Corporate net-zero targets continue to boom, but more integrity ‘urgently’ needed

The Net Zero tracker, which released its latest analysis today (6 November), found that the number of corporate net-zero targets has risen by more than 40% in 16 months, from 700 in June 2022 to 1,003.

Combined, the firms with net-zero targets in place have an annual aggregate revenue of around $27trn.

While the Net Zero Tracker welcomes the jump in corporate net-zero targets, it does warn that targets need to be more ambitious.

The Tracker found that only 37% of corporate net zero targets fully cover Scope 3 emissions and just 13% specify quality conditions under which any offsets would be used. The Tracker warns that this signals an overreliance on low quality offset credits, rather than emissions reductions.

The headline trend from the latest Tracker is that corporate net-zero targets are progressing on quantity, but that the integrity of mitigation targets and ambitions regarding Scope 3 should “urgently improve”.

The Net Zero Tracker’s project lead John Lang said: “A clear line in the sand on net zero has surfaced. Countless net zero targets are credibility light, but now we can say for certain that most of the world’s largest listed companies are on the right side of the line on net zero intent.

“With credible net zero target-setting a proxy for forward-thinking, future-proofing companies, it begs a simple question: are the firms we’re investing in, working for and buying from on the right or wrong side of the line?”

Additionally, only 4% of companies with net-zero targets would comply with the revised ‘Starting Line criteria’, set out in June 2022 by the UN Race to Zero campaign.

Race to Zero’s new criteria requires all members to “phase down and out all unabated fossil fuels as part of a just transition”. Major fossil fuel firms themselves have always been barred from participating, but the new requirement applies to all members, including businesses with minority activities in the sector or which are providing financial or other support to the sector. Race to Zero states that this change serves to make explicit the standards to which it has always sought to uphold.

UK efforts

The Tracker also analysed the net-zero targets set by firms based in the UK.

It found that 72 out of the 77 UK-based companies on the Forbes 2000 list have set net-zero targets, while only two do not have any mitigation or climate targets in place.

The Tracker notes that the UK has suffered from the delayed implementation of its Net-Zero Strategy.

Prime Minister Rishis Sunak recently confirmed a five-year delay on the ban on new petrol and diesel car sales. This was set for 2030 under Boris Johnson but will now be amended to 2035. This is aligned with the dates in the EU and many US states. Additionally, Sunak moved a ban on oil boilers in off-grid homes, initially set for 2026, to 2035. A wider plan to phase out 100% of domestic gas boilers by 2035 has also been weakened to 80%. See the full announcements from Sunak’s net-zero bonfire here.

Commenting on the Tracker, Chris Skidmore MP, chairman of the UK Net Zero Review, said:

“The bulk of the UK’s largest businesses are committed to net zero – and are planning and investing to capture the opportunities of the transition. Having signed Net Zero into law four years ago, it’s remarkable that such progress has been made.

“However, the recent stop-start approach to policy is putting business investment at risk and undermining investor confidence. Now is the time for the UK to press this advantage by accelerating policies to support the engines of our economy to deliver on net zero.”

The Tracker’s June iteration recently found that only 4% of the targets set by Forbes Global 2000 companies would meet the minimum requirements for alignment with the UN-backed Race to Zero Campaign. These requirements were updated last year. They include things like not over-relying on carbon offsetting, having a clear investment plan, having science-based 2030 goals and not lobbying against progressive green policy.

A common pitfall is the exclusion of Scope 3 (indirect) emissions from the scope of targets. Less than four in ten of the businesses assessed have targets that fully cover Scope 3 emissions. This is concerning, as most large businesses will see the bulk of their climate footprint occurring indirectly.

The Net Zero Tracker’s methodology for assessing climate commitments supports the UN Secretary-General’s High Level Expert Group (HLEG)’s guidance on ensuring the credibility and accountability of net zero pledges by non-state entities.