World’s largest companies promise much more climate action than they deliver

Large companies emphasize intentions to reduce carbon emissions to net zero, but according to the results of the latest analysis of corporate climate responsibility, 25 of the biggest ones in the world are on a path of reducing only 40% on average, far below the 100% claims. One of the conclusions was that major firms largely fail a net zero climate pledge test.

The Corporate Climate Responsibility Monitor, conducted by the NewClimate Institute in collaboration with Carbon Market Watch, included 25 companies that are among the largest in the world and operate in a variety of sectors and geographic areas – to determine the transparency and integrity of their climate pledges.

Ambitious claims too often lack substance and can mislead both consumers and regulators, according to the analysis

Thomas Day of the NewClimate Institute, lead author of the study, believes that due to growing pressure on companies to respond to climate change, their ambitious headline claims too often lack substance. It can further mislead both consumers and regulators, which are core to guiding the strategic direction of the business, says Day.

He stressed the intention was to uncover as many replicable good practices as possible, but that the team was surprised and disappointed with the results of the analysis, and the overall integrity of the companies’ claims. Day adds that even companies that work relatively well exaggerate their actions.

Corporate integrity and net-zero emissions

The net zero pledge of only one company received a grade of reasonable integrity. The pledges of three others have moderate integrity. Ten have weak integrity and the remaining 12 very poor integrity.

For some of the companies, their main pledges serve as a long-term vision that is supported by specific short-term emission reduction goals, the analysis reveals. Although none of the promises have a high degree of integrity overall, Maersk is in the first place, with a pledge having reasonable integrity, followed by Apple, Sony, and Vodafone with moderate integrity.

The companies’ pledges have been undermined by contentious plans to reduce emissions elsewhere, hidden critical information, and accounting tricks

The authors point out that most companies fail to set and pursue ambitious goals when it comes to striving for carbon neutrality. According to the document, many pledges have been undermined by continuous plans to reduce emissions elsewhere, hidden critical information, and accounting tricks.

The results show the headline pledges of Amazon, Deutsche Telekom, Enel, GlaxoSmithKline, Google, Hitachi, IKEA, Vale, Volkswagen, and Walmart to meet climate goals have low integrity, while Accenture, BMW Group, Carrefour, CVS Health, Deutsche Post DHL, E.ON SE, JBS, Nestlé, Novartis, Saint-Gobain, and Unilever received a rating of very low integrity from the NewClimate Institute.

Criteria for analyzing corporate responsibility

The Corporate Climate Responsibility Monitor, published by the NewClimate Institute and Carbon Market Watch, provides an assessment based on methodology and criteria on how transparent companies were in target setting and corporate reporting. It includes their climate goals, the number of carbon offsets they plan to use, and their reliability, as well as progress in reducing their emissions.

Assessments are made for companies that have committed to high-profile climate change mitigation pledges

Assessments are made only for companies that had committed to high-profile climate change mitigation pledges within some of the major corporate climate action networks and initiatives, the authors explained. To gain insight from several geographical areas and sectors, the choice is limited to two companies per sector of the economy and a maximum of five companies from one country, the authors said.

Promises and obligations

The headline climate pledges of the companies require detailed evaluation and in the majority of the cases they cannot be taken at face value, says Sybrig Smith, a climate policy analyst at the NewClimate Institute.

The key finding is that companies’ net zero pledges are not what they may seem, says the lead author of the analysis

“The key finding is that companies’ net zero pledges are not what they may seem. We found that the headline pledges of 25 of the world’s largest companies in reality only commit to reducing emissions by 40% on average, not 100% as suggested by the terms ‘net zero’ and ‘carbon neutral’,” Thomas Day asserted.

The headline pledges of only three of the 25 companies would result in a 90% reduction in emissions throughout their value chain: Maersk, Vodafone and Deutsche Telekom.

Thirteen companies have explicitly committed to reducing emissions throughout their value chain. The reduction should average only about 40% from 2019 to the target year. The other 12 companies did not commit to specific emissions reduction by their target year.

In 2019, the total emissions of the monitored companies accounted for 5% of global greenhouse gas emissions.

On average, the 25 companies specifically commit to reducing only about 20% of their emission footprint by their target year, against a combined 2.7 gigatons of carbon dioxide equivalent (GtCO2e) from 2019, the corporate monitor revealed. It is equivalent to roughly 5% of global greenhouse gas emissions.

Reliance on carbon offsets also undermines integrity, and 24 out of 25 companies are likely to rely on such carbon credits of varying quality, according to the analysis.

With ambitious goals, short-term actions are needed

“Misleading advertisements by companies have real impacts on consumers and policymakers. We’re fooled into believing that these companies are taking sufficient action when the reality is far from it,” said Gilles Dufrasne from Carbon Market Watch.

He pointed out such practices would continue without additional regulations and that it is necessary for governments and regulatory bodies to get involved and put an end to the greenwashing trend.

“Countries have shown that we need a fresh start when adopting the Paris Agreement, and companies need to reflect this in their own actions,” Dufrasne said.

Examples of climate leadership have also been identified in the analysis. Google is developing innovative tools for renewable energy sources, while Maersk and Deutsche Post are investing heavily in decarbonization technologies.

Regulators in companies, as well as standards-setting initiatives, must find ways to differentiate and separate climate leadership from greenwashing

There is still great potential for companies to expand their best climate practices, the authors say. They underscored that regulators in companies, as well as standards-setting initiatives, must find ways to differentiate and separate climate leadership from greenwashing, as well as to support ambitious innovation and accelerate decarbonization.

Conference in Serbia

What awaits the economy and companies operating in Serbia amid the global economic transformation, the challenges of climate change, and energy transition will be the topics of upcoming conference Serbian companies on the changing power market. The event will be held on February 22 in Belgrade, organized by Balkan Green Energy News.