The transportation sector faced numerous challenges when the Task Force on Climate-related Financial Disclosures (TCFD) was first introduced. However, compliance with TCFD recommendations has increased sustainability and profitability for businesses.
Upon the launch of TCFD, the transportation sector grappled with a range of issues:
- High carbon emissions;
- Inefficient fuel consumption;
- Outdated infrastructure.
Additionally, companies faced the challenge of integrating climate-related risk management into their decision-making processes and reporting frameworks.
According to the IPCC’s AR5 (2014) report, the transport sector was accountable for 14% of anthropogenic greenhouse gas (GHG) emissions. Positioning it as the third most substantial contributor after the energy and industrial sectors.
TCFD compliance has driven positive change in the transportation sector. Businesses have become more proactive in mitigating climate-related risks and adopting low-carbon technologies. Moreover, companies have shifted towards cleaner fuels. Investing in energy-efficient infrastructure increased. These actions have reduced their environmental impact and strengthened their market positions.
In principle, embracing TCFD recommendations boosts the sector’s profitability. Companies are integrating climate risk management into their operations, and reporting increases investor confidence. As a result, better access to capital, lower borrowing costs, and higher valuations. Furthermore, businesses experience improved operational efficiency, leading to cost savings and enhanced profitability.
In 2020, the transport sector demonstrated outstanding performance in complying with the Task Force on Climate-related Financial Disclosures (TCFD) recommendations, becoming one of the top-performing sectors. The transport companies attained the second-highest quality score for their disclosures. Among the companies evaluated, 38% reported all TCFD recommendations, and 63% achieved a quality score higher than the overall sector average.
Despite ranking as the second-best-performing sector in 2020, the transport industry exhibited notable variations in quality across different markets.
Approximately one-third of the evaluated companies, according to TCFD compliance, scored below 10% in quality, while some achieved over 50%.
Per the TCFD Status Report 2022, the situation has remained unchanged. Transportation companies continue to exhibit the second-lowest average level of disclosure at 32%, almost twice the rate of companies in the Technology and Media sector (15%).
In 2021, transportation companies predominantly disclosed information in line with Strategy a) and Metrics and Targets c), at 54% and 48%, respectively. The least frequent disclosure was related to Strategy c), with only 12% of companies providing this information. Over the period from 2019 to 2021, the most significant increase in disclosure, amounting to 20 percentage points, was observed in the categories of Strategy a) and Metrics and Targets c).
That is why, starting on January 1, 2024, issuers from previously mentioned industries and those in the materials, buildings, and transportation sectors will be required to comply with mandatory climate-related reporting.
In conclusion, TCFD compliance has contributed to enhanced sustainability and profitability within the transportation sector, yet there is still potential for further growth. Companies can decrease their environmental footprint and boost their financial performance by tackling the sector’s crucial challenges and implementing TCFD recommendations. As TCFD reporting becomes mandatory for transportation businesses in the future, we will likely witness even better outcomes than the previous year.
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