Report: Net-zero targets from corporates becoming more 'genuine'
An analysis of the climate commitments of 401 companies has found that the uptake of "genuine" net-zero targets - those regarded as ambitious and not greenwashing - has more than doubled in the past year.
The analysis was undertaken by the Transition Pathway Initiative (TPI) – a coalition of more than 100 asset managers and owners – with results published in the organisations latest annual ‘State of Transition’ report.
It covers 401 large businesses in the energy, transport, consumer goods and industrials and materials sectors, collectively representing 16% of the global market, assessing the state of their climate commitments and progress to date.
In the 2020 edition of the report, just 14 businesses were classed as having ‘genuine’ net-zero targets. This edition shows that this number has more than doubled to 35, with net target-setters including Enel and Volkswagen, which have both faced climate campaigners in the recent past.
The TPI classes net-zero commitments as ‘genuine’ when they include all of the most material emissions from a company, including Scope 3 (indirect) sources; when they are backed up with ambitious intermediate targets and when they have deadlines of 2040 or sooner. On this latter point, the TPI emphasises the fact that the Intergovernmental Panel on Climate Change (IPCC) cites 2050 as the latest acceptable net-zero deadline to have the best chance of delivering the Paris Agreement’s 1.5C pathway.
Firms named as ‘leaders’ include ArcelorMittal, National Grid, Orsted, Rio Tinto and Cemex. Saudi Aramco is named as the worst laggard. Other firms falling short of the Paris Agreement include SAIC Motor, Phillips 66 and EasyJet.
Beyond net-zero targets themselves, the report assesses the extent to which businesses are measuring and managing the risks and opportunities of the low-carbon transition. It asks whether they are disclosing risk in line with the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and whether the low-carbon transition is embedded in governance and business strategies.
With these factors in mind, the report concludes that the average corporation has begun “building capacity on climate change” in terms on things like internal skills and developing long-term targets. However, it is yet to truly integrate climate risks and low-carbon opportunities into decision-making at the operational level.
TPI chair Adam Matthews, also the Church of England Pensions Board’s chief responsible investment officer, said that improvements are “significant” but that the proportion of firms leading on climate action “needs to expand rapidly”.
He said: “As we enter the ‘decade of transition’, having only 17% of companies with credible net-zero commitments is not enough. As investors, we need to work with companies to ensure that they are aligned with a pathway to keep global warming at 1.5C.
“Equity and debt investors can now clearly identify those companies who are serious about taking action on climate change and those that are not."
Jargon or genuine?
The publication of the report comes after separate research from sustainability consultancy South Pole, covering 120 businesses, found that just one in ten with net-zero targets have set science-based emissions targets in the interim.
Similarly, a 2020 survey of energy managers at 104 organisations by Inspired Energy found that two-thirds are concerned about climate jargon. Almost nine in ten respondents said that ‘net zero’ is in danger of becoming a meaningless statement unless there’s consistency in approach and measurement among businesses.
Demands are mounting for policymakers in nations with net-zero targets to outline what is entailed for businesses and how the private sector will be supported. Here in the UK, the Government is expected to publish a full net-zero plan covering all key emitting sectors ahead of COP26. Work on roadmaps for certain sectors, including transport, heat and buildings, was delayed last year amid Covid-19.