Large companies are failing in good practice climate leadership

climate leadership

The majority of large companies analysed in a new report are failing in good practice climate leadership, according to Carbon Market Watch.

The 2023 Corporate Climate Responsibility Monitor found the climate strategies of 15 of the 24 largest companies to be of low or very low integrity and that most of the companies’ strategies do not represent examples of good practice climate leadership.

Companies’ climate change commitments do not match what their pledges might suggest. Their combined emission reduction commitments are wholly insufficient to align with 1.5°C-compatible decarbonisation trajectories; targets and potential offsetting plans remain ambiguous; and the exclusion of emission scopes severely undermines the targets of several companies.

The integrity of emissions disclosure practices is more encouraging, the report says, with most companies’ disclosures having at least a moderate level of transparency. The report also found examples of companies with credible decarbonisation commitments and companies taking proactive and innovative action to reduce GHG emissions, but these good practice examples represent a minority. The report identified limited progress in the transparency or integrity of companies’ climate strategies over the past year.

Since the publication of the 2022 Corporate Climate Responsibility Monitor, there have been a number of important developments in the guidelines and governance of corporate climate strategies: the Science Based Targets initiative’s (SBTi) Net Zero Standard entered a new phase of implementation, a UN-convened high-level expert group (HLEG) published recommendations for credible corporate climate targets, while the International Standards Organisation published guidelines for net-zero targets.

Yet, for the ten companies also analysed in the previous Corporate Climate Responsibility Monitor the report identified only limited signs of improvement in the transparency or integrity of some companies’ strategies, while many of the key issues previously highlighted persist.

Companies’ 2030 targets cannot be taken at face value. Nearly all the 24 companies assessed have pledged 2030 targets, but these targets can rarely be taken at face value.

For many companies, 2030 targets address only a limited scope of emission sources, such as only direct emissions (scope 1) or emissions from procured energy (scope 2) and only selected other indirect emission categories (scope 3). Scope 3 emissions account for over 90 per cent of the GHG emission footprints for most of the companies assessed.

For others, 2030 targets are misleading due to reliance on offsetting. Climate pledges for 2030 fall well short of the economy-wide emission reductions required to stay below the 1.5°C temperature limit.

For the 22 companies with targets for 2030, these targets translate to a median absolute emission reduction commitment of just 15 per cent of the full value chain emissions between 2019 and 2030. This may increase to 21 per cent under the most optimistic scenario that emission intensity targets translate to equivalent absolute emission reductions. This compares to the need to cut global GHG and CO2 emissions by 43 per cent and 48 per cent between 2019 and 2030 respectively.

Third-party certifications lend credibility to companies whose targets are highly insufficient. The SBTi has certified the 2030 targets of 16 of the 24 companies included in the analysis and another five companies are listed on SBTi’s website as ‘committed’ to science-based targets for 2030. Most of these companies highlight their SBTi certifications in their climate-related communications as well as in litigation processes, to defend targets that are highly insufficient and sometimes misleading.

The Carbon Market Watch report found the majority of these companies’ 2030 targets to be of poor integrity, due to them not meeting the 1.5°C compatible benchmarks that scientific and grey literature provide, such as from SBTi’s own methodologies. It is clear that more must be done by large organisations to demonstrate climate leadership.

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