Assessing the transparency and integrity of companies’ emission reduction and net-zero targets
The Corporate Climate Responsibility Monitor, conducted by NewClimate Institute in collaboration with Carbon Market Watch, assesses the climate strategies of 25 major global companies. It critically analyses the extent to which they demonstrate corporate climate leadership.
About the Corporate Climate Responsibility Monitor:
Companies around the world are increasingly alert to the climate emergency, facing calls from a growing range of stakeholders to take responsibility for the environmental impact of their activities. Most large companies now have public climate strategies and targets, many of which include pledges that, on the face of it, appear to significantly reduce, or even eliminate, their contributions to global warming. The rapid acceleration of corporate climate pledges, combined with the fragmentation of approaches means that it is more difficult than ever to distinguish between real climate leadership and unsubstantiated greenwashing. This is compounded by a general lack of regulatory oversight at national and sectoral levels. Identifying and promoting real climate leadership is a key challenge that, where addressed, has the potential to unlock greater global climate change mitigation ambition.
The Corporate Climate Responsibility Monitor evaluates the transparency and integrity of companies’ climate pledges. The objectives of the Corporate Climate Responsibility Monitor are:
- Identify and highlight good practice approaches that can be replicated by other companies, recognising that companies are experimenting to work out what is constructive and credible practice.
- Reveal the extent to which major companies’ climate leadership claims have integrity, and provide a structured methodology for others to replicate such an evaluation.
- Scrutinise the credibility of companies’ plans for offsetting their emissions through carbon dioxide removals or emission reduction credits, recognising that voluntary carbon markets are highly fragmented and there remains a lot of uncertainty on credible good practice.
The Corporate Climate Responsibility Monitor focuses on four main areas of corporate climate action: tracking and disclosure of emissions, setting emission reduction targets , reducing own emissions and taking responsibility for unabated emissions through climate contributions or offsetting. Finally, it evaluates 25 major global companies’ transparency and integrity across these four areas.
The 25 companies assessed in this report are major multinational companies. Their total self-reported GHG emission footprint in 2019 amount to approximately 2.7 GtCO2e. This is equivalent to roughly 5% of global GHG emissions.
Headline pledges are often ambiguous and emission reduction commitments are limited
Net-zero targets aim to reduce the analysed companies’ aggregate emissions by only 40% at most, not 100% as suggested by the term “net-zero”. All of the 25 companies assessed in this report pledge some form of zero-emission, net-zero or carbon-neutral target. But just 3 of the 25 companies – Maersk, Vodafone and Deutsche Telekom – clearly commit to deep decarbonisation of over 90% of their full value chain emissions by their respective net-zero and zero emission target years. At least 5 of the companies only commit to reduce their emissions by less than 15%, often by excluding upstream or downstream emissions. The 13 companies that provide specific details on what their headline net zero pledges mean, commit to reduce their full value chain emissions from 2019 by only 40% on average. The other 12 companies do not accompany their headline pledges with any specific emission reduction commitment for their target year. Collectively, the 25 companies specifically commit to reducing only less than 20% of their 2.7 GtCO2e emission footprint, by their respective headline target years.
Targets for 2030 fall well short of the ambition required to align with the internationally agreed goals of the Paris Agreement and avoid the most damaging effects of climate change. Among the companies we assessed, 15 of the 25 prominently report interim climate targets. However, our analysis finds that the average emission reduction commitment of full value chain emissions between 2019 and 2030 is just 23%.
Demonstrated good practice emission reduction measures must be replicated and scaled up
Companies’ uptake of readily-available emission reduction measures shows little sense of urgency. Good practice examples for target-setting and the implementation of emission reduction measures are demonstrated among our sample of companies for all emission scopes and can be readily replicated by ambitious peers. Yet many of the companies could significantly improve their uptake of ambitious measures to address their climate footprint, especially for their upstream and downstream emissions (scope 3). Scope 3 emissions account on average for 87% of total emissions for the 25 companies assessed in this report, but only 8 of the 25 companies disclosed a moderate level of detail on their plans to address these emissions. Companies could demonstrate their climate leadership by further prioritising climate change objectives and engaging in constructive dialogue to share knowledge on good practices.
A few companies demonstrate leadership with higher quality and innovative approaches for sourcing renewable electricity, but the overall integrity of renewable electricity procurement remains low. Most companies assessed in this report use unbundled renewable energy certificates (RECs) to claim their energy use has limited, or no, climate impact, i.e. they source their electricity from the local regional or national grid, and in addition purchase certificates from renewable energy producers in potentially different locations. Companies use RECs to claim the reduction of their electricity-related emissions, despite the significant limitations of this construct. There are promising signs that companies are starting to understand the nuances of renewable electricity quality, as 6 out of the 25 analysed companies source the majority of their electricity from higher quality power purchase agreements (PPAs) and own-generation. Beyond this, some companies are innovating to find new ways to further improve the integrity of renewable energy procurement.
Offsetting plans are contentious, but climate contributions without neutralisation claims are gaining traction as an alternative approach
Companies’ plans to offset or “neutralise” their emissions are especially contentious. 19 of the 25 companies assessed already know that they will rely on offsetting for their future pledges, and only one company plans explicitly without offsets. At least two-thirds of these companies rely on carbon dioxide removals from forestry and other biological-related carbon sequestration (nature-based solutions) to claim that their emissions in the future are offset, i.e. that the impact to the climate is the same as if the emissions were never released in the first place. But these approaches are unsuitable for individual offsetting claims, because biological carbon storage can be reversed (e.g. when forests are cut and burned) and because there is a global requirement to reduce emissions and increase carbon storage, not one or the other.
The concept of making a contribution to climate change mitigation beyond the company’s value chain without claiming carbon neutrality is gaining traction. Examples identified are however undermined by the modest scale of contributions, or a lack of transparency regarding the objectives of the programmes and potential to use the investments to support offsetting claims in the future. More good practice examples are required to facilitate replication of the climate contribution approach.
Companies will be the innovators that find the solutions to the climate crisis, but they must be subject to scrutiny and regulation
Mitigation of climate change depends on innovation; companies have, and will continue, to play a central role in finding and scaling up solutions for deep decarbonisation. These efforts need urgent acceleration. The findings of this report indicate that regulators should not rely on consumer and shareholder pressure to drive corporate action. Companies must be subject to intense scrutiny to confirm whether their pledges and claims are credible, and should be made accountable in the case that they are not. Truly ambitious corporate actors can be supported by introducing stronger regulation that levels the playing field by ensuring that those ambitious actors are not at an economic disadvantage compared to their less ambitious peers. Regulators and standard-setting initiatives must find ways to distinguish and segregate climate leadership from greenwashing, to support ambitious actors to innovate and accelerate decarbonisation.
The Corporate Climate Responsibility Monitor will be an annual publication.
You can find a recording of the virutal press launch on 7 February 2022 here.