half of their supplier-related spend173%41%Working with first tier suppliersFinancial&technical assistance to direct suppliers286%3%C
238、onducted at least a partial biodiversity value chain impact assessmentConducted a holistic biodiversity value chain impact assessment328%13%Meanwhile,86%of the forest questionnaire respondents indicate that they are engaging with suppliers from which they buy directly from25.However,only 3%provide f
239、inancial and technical assistance to these direct suppliers as part of this.Moreover,only 30%of traders,manufacturers and retailers work beyond first tier suppliers through capacity building.Greater engagement with indirect suppliers is vital,especially in light of the EUs Directive on Corporate Sus
240、tainability Due Diligence(CSDD)proposal that stipulates companies take appropriate measures to identify(potential)environmental impacts at the level of indirect business relationships in their value chain.26Consideration of sector-specific decarbonization pathways and nature-related challenges are k
241、ey in the development and assessment of implementation and engagement strategies.We will explore this more in-depth in the next section.25 Processors,traders,manufacturers and retailers only26 European Commission(2022)Proposal for a Directive on Corporate Sustainability Due DiligenceTransition in pr
242、ogress37Louis Vuitton Mot Hennessy(LVMH)Group is a luxury conglomerate that owns up to 75 brands across six sectors,spanning wines and spirits,fashion and leather goods,perfumes and cosmetics,watches and jewellery,selective retailing,and other activities.Under its LIFE 360 programme,LVMH has identif
243、ied four strategic pillars covering value chain transparency,biodiversity,climate change and the circular economy.Value chain transparency is the key enabler required to achieve all these strategic pillars.With brand image and credibility key for a luxury group,LVMH has recognised the need for a tra
244、nsparent and traceable approach.It aims to integrate 100%of strategic suppliers into dedicated traceability systems to embed eco-design principles across all new products by 2030.LVMH now collaborates with Fairly Made and Source Map,that support the company which both support with traceability softw
245、are and data to build the capabilities to achieve this.LVMH has also defined specific targets for reducing their impact on biodiversity,climate change mitigation,and circular economy(e.g.,100%sourcing of strategic raw materials to be certified for ecosystem and water resource preservation)and has in
246、itiatives in place across its brands.For instance,It is moving supply chains out of areas of high environmental and reputational risk,such as the Amazon for its leather sourcing.It works with farmers in the supply chain to implement regenerative practices and monitor its impact,including regular ana
247、lysis of soil carbon content.On a product level,it is improving reparability of its products to improve durability and reduce waste,and using alternative materials to replace virgin plastic use.For consumers,it engages in cross-industry initiatives like the EcoBeautyScore Consortium,which aims to de
248、velop an environmental impact scoring system to support consumers making more sustainable cosmetic purchase decisions.As LVMH progresses from piloting these projects to rolling them out across its entire suppliers network,further building out its dedicated value chain traceability systems will be ke
249、y.Case studyLMVH38393Sector deep-divesFeatured case studySymrise AGSymrise has made the principles of sustainability a key component of its operations many years ago.Designed primarily to protect the climate,water and forests,our interconnected measures have earned us top grades from the CDP many ti
250、mes.This success motivates us to continuously optimize our sustainability activities,as we realize their significance in our efforts to protect the climate.Thats why we aim to establish climate-positive operations starting in 2030 with our clearly defined action plan.In combination with many other m
251、easures that minimize our consumption across all levels or make our processes more efficient,the circular economy forms a component that we apply extensively to our raw material and product portfolio.We want to focus on circular processes as much as we can by using 100 percent of raw materials when
252、possible,avoiding waste and returning materials to processes.To help reduce the impact on nature,we source our raw materials responsibly and use them efficiently.At the same time,we aim to ensure that,ideally,all products we manufacture are fully biodegradable and can be safely returned to nature af
253、ter use.For consumer goods that end up back in the natural environment after use,the circular economy offers five central principles that we successfully apply at Symrise:1.Regeneration of nature:Rather than exploiting nature,we rebuild natural capital.2.Sustainable agriculture:We promote concepts s
254、uch as regenerative agriculture,agroecology,agroforestry and conservation agriculture throughout our value chains.This allows us to exert a positive impact on nature.3.Composting and anaerobic decomposition:Through decomposition of organic substances such as food byproducts and other biological mate
255、rials,compost or biogas can be generated,which we provide for additional use in agriculture or for power generation.4.Cascaded utilization:With cascaded utilization,we use raw materials across several levels.5.Extracting biochemicals from byproducts creates source materials for new products.OutlookT
256、he Symrise business model has always used byproducts and co-products from other industries to create new value.We thus tap sustainable sources of raw materials,develop process innovations and alternatives to raw materials,expand our portfolio,consistently increase the percentage of sustainable and c
257、ircular raw materials,and systematically apply the principles of green chemistry.This ultimately allows us to reconcile our economic interests with environmental and social aspects.Bernhard Kott,Chief Sustainability Officer4041Credible climate transition plans are sector specific.They investigate co
258、ncrete levers to reduce emissions and benefit nature,while acknowledging the commercial trade-offs for companies.This section highlights levers for companies in three diverse sectors:automobile manufacturers,financial services companies,and grocery retailers.3.1 Automobile manufacturersDecarbonizati
259、on strategies for automakers must focus on both manufacturing including emissions from their production,energy that powers it,and all along their raw material and parts supply chain and downstream emissions from the use of the vehicles they produce.In particular,robust plans must include:Implementat
260、ion:how car companies plan to decarbonize its own operations through more energy-and raw materials-efficient processes and use of renewable energy Implementation:how auto manufacturers will shift their product portfolios from internal combustion engines(ICE)to zero-emissions vehicles to reduce the d
261、ownstream emissions emerging from the use of their vehicles Engagement:how automakers will work with suppliers to decarbonize the production of car components and raw materialsMany existing actions do not go far enough and are not comprehensive enough.Almost seven out of 10 automakers report informa
262、tion on specific emission-reduction initiatives ongoing at their own production operations over the past year.For their suppliers upstream and customers downstream parts of the value chains that account for 99%of the emissions reported to CDP disclosures often lack similar detail.Less than a quarter
263、 of automobile manufacturersprovide EV sales and future product mix targets1/4 Only 11%of car companies are collaborating with suppliers to help them transition to low-carbon operations11%For example:While almost 70%of companies report current electric-vehicle(EV)sales,less than a quarter provide go
264、als for future EV sales and the eventual product mix of the companies.This makes it difficult for investors to assess whether the automakers product strategies are aligned with 1.5C and whether they show sufficient ambition and feasibility.More stringent reporting requirements coming from the Europe
265、an Financial Reporting Advisory Group(EFRAG)could make guidance on changes in companies product and service portfolios and adoption of new technologies mandatory 27,28 Half of car companies do not disclose their spending on EV research&development(R&D),meaning investors have limited information to a
266、ssess the degree of commitment the manufacturers are making to the successful transition to a net-zero product portfolio.Over three-quarters of automotive manufacturers disclose some information on supply-chain engagement,but it is often limited to the collection of supplier information and does not
267、 involve any requirements or pressure on suppliers to cut emissions in their operations.In other words,pursuing transformative engagement is the exception:Only 11%of car companies are collaborating with suppliers to help them transition to low-carbon operations,such as hydrogen-powered steel product
268、ion,to secure new lower carbon raw materials Less than one-third of companies have integrated climate into their supplier contractsSector deep divesFigure 20Supplier engagement is widespread-but often limited to information sharing%of automobile manufacturers engaging with suppliers and average in-s
269、cope supplier spend,by type of supplier engagementIncreasing depth of supplier engagementAverage in-scope supplier spendInnovation and collaboration (changing markets)Engagement and incentivization (changing supplier behavior)Information collection (understanding supplier behavior)11%44%78%100%77%59
270、%Figure 19Automobile manufacturers show a lack of clarity on their future adoption of EVs%of automobile manufacturers disclosing current EV unit sales%of automobile manufacturers disclosing EV sales targets%of automobile manufacturers disclosing commercial scale EV-related R&D spend69%50%23%Source:O
271、liver Wyman analysis;CDP dataSource:Oliver Wyman analysis;CDP data27 European Financial Reporting Advisory Group(EFRAG)(2022)Draft European Sustainability Standards:ESRS E1 Climate Change28 The first delegated act that will mandate these reporting requirements is expected by end of June 20234243Sect
272、or deep dives Judging by automaker disclosures on implementation and engagement,the sector is not ready for delivering the transition.None of the car companies show advanced transition readiness,according to the criteria used in this reports Section 1,while between 50%and 60%could be considered deve
273、loping.This implies that the remaining companies representing up to half of outstanding debt to automotive manufacturers could face more expensive financing when financial institutions begin to ration financing to companies without credible transition plans.In contrast,companies that can credibly de
274、monstrate their ability to transition may be able to access sustainable financing at a cost advantage.Volvo Cars is an example of an automaker that has set clear guidance on the actions its taking to reduce emissions across its own operations,and all along the value chain,both upstream and down.(See
275、 Volvo Cars case study).3.2 Financial services companiesFinancial institutions(FIs)can support a net-zero nature-positive transition by shifting their investment,lending,and underwriting activities towards more sustainable activities and by engaging clients on their own transitions.Credible transiti
276、on planning of a financial institution must,therefore,provide clarity on:Implementation:how it is adapting policies and decision-making criteria to steer investment portfolios in line with its environmental objectives Engagement:how it is integrating environmental objectives into engagement strategi
277、es to support and encourage the transition of clients and portfolio companiesImplementation is more advanced on climate than nature:69%of financial institutions report to be taking action to align their portfolios to 1.5C.Many institutions that have joined one of the GFANZ-aligned alliances are tran
278、slating their net-zero portfolio commitments into sector-specific targets(see Figure 3).Others,such as the KBC Group,indicated they are taking a more bottom-up approach committing to sector-specific reduction targets first(see KBC case study).In contrast,only 35%of leading companies have also starte
279、d to integrate nature into their strategies,for instance by taking action on biodiversity.(see Aviva case study).None of Automobile manufacturers show advanced transition readiness according to the criteria used in Section 1of financial institutions are taking action to align their portfolios to 1.5
280、C69%Between 2018 and 2025,the Swedish carmaker Volvo Cars aims to cut CO2 emissions by 40%per average car.This will involve a 25%reduction in both operational and supply chain emissions,as well as a 50%drop in tailpipe emissions per average car.To achieve this,it is addressing emissions across their
281、 value chain and adopting circular economic principles.For its operations,Volvo Cars targets a 60%reduction in Scope 1 and 2 between 2019 and 2030.A key focus is energy:it now powers its global plants using 66%climate neutral energy1,including 94%climate neutral electricity.Their Gothenburg plant wa
282、s their first to achieve climate neutrality,through a shift to biogas and district heating,in 2021.Volvo plans to be a fully electric car company by 2030.It will launch one new electric vehicle(EV)model annually and it is investing heavily in EV industrial infrastructure.This includes the constructi
283、on of a battery Gigafactory in Gothenburg in partnership with Northvolt,and a new EV-only car plant in Slovakia.To help achieve a 25%reduction in supply chain emissions per average car,Volvo Cars Tier 1 suppliers are requested to switch to 100%climate neutral energy by 2025.Carbon intensive material
284、 is in focus.Aluminium suppliers are directed to approved smelters that use climate-neutral electricity in the refining process.Meanwhile,the company plans to become the first automaker to use near zero-emissions steel from Swedish steelmaker SSAB.Circular targets to help reach this goal include sec
285、uring 25%recycled2 and biobased content in new vehicles by 2025.Case studyVolvo Cars1 Volvo Cars facilitates its shift climate neutral energy through a combination of own investments,closing long-term power purchasing agreements(PPA)or the acquisition of energy attribute certificates(EACs)2 Volvo Ca
286、rs uses the ISO 14021 standard as a basis for its definition of recycled content for all materials except steel where it uses the definition of World Steel39%27%83%31%37%87%4445Sector deep dives Figure 21The implementation of nature-related considerations into decision-making is still significantly
287、lagging climate 22%ForestsForestsWaterWaterClimateClimate29%29%61%ForestsWaterClimate1.This covers integration through environmental requirements and/or exclusion policies;Source:Oliver Wyman analysis;CDP data%of FIs that offer products that mitigate their clients environmental impact,by topic%of FI
288、s that integrated environmental aspects into their policy framework1,by topic%of FIs that integrated environmental aspects into their covenants,by topicof financial institutions report to act on biodiversity and climate change35%The gap between climate and nature is also clear when specific implemen
289、tation actions are compared.Significantly more financial institutions reported that they have integrated climate priorities into their commercial offerings,policy frameworks,and covenants than the number reported doing the same on behalf of forests and water.The Aviva and KBC case studies include ex
290、amples of nature-related products such as a surety offering and an environmental advisory partnership as well as the integration of environmental criteria through sector-specific policies.Turning to engagement,the financial sector reported making good progress on integrating climate into engagement
291、strategies.But there is room for more.For instance,only 6%of NZBA banks supported CDPs engagement strategies.Science-Based Targets campaign in 2021-2022 the lowest participation rate of all GFANZ alliances.29 Moreoverthe proportion of financial institutions reporting to have integrated both climate
292、and nature is also quite small.Only 13%of banks and 7%of insurers engage their clients onboth.Asset managers report to have made more progress,likely reflecting29 The campaign provides an easy way for financial institutions to directly and collaboratively ask the worlds highest impact companies to s
293、et a 1.5C.target,therefore allowing equity and debt portfolios to align with net-zero and the Paris agreement.In 2022,financiers with$37 trillion supported this campaign;source:CDP(2022)CDP Science-Based Targets Campaign:Final Progress Report:2021-22 campaignAviva,the largest UK insurer,aims to reac
294、h net-zero financed emissions for its investments and underwriting activities by 2040 ten years ahead of the GFANZ commitment and align with the global goal of reversing biodiversity loss by 2030.The company was one of the first financial institutions to publish a climate transition plan with nature
295、-positive components,and has now published a biodiversity report outlining tangible actions.Aviva has taken a leadership role in industry and regulatory initiatives such as GFANZ and the UK Transition Plan Taskforce,to help shape the sectors agenda on transition planning in a way that meets its need
296、s as an investor and underwriter.For its own transition plan,the company is engaging with its suppliers,customers,and investees as well as developing new products with a positive environmental impact.It provides surety bond guarantees to the existing activities of Canadian mining companies,to ensure
297、 that land is restored to its original condition in case of bankruptcy.It also recently launched a stand-alone insurance cover for EV charging points,is investing heavily in renewables including 110m investment into EV charging point installation company Connected Kerb-and has earmarked 100m for nat
298、ure-based solutions funding by 2030.The company is also expanding its environmental engagement with companies it invests in.It launched a program in 2021 targeting its portfolios biggest emitters to engage them to set robust net-zero targets with clear plans,and intends to divest from all companies
299、that have not made sufficient progress by 2024.In addition,it has launched an initiative to decarbonize the supply chain of its claims activities through supplier collaboration.Case studyAviva1 Glasgow Financial Alliance for Net-Zero(GFANZ)consists of banks,insurers,asset owners,asset managers,finan
300、cial service providers,and investment consultants.All GFANZ alliance members have All members independently committed to the goal of achieving net-zero emissions across their portfolios by 205047Sector deep dives Over 80%of FIs report that they are assessing the alignment of at least some of their c
301、lients with a 1.5C world80%Figure 22Asset managersClient engagement Client engagement Investees engagementInvestees engagementAsset managersBanksBanksInsurersInsurers%of financial institutions engaging with clients/investees on climate-related topics,by type of institution%of financial institutions
302、engaging with clients/investees across climate and nature-related topics,by type of institution 58%4%82%13%64%7%88%24%33%12%70%14%the pre-existing capabilities and strategies for engaging investees that many already possessed and into which climate and nature could be integrated Nonetheless,more tha
303、n three-quarters of asset managers have yet to integrate climate and nature into engagement strategies with their portfolio companies.A key enabler to achieving their environmental commitments is a financial institutions ability to assess the credibility of a corporates transition planning.Financial
304、 institutions are working to build the data and infrastructure to assess progress,and to support engagement with corporates.Over 80%of financial institutions reported they were assessing the alignment with a 1.5C world of at least some of their clients,and most are planning to increase the scope of
305、their assessment across a larger part of their portfolio.More than one in four also reported they were integrating nature-related aspects as part of their client risk assessment processes.For this,it is important that financial institutions build sector-specific expertise within the organization.Typ
306、ically,it is easier to engage with corporates as they have more expertise themselves already.However,also small,and midsize clients need to transition and financial institutions such as KBC have developed approaches to support this(see KBC case study).Source:Oliver Wyman analysis;CDP data46Belgian b
307、ank and insurer KBC discloses comprehensively on its engagement strategy one of the key elements of a robust climate transition plan.It set sector-specific emissions reduction targets following an assessment of eight sectors covering two-thirds of its lending activities and associated Scope 3 emissi
308、ons.The targets aim to reduce the emission intensity across KBC portfolios-ranging from 14%for steel to 81%for passenger cars by 2030.It has also committed to setting a target through the SBTi.KBC works with small to mid-sized companies,which are often in the early stages of their transition journey
309、 but will be affected by new regulation such as the Corporate Sustainability Reporting Directive(CSRD).Education and advisory play a key role to kick-start their climate actions.To that end,KBCs Sustainable Finance Programme was set up to embed climate among its 40,000+employees,particularly its fro
310、nt-line relationship managers.For example,KBC has a training programme to equip every client-facing manager with sustainability expertise where gamification helps employees see consequences of climate-related client decisions.And it incentivizes action:relationship managers have climate targets set
311、by product and have explicit objectives to discuss climate issues with clients.For instance,referrals to its partnered sustainability advisory agency are a renumeration KPI more than 200 referrals have already been made.Moreover,the bank provides clients with access to relevant expertise and tooling
312、(e.g.,an internally developed carbon footprint calculator)to facilitate these conversations.Case studyKBC20%14%3.3 Grocery retailersAnother sector with a substantial environmental footprint is the food industry.Agriculture and food systems are responsible for 31%of human-caused GHG emissions and hav
313、e a substantial impact on nature,with the global food system representing one of the biggest drivers of water use,land-use change,habitat destruction,and biodiversity loss.Grocery retailers play a significant role in the food value chain as a link between consumers and food producers.In fact,grocery
314、 retail is one of the most value-chain dependent sectors in the economy:97%of its total emissions are Scope 3 and three-quarters of those are upstream.Their most important nature-related impacts,such as deforestation,also occur deep within their value chains.Thus,for grocery retailers,the engagement
315、 strategy is key for achieving impact reductions throughout the value chain.While dealing with suppliers is obviously one of the quickest ways to protect nature,grocers also can effect change by influencing their customers consumption patterns promoting,for instance,sustainable diets and discouragin
316、g food waste.4849Sector deep dives Upstream,many retailers appeared to have made limited progress embedding their engagement strategies in supply chains as a clear gap exists between intention and action.For example:Almost all grocery retailers claim to involve their value chain on climate,but sligh
317、tly over one-third use contracts to require suppliers to adhere to best climate-related practices.On the other hand,grocery chain Carrefour demands contractually its top 100 suppliers to set SBTs by 2026(see Carrefour case study)All grocers indicate the vital importance of having sources of good qua
318、lity freshwater available.But when it comes to vetting their suppliers on water-use practices:Only 14%of retailers receive water-related information over more than half of their supplier-related spend Almost 90%of grocery retailers have made public statements on reducing deforestation.Yet only one o
319、ut of five have embedded deforestation monitoring activitiesDownstream,retailers can influence customers and nudge them into making more sustainable choices.Almost 90%of responding retailers indicated that they involve both their upstream and downstream supply chain in their own climate efforts.In p
320、ractice,most of the reported downstream activities are around education and information-sharing.For example,since 2019,Finnish grocery store chain K-Ostokset has provided a calculator for customers to use to assess the carbon footprints of their purchases.British grocer Tesco has created product lab
321、elling that allows customer to shop more sustainably.But there is much more grocery retailers could do to influence customer decisions towards sustainable outcomes.For instance,they could leverage their commercial tools to nudge clients in the sustainable direction such as by giving preferential pro
322、duct placement to more sustainable products.In sum,the grocery retailer sector publicly indicates strong ambition but is not yet delivering against the rhetoric.As scrutiny of transition plans increases,grocery retailers will begin to feel the heat from consumers and regulators without more follow-t
323、hrough and eventually may find their access to capital restricted,leaving companies like Carrefour with distinct advantages.Figure 23Grocery retailers are strong on intent,but lack in action to reduce their environmental footprintEngages with their supplier on climate-related topicsIncludes climate
324、KPIs in supplier contracts Indicates freshwater is important for direct useRequests suppliers about water use data1Adopted a public commitment to reduce deforestationEmbeds deforestation footprint monitoring activitiesWaterClimateActionIntentForests1.Respondents indicating that they do not know if t
325、hey request their suppliers about water use are marked as no;Source:Oliver Wyman analysis;CDP dataGrocery retailCDP respondent average 94%79%100%72%37%39%39%87%79%43%Slightly over one-third of require suppliers to meet climate-related requirements through contractingAlmost 90%of grocery retailers en
326、gage both their upstream and downstream supply chain on climate 90%1/35051Sector deep dives Featured case studyBeiersdorf AGRooted in our history,the Beiersdorf promise to protect,care and nurture is driving positive action for a more sustainable future.Combating and mitigating climate change is the
327、 central challenge of our time and as one of the largest skin care companies in the world,we recognize our role in tackling this.Since 2020,our CARE BEYOND SKIN Sustainability Agenda has been an integral part of our corporate C.A.R.E+strategy.We are taking a holistic approach to driving climate prot
328、ection forward at all levels in our company.We have set ourselves one of the most ambitious targets in our industry:to reduce our absolute greenhouse gas emissions(Scope 1,2 and 3)by 30%by 2025 compared to 2018.Our climate target is based on the latest scientific findings and is recognized by the Sc
329、ience Based Targets initiative(SBTi).Since 2018,we have succeeded in reducing emissions by 12.7%in all areas despite corporate growth.Since 2019,we have been using 100%electricity from renewable sources for all production sites and affiliates worldwide.We also converted our first production site in
330、Berlin to operate climate neutral as of January 2022 via the switch to biogas.By 2030 our target is to achieve climate-neutral operations in all our factories.As protecting forests(and biodiversity)and other natural carbon sinks are crucial to fighting climate change,we have also set ourselves the t
331、arget of zero deforestation for the sourcing of key renewable raw materials such as palm,soy,and paper by 2025.Already since the end of 2021,the palm(kernel)oil derivatives used in product formulations have been sourced exclusively from sustainable,certified sources.Projects are also underway in coo
332、peration with WWF Germany to train and support local smallholders in Indonesia and Malaysia in sustainable and deforestation-free cultivation.Furthermore,we have also reached a milestone related to water security.As part of the strategic partnership with WWF Germany,we have conducted a global water
333、risk analysis and are currently developing long-term context-based water targets that go beyond the current target to reduce water in the production process by 25%per manufactured product by 2025(base year 2018).We will continue to“transform the norm”and make a measurable and positive contribution to our environment and society with ambitious commitments to foster a more inclusive society inspirin