The climate crisis has reached a critical juncture. While global temperatures soar to unprecedented levels, major corporations are quietly abandoning the very climate commitments they once championed. This alarming trend, exemplified by industry giants, reveals a fundamental flaw in voluntary climate action and underscores the urgent need for mandatory climate transition plans under the European Union’s ESRS E1 framework.
Record-breaking temperatures signal climate emergency
The year 2024 marked a watershed moment in climate science, with global average surface temperatures reaching the highest levels since record-keeping began in 1880. NASA scientists confirmed that Earth’s surface temperature was 1.28 degrees Celsius (2.30 degrees Fahrenheit) above the 20th-century baseline, surpassing the previous record set in 2023.
The data reveals an even more sobering reality: Earth in 2024 was approximately 1.47 degrees Celsius (2.65 degrees Fahrenheit) warmer than the mid-19th century average, with temperatures exceeding 1.5 degrees Celsius above baseline for more than half the year. According to the Indicators of Global Climate Change report published in June 2025, the best estimate shows a rise of 1.52°C above pre-industrial levels, of which human activity contributed around 1.36°C.
Source: Indicators of Global Climate Change 2024: annual update of key indicators of the state of the climate system and human influence, Forster et al.
Failure of voluntary climate action
Against this backdrop of escalating climate impacts, a troubling pattern has emerged among the world’s largest corporations. More than 4,000 companies made climate pledges in recent decades, but many are now abandoning or weakening those goals, especially in markets where regulatory pressure has eased.
The widespread abandonment of climate pledges reveals a fundamental truth: Voluntary corporate climate action is insufficient to address the scale and urgency of the climate crisis. Furthermore, research by the NewClimate Institute examining 25 major companies found that even those with ambitious-sounding net-zero pledges have collectively committed to reduce emissions by only about 40%, not the 100% that consumers might expect.
This highlights the need for regulatory intervention to ensure climate action.
ESRS E1: The solution through mandatory transition plans
The European Union’s Corporate Sustainability Reporting Directive (CSRD) and its European Sustainability Reporting Standards (ESRS) represent a crucial step toward mandatory climate accountability. ESRS E1, specifically focused on climate change, requires companies to disclose comprehensive climate transition plans that demonstrate how their business model and strategy align with limiting global warming to 1.5°C.
ESRS E1-1 mandates that companies disclose their transition plan for climate change mitigation, including:
- Decarbonization strategy and quantified reduction measure: Identification of key actions planned, quantified carbon reduction measures including changes in product and service portfolios and adoption of new technologies.
- Climate targets: An explanation of whether the company’s targets are compatible with limiting global warming to 1.5°C in line with the Paris Agreement.
- Investment commitment: Quantification of investments and funding to leverage key reduction actions and supporting the transition plan implementation.
- Integration with business strategy: Demonstration of how the transition plan is embedded in overall business strategy and financial planning.
The standard also requires companies that do not have a transition plan to indicate whether and when they will adopt one. This mandatory approach addresses the accountability gap that has allowed companies to abandon voluntary commitments without consequence.
Benefits of corporate climate transition plans
Evidence-based climate transition plans provide multiple benefits that extend beyond regulatory compliance:
- Financial advantages: Top environmental performers in Europe historically secured an average 100 basis points WACC discount, while over 50% of investors plan to boost sustainable investments.
- Competitive positioning: Companies with robust transition plans can stay ahead of competitors and secure green advantages with increasingly sustainability-conscious customers.
- Risk management: Transition plans are crucial for companies to anticipate and adapt to physical and transition risks induced by climate change.
- Talent attraction: 40% of talent now puts sustainability as a primary job selection driver.
Conclusion: From voluntary promises to mandatory action
The spectacular failure of voluntary corporate climate commitments, combined with accelerating climate impacts, has created a critical moment for climate policy. The retreat of major corporations from their climate pledges while global temperatures reach record highs demonstrates that voluntary action alone cannot deliver the transformation needed to avoid catastrophic climate change.
ESRS E1’s transition plan requirements move companies from voluntary promises to enforceable action. B By requiring climate targets aligned with a 2050 net-zero goal, decarbonization strategies, and integration with business planning, these standards provide the accountability that voluntary commitments have failed to deliver.
As NASA Administrator Bill Nelson observed: “Between record breaking temperatures and wildfires currently threatening our centers and workforce in California, it has never been more important to understand our changing planet”. The time for optional climate action has passed. Mandatory transition plans under ESRS E1 are not just regulatory requirements—they are essential tools for corporate accountability in the fight against climate change.
The choice is clear: we can no longer rely on the failed model of voluntary corporate promises. We must embrace the mandatory framework provided by ESRS E1 to ensure that climate commitments translate into real, measurable action.
Contact Sphera today for expert support in successfully developing quantified climate transition plans.
