Japanese companies outshine peers on climate risk disclosures – Sustainable Views

Corporate Climate Disclosure: Assessing Progress Towards Sustainable Development Goal 13

Global Overview of Corporate Climate Action Reporting

An analysis of 1,900 global companies reveals a significant gap in corporate reporting on climate change, a critical component for achieving Sustainable Development Goal 13 (Climate Action). While a majority of companies acknowledge climate risks, the depth of their analysis often falls short of the comprehensive standards needed to drive meaningful change and ensure sustainable industrial practices as outlined in SDG 9 (Industry, Innovation, and Infrastructure).

• 77% of companies assessed provide some form of climate-scenario disclosure.
• Only 30% of companies provide comprehensive data that meets all criteria for robust analysis.

This disparity indicates that while awareness is high, the commitment to transparent and actionable reporting, which underpins SDG 12 (Responsible Consumption and Production), remains insufficient on a global scale.

Criteria for Comprehensive Disclosure

To qualify as comprehensive, a company’s climate-scenario analysis must meet six key criteria. These standards ensure that corporate strategies are aligned with global climate targets and contribute effectively to SDG 13.

1. Evaluation of high-warming or high-stress climate scenarios.
2. Consideration of long-term time horizons for risk assessment.
3. Benchmarking against established international climate pathways.
4. Inclusion of pathways from the UN’s Intergovernmental Panel on Climate Change (IPCC).
5. Inclusion of pathways from the International Energy Agency (IEA), linking to SDG 7 (Affordable and Clean Energy).
6. Demonstration of a robust and detailed modeling process.

Regional Disparities in Climate Reporting

Significant regional variations exist in the quality of climate-related disclosures, highlighting an uneven global progression towards the Sustainable Development Goals. Proactive policy and strong governance frameworks appear to be key drivers of superior performance.

• European Union: 50% of companies provide comprehensive disclosures.
• East Asia and the Pacific: 39% of companies meet the comprehensive standard, with Japanese firms noted for detailed physical risk assessments vital for SDG 11 (Sustainable Cities and Communities).
• North America: Only 10% of companies provide comprehensive disclosures.

The Role of Frameworks and Partnerships (SDG 17)

The success of regions like Japan and the EU is largely attributed to the adoption of international frameworks and supportive government policy, demonstrating the power of SDG 17 (Partnerships for the Goals). The Task Force on Climate-related Financial Disclosures (TCFD) has been instrumental in standardizing reporting.

• TCFD Framework: Established in 2017, it provides a global standard for climate-related financial reporting, explicitly requiring scenario analysis.
• Japanese Government Initiative: The Ministry of Economy, Trade and Industry created a TCFD study group in 2018, leading to strong national guidance and high disclosure rates, with 2,068 of 2,190 listed companies making TCFD-related disclosures in a 2024 survey.
• EU Legislation: The integration of TCFD principles into the EU’s Corporate Sustainability Reporting Directive has driven the high rate of comprehensive reporting among EU companies.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

1. SDG 13: Climate Action
   • The article’s core subject is climate-scenario analysis by global companies. This directly relates to taking urgent action to combat climate change and its impacts. The discussion revolves around how corporations assess and disclose their resilience to climate-related risks, which is a fundamental component of climate action.
2. SDG 12: Responsible Consumption and Production
   • The article focuses on corporate reporting frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and the EU’s Corporate Sustainability Reporting Directive (CSRD). These frameworks encourage companies to adopt sustainable practices and integrate sustainability information into their reporting cycles, which is a key aspect of ensuring sustainable consumption and production patterns.
3. SDG 17: Partnerships for the Goals
   • The article highlights the collaborative efforts required to implement these reporting standards. It mentions the TCFD being established by the Financial Stability Board, Japan’s government creating a study group to promote the framework, and the EU integrating its principles into legislation. This demonstrates the multi-stakeholder partnerships between international bodies, governments, and the private sector to achieve sustainability goals.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 13.2: Integrate climate change measures into national policies, strategies and planning.
   • The article provides clear examples of this target in action. It states that Japan’s Ministry of Economy, Trade and Industry established the “TCFD Study Group on Green Finance and Corporate Disclosure” and produced national TCFD guidance. It also notes that the EU integrated TCFD principles into its “Corporate Sustainability Reporting Directive.” These are direct instances of national and regional bodies integrating climate-related measures into policy and corporate regulation.
2. Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.
   • The entire analysis by Clarity AI, which examines how 1,900 global companies report on climate scenarios, is a direct evaluation of this target. The TCFD framework itself is a mechanism designed to encourage large companies to report on climate-related financial information, thereby integrating sustainability data into their standard reporting. The article’s statistics on disclosure rates (77% providing some data, 30% providing comprehensive data) measure the progress of this integration.
3. Target 17.17: Encourage and promote effective public, public-private and civil society partnerships.
   • The development and adoption of the TCFD framework as described in the article is an example of a public-private partnership. It was established by the Financial Stability Board (a public international body), promoted by governments (Japan, EU), and implemented by private sector entities (the 1,900 companies analyzed). This collaboration is essential for creating a consistent global standard for climate reporting.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

1. Indicators for Target 12.6 (Corporate Sustainability Reporting)
   • The article provides several quantitative indicators that measure the number and quality of companies integrating sustainability information into their reporting:
     • The percentage of global companies disclosing any climate-scenario information: “77 per cent of the companies assessed met at least one of these criteria.”
     • The percentage of global companies providing comprehensive disclosures: “just 30 per cent meeting all six [criteria].”
     • Regional disclosure rates for comprehensive data: “Half of EU companies disclosed comprehensive scenario data, followed by 39 per cent in east Asia and the Pacific. In North America, only 10 per cent…”
     • National adoption rates: “A separate 2024 disclosure survey by the Japan Stock Exchange found that 2,068 of 2,190 listed companies made at least one TCFD-related disclosure.”
2. Indicators for Target 13.2 (Integration of Climate Measures into Policy)
   • The article provides qualitative indicators of policy integration by naming specific government-led initiatives:
     • The establishment of “Japan’s Ministry of Economy, Trade and Industry… TCFD Study Group on Green Finance and Corporate Disclosure in 2018.”
     • The creation of Japan’s “first TCFD guidance later that year.”
     • The integration of TCFD principles into the “EU’s Corporate Sustainability Reporting Directive.”
3. Indicators for Target 17.17 (Effective Partnerships)
   • The article implies the existence and effectiveness of partnerships through the description of collaborative actions:
     • The establishment of the TCFD by the Financial Stability Board as a global framework.
     • The widespread analysis of companies representing “85 per cent of the MSCI All Country World index,” indicating broad private sector engagement with the partnership’s goals.

Summary Table of SDGs, Targets, and Indicators

Source: sustainableviews.com