Two thirds of enterprise Net Zero targets lack integrity

Around two-thirds of enterprise Net Zero targets lack integrity, according to a study by the New Climate Institute.

Highlighting the lack of progress, in February 2023 the Carbon Disclosure Project revealed that of the 18,000 organisations that had disclosed climate transition plans, only 0.4 per cent were credible.

In a bid to improve reporting and credibility the Scope 3 Maturity Benchmark has been created by Proxima in collaboration with the Scope 3 Peer Group, a community that includes many of the world’s most recognisable companies who have chosen to work together to advance progress on Scope 3.

The intent was to create a useful tool that could help participating organisations. By getting involved, participants access the collective learnings of the community, who have worked together with Proxima to create a model that reflects their real insights on Scope 3; what they have done, are doing, and plan to do next.

Having built the initial tool, a pilot group of 37 organisations, who employ over 1.2m people and whose revenues total in excess of $700bn, have benchmarked their own maturity.

The new benchmark report summarises the data and findings from this pilot group. It’s not always pretty reading, but it is honest, demonstrating both the scale of the challenge and highlighting why collaboration on “the how” is key to creating a forward-looking plan.

Among the report sample funding set aside in procurement for resources, technology and partners focused on Scope 3 averages around 0.01 per cent of revenues at around $61m across the 37 companies.

However, within the sample 25 per cent of the pilot group had no defined budget set aside for Scope 3 and 75 per cent of total funding was allocated to three organisations, ten per cent of the sample. Within the pilot group, there was some evidence that those that had proportionately greater levels of funding were more likely to be concentrated toward the top quartile of overall performance.

Key observations from the pilot group report include: the top performing elements were organisational, target setting and executive sponsorship, suggesting that organisations are leading with making and communicating Net Zero commitments.

Organisations still struggle with procurement strategy, talent, and supplier management. The gap between what is committed and progress on the ground is stark.

Procurement strategy scored lower than business strategy on 90 per cent of responses. Unsurprisingly, those that performed well on procurement strategy were higher performers overall.

Greater investment in the problem brings greater overall maturity. Those with more significant funding and resource were more likely to be top-quartile performers.

There is a huge disparity between the haves and the have-nots. The top 25 per cent of performers have proportionately twice as much budget and headcount as the remaining 75 per cent.

Industry Collaboration features strongly in the highest performing organizations. The opportunities are there to come together to address Scope 3, and feel the benefits of doing so.

Supplier collaboration and supplier management are low scorers, as are other more structural elements of procurement organisation, people, and process. Are we really mobilising or still at the dialogue stage?

The talent puzzle cannot be solved in the short term without investment. Low scores on talent are compounded by low maturity in training and literacy. Most learning around Scope 3 and development is self/peer learning.

A majority are using no data tools or have built custom spreadsheets. However, an emerging set is beginning to get to grips with the technology ecosystem and is in the early stages of deploying carbon accounting platforms.

There is a solid concentration of scoring around maturity levels of 1-3, with 86 per cent of responses in this range. Only eight per cent of responses were over 3. This means we should be optimistic about the collaboration opportunity and having a pathway to follow.

Across many elements, this progression is the difference between acting on a best-efforts basis and investing and embedding decarbonisation in the DNA of the business. It is a big leap, and success may be contingent on low-scoring procurement elements in people, process, strategy, and supplier engagement.

The three most popular applications of the benchmark so far have been to build roadmaps or business cases and to collaborate with peers on a sector-based view to identify collective priorities and opportunities.