ERM: Mapping the Future of Corporate Climate Initiatives

Climate change presents challenges both immense and unprecedented, impacting not just the environment but also the economic landscape globally.

In response, companies are increasingly engaging in rigorous climate transition planning.

While more than 70% of Fortune 500 companies have pledged to achieve net zero emissions, a significant gap remains with only a minority having implemented detailed plans to reach these goals.

“Corporate climate action is at a critical juncture,” says Paul Simpson, Partner, Climate Change and Sustainability at ERM, the largest global pure play sustainability consultancy.

“While companies increasingly understand their climate-related risks and impacts, and many are setting ambitious targets to address them, businesses still find it difficult to convert targets into operational actions that create commercial value.”

Effective climate transition planning transcends corporate social responsibility, emerging as a strategic necessity that promises substantial capital accessibility and long-term value creation.

As the demand for transparency and proactive measures in addressing climate issues grows among investors, regulators and consumers, companies that actively engage in managing their climate-related risks and opportunities are better positioned for success in the emerging low-carbon economy.

Introducing Paul Simpson

Paul Simpson, a pivotal figure at ERM since 2023, also lends his expertise as an advisor to various organisations tackling climate change and environmental impacts, including Watershed.

His commitment to the net zero transition was highlighted in 2001 when he founded CDP, a global non-profit organisation that pushes entities to reduce their greenhouse gas emissions and protect natural resources.

In 2022, Paul was made an Officer of the Order of the British Empire (OBE) for services to Tackling Climate Change. 

Previously, he has served on the boards or as a member of:

• Science Based Targets initiative
• We Mean Business
• The Investor Agenda 
• Climate Disclosure Standards Board, now part of the International Sustainability Standards Board
• International Integrated Reporting Council (IIRC)
• Global Stranded Assets Advisory Council for the Smith School of Enterprise and the Environment at the University of Oxford
• Friends of Climate Action group at the World Economic Forum
• EIRIS, now part of Moody's
• Global Agenda Council on Measuring Sustainability at the World Economic Forum
• United Nations Framework Convention on Climate Change (UNFCCC) Clean Development Mechanism (CDM) Policy Dialogue

Boosting investor confidence through sustainability

Robust climate transition planning is not just about ecologically sound practices — it's about securing investor confidence.

“Done right, climate transition planning is a great tool for bridging the valuation and communication gap between companies and investors,” Paul explains.

The Global Sustainable Investment Alliance says more than 60% of global assets under management now considering ESG factors. With a focus on climate change, investors are more inclined towards companies evidencing solid, actionable low-carbon transition strategies.

By formulating and divulging definitive climate strategies, companies not only communicate readiness to confront climatic challenges but also attract beneficial investment opportunities, reduced capital costs and heightened shareholder value.

Navigating new regulatory landscapes

Globally, governments are intensifying their climate change mitigation efforts, resulting in rapidly changing regulatory frameworks.

“A wave of new requirements for companies has put climate transition planning firmly on the map,” Paul continues. 

“Beginning in 2025, the EU Corporate Sustainability Reporting Directive (CSRD) expects 14,000 companies to state whether they have a climate transition plan and provide details if they do, while the EU Corporate Sustainability Due Diligence Directive (CSDDD) wants 6,000 companies to have transition plans ready by 2027. 

“The International Sustainability Standards Board (ISSB), whose framework has been adopted by regulators worldwide, also increased its focus on transition planning by incorporating the Transition Plan Taskforce (TPT).

“The TPT is widely recognised as a trailblazer in transition planning disclosures.”

Effective management of these new regulations not only reduces compliance risks but also positions companies more strategically for enduring sustainability and resilience in business operations.

The journey to net zero

As efforts to combat climate concerns intensify, successful climate transition planning becomes a crucial differentiator for businesses across sectors.

Enterprises that embrace and effectively implement these strategies significantly contribute towards global climate goals while ensuring competitive advantage and sustainable growth in the dynamic business environment.

“Climate transition planning is not a silver bullet that will solve all the complexities of the transition to a low-carbon economy,” Paul says. 

“However, if companies and investors put in the work, transition planning can lay the foundation for capturing the commercial value of decarbonisation and improving communication and mutual understanding between companies and investors. 

“The capital flows this would unlock could bring a net zero future much closer.”

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