Report highlights challenges and opportunities in the transition to increased sustainable business models
Every year, CDP publishes a report, in connection with the CDP Europe Awards, which analyzes the reporting data sets collected by European companies reporting to CDP from the previous year and derives recommendations for future action. The CDP Europe Report 2023 shows: progress made by European companies in economic transformation falls short of expectations in 2023. The report encourages companies to use sustainability reporting and environmental data to mobilize capital, redirect financial flows to decarbonization measures and sustainable investments, as well as contribute to meeting the 1.5°C target.
Measuring environmental impact is becoming increasingly important for European companies – this is also reflected in a 26% increase in CDP reporting in 2023 compared to the previous year. According to the CDP Europe Report 2023, which CDP compiled in collaboration with the strategy consultancy Oliver Wyman, over 1,600 European organizations submitted environmental data to CDP last year. European companies also managed to reduce their Scope 1 and 2 emissions by 17% between 2019 and 2022. More than half (55%) of the reporting companies stated that they had developed climate protection strategies with specific details on how they plan to achieve their climate targets – around 15% more than in the previous year.
Despite the increasingly ambitious climate protection commitment of many organizations, the report criticizes that the economic structures required for a successful transformation are not developing fast enough in many sectors. Although the number of European companies setting climate targets and developing decarbonization strategies is increasing, only one in five companies is able to make significant progress in terms of implementation. The report also shows that 70% of companies in Europe invested less than a quarter of their expenses in climate action measures. More than half of companies from emission-intensive sectors cited the frequent lack of access to capital as a key barrier to implementing decarbonization measures.
Reporting data serves as the basis for transformation
According to the report, a successful transformation process involves a major revamping for companies: Their success will increasingly be measured by how committed they are to climate action and sustainability, how well they adapt to the evolving regulatory framework, and how successfully they take advantage of the opportunities that arise. Companies will increasingly be confronted with the economic challenges associated with the transition to more sustainable business models. These could include redirecting investments towards eco- solutions such as the procurement of renewable energy, the development of lower-emission and more climate friendly products, or more proactive sustainability management along the value chain.
The report urges companies to make greater use of sustainability reporting as a fundamental tool for successful transformation. It argues that the transparent transmission and use of comparable environmental data is an important basis for identifying potential for action, measuring individual competitiveness, and mobilizing capital for sustainable, future-oriented investments. After all, a company's CDP score can be decisive for access to public funds to implement related optimization or decarbonization measures. Based on the available information, companies and investors could therefore make sound, business-relevant and sustainable decisions more easily. Finally, the disclosure of environmental data is a prerequisite for companies to fulfill the EU-wide CSRD reporting obligations and helps businesses meet the growing transparency and sustainability requirements expected by their customers.
Call for closer cooperation to bridge the financing gap
The report, however, also shows that a successful decarbonization of the economy requires more than a shift activated by the private sector, but also government-supported financial incentives and backing from the relevant financial institutions. With targeted investments from companies, investors, financial institutions, and governments in Europe, in hand with increased cooperation between the individual players, it suggests the possibility of bridging the financing gap. According to the report, the transformation and development of a sustainable economy can only succeed collectively.
Read the full CDP Europe Report 2023 "Get the money moving: Meeting the European corporate transition challenge" here.
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