Four out of five European companies are not cutting their carbon emissions at the pace or scale necessary to meet the EU’s climate targets, according to a report released Tuesday. The cost of adaptation is one factor holding back businesses, despite 20 percent expecting to lose customers to more climate-friendly competitors, the report by non-profit Carbon Disclosure Project (CDP) and management consulting firm Oliver Wyman found.

While many firms have adopted transitions plans they "are struggling to change their business models at the pace and scale required," James Davis, partner at Oliver Wyman, said in a statement.

A key challenge, he added, is "green business models are typically less attractive and riskier than the existing ones they seek to replace."

Insufficient investment

But to meet the EU’s targets to cut emissions by 55 percent by 2030 compared to 1990 levels "the need to significantly accelerate efforts could not be clearer", the report stated. Its findings were based on an analysis of 1,600 European companies, including those in the United Kingdom, representing 89 percent of the continent’s market capitalisation.

Insufficient investment, including access to capital, was the main hindrance to a more rapid transition. Less than a quarter of capital expenditure was being dedicated to projects aligned with their transition plan or European criteria for the environmental performance of economic activities within the bloc.

More targeted public policies

At the same time, "government policy has not yet shifted the economic landscape decisively enough in favour of greener products and services" and could offer more support to certain sectors, the report said.

For European electricity companies already facing a shortfall in funding to replace oil and coal generation with renewables "this investment gap would widen to 285 billion euros by 2030".

Greater collaboration across the financial sector was needed to spread risk between the many players from banks to philanthropic organisations involved in the green transition, the report said.