We’ve taken a look at the policies, processes and structures FTSE 100 companies have in place to deliver on their promises to decarbonise. Find out what actions you can take from the UK’s largest companies to accelerate decarbonisation and transform your business.
Matching commitments with action
While many companies have shared their ambitions to commit to a more sustainable future, they often fall short when it comes to their delivery plans.
FTSE 100 companies generally have a transition plan and a sustainability report, but the quality and comprehensiveness of outcomes and actions can vary. We found only one quarter (26) of the UK’s largest companies have comprehensive, measurable and specific actions that can be used to decarbonise.
So while there’s clear intention when it comes to committing to a more sustainable future, actions are lagging.
“Companies are now beginning to realise that they will be judged on their actions, not on their commitments. But the problem some find is the goals they’ve committed to are no longer achievable. By taking time to review and reset, companies can refocus efforts on what’s achievable and realistic for their business today and in the future.”
Toby Smith
Director, Sustainability, PwC UK
Typically, ESG timelines stretch far beyond business performance evaluation cycles, and beyond CEO tenures. Some executive boards are now in a position where they’ve inherited targets that now seem unachievable. Meanwhile, others are finding the complexity of gathering the robust and assured data needed to report and measure progress more challenging than it felt when goals were initially set. And with targets creeping closer, businesses are beginning to take ESG more seriously. By taking time to review and reset, companies can refocus efforts on what’s achievable and realistic for their business today and in the future.
Rethinking sustainability to drive growth
Those getting ahead are reframing the way they think about ESG. By looking at the move to sustainable business practices as a route to growth, companies can create long-term value. Innovation in this area not only helps meet decarbonisation goals but also positions the company competitively in a market increasingly driven by environmental consciousness, and where investors are eyeing the risks and opportunities of sustainability.
The level of engagement in developing new products or services linked to decarbonisation depends on the company’s sector, strategy, and innovation capacity. More than three quarters of FTSE 100 companies have shown some level of innovation, with new products or services linked to decarbonisation, demonstrating the progress being made.
Getting the foundations right
Almost all FTSE 100 companies have at least a satisfactory level of governance in place for their transition towards net zero. However, when it comes to the depth of change, not all are equally effective.
By building strong foundations: good governance around ESG, linking executive remuneration with sustainability targets, and delivering consistent, data-led sustainability reporting, companies are far more likely to succeed. By knowing you’ll be held accountable, you’re more likely to take action.
So what can we learn from FTSE 100 companies, and in particular, those doing it well?
Governance should involve all aspects of your business and crucially, your people. Once your people know what success looks like, they can help you to deliver. Taking a step further means embedding accountability by linking carbon emissions to remuneration. This approach ensures leaders are financially motivated to achieve sustainability goals, and while this is widespread among FTSE 100 companies, only 13 of the FTSE 100 companies have a mechanism we consider as exceptionally effective.
While almost three quarters of FTSE 100 companies have good or exceptional levels of ESG reporting, the primary focus is – understandably – compliance. Given the rise in mandatory requirements, such as the Corporate Sustainability Reporting Directive (CSRD), there’s a huge need for quality data around sustainability. By getting ahead of this need, businesses can use data to demonstrate their efforts around net zero progress as well as using it to inform wider decision-making and create value.
“The need for quality data around sustainability is high, and by ensuring data is transparent - and externally-assured - businesses can have more clarity on where they are, the impact of any actions they take, and be realistic about the journey they need to go on to reach their sustainability goals.”
Laura Kelly
Partner, Sustainability, PwC UK
Companies are starting to realise the strategic importance of embedding ESG into their business models. However, when announcing ambitious targets, many stall when it comes to producing comprehensive plans.
How can businesses take action to accelerate progress?
Our analysis: five ways businesses can accelerate decarbonisation
- 1. Action plans
- 2. Sustainability-focused innovation
- 3. Governance
- 4. Remuneration
- 5. Sustainability reporting
1. Action plans
A comprehensive decarbonisation action plan outlines the specific strategies, steps and timelines a company will take to reduce its carbon emissions. These plans provide a roadmap for transitioning to a low-carbon economy, with clear targets, milestones and transparency in tracking progress.
Questions to ask:
- How can you make sure your action plan is comprehensive enough to succeed? Define what net zero means for your business. Companies commonly use net zero and carbon neutral interchangeably. Understand the types of emissions you will cover and ensure this captures the wide ranging aspects of decarbonisation, such as operational, supply chain, product and customer emissions, as well as offsetting or removals. Provide specific targets, baselines, timelines, and resources for each aspect.
- Is your plan accountable? Follow or align with recognised frameworks and standards for decarbonisation, such as the Science Based Targets initiative (SBTi), the Net Zero Asset Owners Alliance (NZAOA), the Transition Plan Taskforce (TPT), and the RE100, EP100, and EV100 campaigns.
- Does your decarbonisation plan align with your business objectives? Converging your business and sustainability plan is a critical element to success. Decarbonisation should be considered and built-in to all future plans.
2. Sustainability-focused innovation
Developing new products focused on sustainability involves creating goods and services that reduce carbon emissions or support a low-carbon economy.
Questions to ask:
- Are your new products directly reducing carbon when compared to your existing offering?
When launching new products or services, ensure decarbonisation is a key element. Innovation should incorporate low-carbon or carbon-neutral products, energy-efficient or renewable-powered products, or circular or recyclable products - How are you facilitating the move to a net zero economy? Enable or facilitate decarbonisation: such as green finance or investment products, low-carbon or renewable energy solutions, carbon capture or removal technologies, or sustainable mobility or transport options.
- Can you create or focus on new opportunities? Create new markets or opportunities for decarbonisation, such as innovative or disruptive products or services that address unmet or emerging needs or demands related to climate change or sustainability.
3. Governance
Effective governance ensures sustainability is a priority for leadership, climate risk is integrated into decision-making, and all levels of the organisation are held accountable for meeting carbon reduction targets.
Questions to ask:
- Have you engaged with the right stakeholders? It might seem obvious, but regularly engage with internal and external stakeholders: employees, customers, suppliers, investors and regulators on ESG and decarbonisation issues. Make sure this is meaningful two-way communication by seeking feedback and input on your ESG performance and impact.
- Are your ESG and decarbonisation targets ‘built in’? Have one singular business strategy, aligning your ESG and decarbonisation objectives with your overall business strategy and purpose, and integrate them into the decision-making and risk management processes across the organisation.
- Is your corporate structure set up for success? Involve the Board of Directors, the Executive Committee, and dedicated ESG or sustainability committees or teams. Ensure clear roles and responsibilities, regular meetings and discussions, and robust reporting and disclosure mechanisms.
4. Remuneration
To incentivise change, decarbonisation-linked remuneration ties executive pay to ESG performance, particularly reducing carbon emissions. This approach ensures leaders are financially motivated to achieve sustainability goals, aligning their personal incentives with the company’s long-term environmental commitments.
Questions to ask:
- Have you developed a clear and comprehensive link between remuneration and decarbonisation targets? Link variable pay of directors, senior executives and employees to the achievement of ESG and decarbonisation objectives and targets, and provide clear and measurable criteria and methods for ESG integration and evaluation. Decarbonisation is a long-term commitment, so consider how annual progress and reviews can meet these broader goals.
- Are incentives meaningful? Include larger incentive structures that champion ESG as a core tenet of remuneration. The current leading standards have 20% or higher remuneration linked to ESG progress and targets.
- Are your wider stakeholders - and shareholders - onboard with your approach? Engage with and disclose to shareholders and other stakeholders on ESG and decarbonisation linked remuneration, and ensure transparency and accountability of your remuneration policies and practices.
5. Sustainability reporting
Effective reporting ensures transparency, accountability, and stakeholder engagement, providing a clear picture of a company's sustainability efforts and outcomes.
Questions to ask:
- Is your reporting comprehensive and regularly disclosed? Cover all relevant aspects of your operations, including Scope 1, 2, and 3 emissions. Reporting should provide detailed information on your carbon footprint, energy consumption, waste management, water usage, and other environmental impacts. In addition, provide regular updates on progress towards decarbonisation goals through annual reports, sustainability reports, and interim updates. This ensures continuous communication and accountability.
- Are you taking a strategic approach to reporting, aligned to relevant frameworks? Align with recognised reporting frameworks and standards such as the Task Force on Climate-related Financial Disclosures (TCFD), Global Reporting Initiative (GRI), and Sustainability Accounting Standards Board (SASB). This ensures consistency, comparability, and credibility of the reported data, as well as demonstrating the value of the progress you’ve made.
- Can you ensure the transparency and accuracy of your data? Provide independent verification or external audits of the reported data to enhance credibility and trust, including assurance statements from reputable firms that validate the accuracy and completeness of the disclosures.
Explore examples from FTSE 100 companies
Sustainability-focused product innovation: Smiths Group
Smiths Group has a number of examples of developing products designed to directly reduce carbon emissions and facilitate the transition to a low-carbon economy.
For example, John Crane, a business of Smiths Group, developed mechanical sealing technology which has been pivotal in preventing the release of millions of tonnes of greenhouse gases (GHG), such as methane, during the transportation and refining of fossil fuels. John Crane's sealing solutions have been awarded contracts for flagship hydrogen projects in Canada and carbon capture and storage (CCS) projects in Malaysia. These projects are critical for the transition to low-carbon energy solutions.
Flex-Tek, another division of Smiths Group, is the largest supplier of back-up electrical heating elements for the North American heat pump market. In FY 2023, Flex-Tek launched Python refrigerant line sets for heat pumps, further expanding its participation in this fast-growing market.
Governance: AstraZeneca
AstraZeneca’s ESG governance structure involves its Board of Directors, its Senior Executive Team, and various committees and functions across the organisation. The Board of Directors is responsible for approving the sustainability strategy and overseeing risk and performance, while the Senior Executive Team develops and implements the strategy. Three Board Committees have authority for specific sustainability-related matters: the Sustainability Committee, the Audit Committee, and the Remuneration Committee.
The company also has an internal Sustainability Steering Committee that monitors key sustainability impacts, risks, and opportunities, and reports to the Board Committees and the Senior Executive Team. The company's Code of Ethics, Global Policy Framework, and OneSHE (Safety, Health and Environment) Framework provide the principles and standards for its sustainability performance and reporting.
The company's ESG governance structure is also aligned with external frameworks and standards, such as the Task Force on Climate-related Financial Disclosures (TCFD), the Global Reporting Initiative (GRI), and the Sustainable Development Goals (SDGs) and has received recognition and awards from various ESG ratings and indices, such as the Dow Jones Sustainability Index, the CDP, and the FTSE4Good Index.
Remuneration: Landsec
Landsec has established a clear and comprehensive link between remuneration and decarbonisation targets, with meaningful incentives that align with leading standards. The company actively engages with its stakeholders and shareholders, ensuring transparency and accountability in its remuneration policies and practices. This approach not only supports Landsec's ESG objectives but also aligns the interests of its executives and employees with long-term sustainable value creation.
Firstly, Landsec has developed a robust link between remuneration and decarbonisation targets, particularly for its CEO, CFO, directors, and business unit managers. For the CEO and CFO, the annual bonus includes specific ESG targets. For the year 2023/24, 20% of the annual bonus was linked to ESG targets, divided equally between energy reduction and development-related carbon reduction targets. The LTIP for senior executives includes a significant portion linked to ESG performance. For the 2021 LTIP awards, 20% was based on the reduction of carbon emissions over the performance period, aligned with Landsec's science-based targets. The 2024 LTIP awards have increased the ESG weighting to 25%, with 15% linked to carbon reduction and 10% to diversity and inclusion targets. The inclusion of diversity and inclusion targets alongside carbon reduction further broadens the scope of ESG considerations.
Landsec has also actively engaged with its stakeholders and shareholders on ESG and decarbonisation-linked remuneration issues, ensuring transparency and accountability. The company consulted with its top 15 shareholders and leading proxy advisers between November 2023 and January 2024 regarding the Directors' Remuneration Policy. The feedback was generally supportive, and the company made adjustments based on this engagement. Additionally, Landsec provides detailed disclosures in its Annual Report, outlining the performance measures, targets, and outcomes related to ESG-linked remuneration. This transparency helps build trust and ensures that stakeholders are informed about the company's progress and commitments.
Methodology
Between August 2023 and August 2024, we analysed publicly available information from across the FTSE 100 to identify and analyse specific decarbonisation initiatives across key actions, including governance, action plans, remuneration, reporting and innovation. From here, we analysed and categorised each company based on internal parameters and graded each company accordingly.
Thanks to Severin Baker for his contribution to this analysis.
