One-fifth of world’s largest corporates have set net-zero targets

The report aims to quantify how robust a net-zero target is by whether it meets the criteria set out by the UN Race to Zero Campaign

That is the key finding from a new report by the Energy and Climate Intelligence Unit (ECIU) and Oxford Net Zero. The research found that 21% of the world’s largest 2,000 public companies, that account for sales of almost $14trn, have set net-zero commitments.

While the commitments are welcome, the report warns that companies risk facing allegations of greenwashing if they don’t build on net-zero commitments with robust governance, transparency and reporting mechanisms.

The report found that the majority of the companies that have set net-zero targets have also set interim targets, while a little over a quarter meet the report’s ‘robustness criteria’.

The ECIU’s senior associate Richard Black said: “Although net zero as a concept is still in its infancy, it is already driving policy change. Clearly though, to keep the world on track to global climate targets we need more countries, states, regions and companies to sign up to targets and existing pledges to be improved.

“There is logic to setting a target and then building a plan and reporting mechanisms to meet that, but companies and countries alike will need to make progress on this in the run-up to COP. Countries such as Japan and the US will need to back their net-zero ambitions with nearer-term 2030 emissions targets.”

The report aims to quantify how robust a net-zero target is by whether it meets the criteria set out by the UN Race to Zero Campaign. Already, 20% of existing net-zero targets meet the starting point for these criteria. However, the report calls on more to be done at a corporate level in the build-up to COP26.

Additionally, the report notes that 124 countries now committed to or considering net-zero, meaning that 61% of global emissions, 52% of the population and 68% of global GDP are covered by said targets. This is up from 49% last year.

Co-author Kate Cullen, net-zero policy researcher at the University of Oxford, said: “Setting targets is the first step and these must be used as the starting point for how countries, states and companies develop detailed emissions reductions plans, particularly in the short term.

“Work like this is therefore of vital importance in helping to set a baseline for net-zero targets globally so that it is possible to better track and measure these, and also to help develop criteria for measuring how robust plans are. Net-zero is already a useful lens through which to view progress on climate change; robust monitoring, evaluation and assessment will help improve it.”

Climate Action 100+

The news comes as Climate Action 100+, the world’s largest investor engagement initiative on climate change representing investors worth $54trn in assets, has also released a new benchmark evaluating how corporates are approaching the net-zero transition.

The Climate Action 100+ Net-Zero Company Benchmark outlines the key indicators for strong net-zero strategies, based on the materiality of emissions, short and medium-term targets, links to boardroom performance and approaches to spending.

The Benchmark found that none of the companies assessed performed strongly across nine key indicators. Indeed, not one company has fully disclosed how it will reach net-zero by 2050 or sooner, which includes intermediate targets within the next decade.

Overall, 52 % of the companies assessed have set net-zero targets, but just half of these cover the full scope of the company’s emissions. More worryingly, just six of the 160+ companies analysed have committed to aligning capital expenditure with net-zero.

More promisingly, 87% of the companies have board-level engagement on climate change, by just one third have tied executive remuneration directly to the company’s emission reduction targets.

Almost three-quarters of the companies have committed to aligning with the Task Force for Climate-related Financial Disclosures (TCFD) recommendations. However, only 10% use climate-scenario planning that includes the 1.5-degrees Celsius scenario and encompasses the entire company.

Rebecca Mikula-Wight, Asia Investor Group on Climate Change (AIGCC), Executive Director and Climate Action 100+ Steering Committee member, said: “The growth of Climate Action 100+ in Asia has been remarkable and is symbolic of the strong willingness of investors across the region to work constructively with companies to help them reduce emissions and accelerate the transition to net-zero.

“While the Net Zero Company Benchmark results show some good progress across Asian markets, we expect that greater progress can be made this year as companies respond to the increasingly strong climate policy signals from national governments in the region.”

Matt Mace