The corporate climate pledges of 24 of the worlds’ largest ‘climate leader’ companies are misleading and their strategies insufficient. Long-term net-zero pledges distract from the fact that climate pledges for 2030 go less than halfway to what is required to stay below the 1.5°C temperature limit.
The second edition of the Corporate Climate Responsibility Monitor assesses the integrity of the climate strategies of 24 major global companies that are prominently highlighting their climate leadership credentials. As in 2022, Maersk is the only company whose climate strategy integrity is rated as reasonable by the report. It found the strategies of eight companies – Apple, ArcelorMittal, Google, H&M Group, Holcim, Microsoft, Stellantis and Thyssenkrupp – to have a moderate level of integrity, while the remaining fifteen companies have low or very low integrity.
Lack of progress
Demonstrating a general lack of progress since the first iteration of the Corporate Climate Responsibility Monitor was published one year ago, long-term net-zero climate pledges made by companies remain ambiguous and serve to distract from the urgent need to cut emissions this decade. In aggregate, the companies covered by our in-depth assessment commit to reduce just 15% of their full value chain emissions by 2030, or up to 21% under the most optimistic interpretation of their pledges. This goes less than halfway to the 43% reduction in greenhouse gases we need to deliver at the global level to limit temperature rise to around 1.5°C. One of the report’s authors, Thomas Day of NewClimate Institute, said:
“In this critical decade for climate action, companies’ current plans do not reflect the necessary urgency for emission reductions. Regulators, voluntary initiatives and companies must place a renewed and urgent focus on the integrity of companies’ emission reduction plans up to 2030. The discourse on longer-term net zero should not distract from the immediate task at hand.”
Corporate climate pledges misleading beyond 2030
Beyond 2030, the net-zero pledges of these 24 companies touting their climate credentials are often misleading. They all claim to be on a pathway to ‘net zero’ or ‘climate neutrality’, which most observers would understand as a commitment to deep decarbonisation towards near-zero emissions. Consensus in the scientific community – reflected in the likes of the SBTi Net Zero Standard and ISO Net Zero Guidelines – shows that delivering global ‘net zero’ requires cuts in today’s emissions levels of at least 90%, or 95%, for most sectors.
But the commitments made by the companies reviewed amount to just a 36% reduction in their combined GHG emission footprint, by their respective net-zero target years. This demonstrates a huge chasm between what the companies are currently committing to and what is needed to avert the most damaging impacts of climate change.
Real climate leaders are struggling to distinguish themselves from those making much more modest commitments. A small minority of companies – including Maersk and Stellantis – are making potentially credible commitments for deep decarbonisation towards 2030 and beyond. But these companies are put on the same pedestal as others – including American Airlines, Carrefour, Deutsche Post DHL, Fast Retailing (Uniqlo), Inditex (Zara), Nestlé, PepsiCo, Volkswagen and Walmart – who make similar claims and also prominently refer to their SBTi certifications to defend climate strategies that actually amount to very limited levels of emission reduction commitments.
Many of the underlying issues that were identified one year ago remain unaddressed: Carrefour still appears to exclude over 80% of its branded stores from its targets; Nestlé’s “50% by 2030” target actually translates to a commitment to reduce its full value chain emissions by just 16-21% due to the exclusion of some emission sources and contentious offset plans.
Offsetting undermines targets
A key concern is that offsetting practices – under various terminologies – are undermining targets and misleading consumers. Half of the companies that were assessed – including Apple, Deutsche Post DHL, Google and Microsoft – make carbon neutrality claims today, but these claims only cover 3% of those companies’ emissions on average. The vast majority of emission sources are excluded from these claims, but this critical information is not clear in the marketing materials displayed to consumers. At least three quarters of the companies assessed plan to heavily rely on offsetting through forestry and land-use related projects in the future.
This is problematic for two key reasons: the non-permanence of biogenic carbon storage makes such projects fundamentally unsuitable for offsetting emissions; and the scale of carbon credit demand implied by these companies’ plans would require the resources of 2-4 planet Earth’s, if followed by others.
There is traction for transitioning away from offsetting claims towards the use of carbon credits for climate contributions.
“By making such outlandish carbon neutrality claims, these corporations are not only misleading consumers and investors, but they are also exposing themselves to increasing legal and reputational liability” said Lindsay Otis, policy expert on carbon markets at Carbon Market Watch. “Instead, they should implement ambitious climate plans to reduce their own emissions, while financing action outside of their own activities, without claiming that this makes them carbon neutral.”
Some companies are demonstrating climate leadership by innovating to transform their sectors, according to the Corporate Climate Responsibility Monitor. These include, for instance, Maersk, which invests in alternative fuels and vessels; Google, which is pioneering 24/7 monitoring and matching renewable energy generation with consumption; Deutsche Post DHL, which invests in electrifying its fleet and scaling-up the production of low-carbon fuels for road, ocean and air transport; and Apple, who are taking measures to make high quality renewable energy procurement options more accessible for their suppliers, as well as implementing measures to extend the lifetimes of devices.
But most companies in the Corporate Climate Responsibility Monitor present measures that focus on incremental improvements at best, shying away from the necessary sector transformations. Plans to install rooftop PV, or energy efficiency improvements, for example, are welcome. Yet these alone are not nearly sufficient in sectors where 1.5°C-aligned trajectories require more transformative changes. The largest and most influential companies in the world must take the necessary steps to accompany the bold claims that they are making and understand the time has lapsed for marginal first steps.
The analysis indicates that regulators, voluntary standard-setting initiatives and companies need to urgently re-appraise their approach to align with the 1.5°C temperature limit. Recent publications from the UN High-Level Expert Group and the International Standards Organisation demonstrate a converging consensus on what constitutes good corporate climate responsibility practice. Through the EU Corporate Sustainability Reporting Directive, we saw the first signs of this consensus finding its way into legislation, though it remains to be seen how such regulation will be applied.