New research from CDP highlights a clear pattern among companies making strong progress in reducing emissions: accountability starts in the boardroom. According to the inaugural CDP Corporate Health Check, eight in ten companies that are on track to meet their emissions targets have linked executive pay to Environmental, Social, and Governance (ESG) goals.
The Corporate Health Check, launched this week and to be presented at the World Economic Forum in Davos, analyses how companies are approaching ESG targets. The findings are based on CDP’s extensive corporate disclosure dataset, which represents 67% of global market capitalisation.
Key findings
The research underscores a vital connection between the use of environmental data and business decision-making. Companies on track with their climate targets are leveraging disclosure data not just for transparency, but to inform key business strategies.
- Nearly 50% of assessed companies use disclosed emissions data for climate risk assessments.
- 64% of on-track companies have climate transition plans in place.
- 78% link executive pay to climate outcomes.
- 41% have introduced an internal carbon price.
- 90% of top-performing companies address climate issues across their value chains, involving both suppliers and customers.
However, the report also shows that only 10% of companies take more comprehensive measures, such as accounting for value chain emissions and setting up robust governance structures.
Sherry Madera, CDP’s chief executive, emphasised the urgency of integrating environmental data into core business strategies: “As pressures on our planet intensify, the inaugural CDP Health Check delivers an unmistakable call to action – the time for decisive leadership is now. Disclosure alone cannot deliver action; integrating this disclosure data as a core dataset for key business decisions enables the levers to be pulled and the change we need to see.”
Boardroom accountability
The importance of board-level involvement in sustainability strategies cannot be overstated. Recent surveys underline this growing understanding, with IBM’s study finding that three-quarters of 5,000 C-suite executives believe enhanced sustainability drives better business results.
Accountability, however, goes beyond board-level enthusiasm. Tying executive pay to ESG goals offers a concrete way to ensure follow-through. PwC research in 2023 found that almost 80% of Europe’s top 50 blue-chip companies on the STOXX index had already adopted this practice.
Moving forward
Despite these advances, CDP’s report makes it clear that there is still a long way to go. Only 1% of assessed companies achieved the highest level of performance in the Corporate Health Check.
Commenting on the CDP report, Gim Huay Neo, Managing Director at the World Economic Forum, said: “The analysis from the CDP Corporate Health Check underscores the reality that while there is positive business momentum, it is not commensurate with the escalating risks and consequences of the climate and nature emergency.
“Companies need to further leverage the power of data, technology, and innovative partnerships to leapfrog from crisis to opportunity for people, planet, and prosperity.”