The world’s top polluting companies are not placing meaningful actions or strategies behind their net-zero commitments, according to the latest assessment from Climate Action 100+.
The group of 700 investors with over $68 trillion in assets under management monitors the top 166 global companies that are responsible for 80 percent of global corporate greenhouse gas emissions. According to its most recent report, the vast majority of the focus companies’ net-zero announcements are not accompanied by decarbonization strategies or any meaningful change to business practices.
The report found that 75 percent of the world’s top polluting companies have made commitments to achieve net-zero by 2050 or sooner, up from 69 percent in a March 2022 assessment, but only half of those companies include critical Scope 3 emissions in their net-zero plans. Scope 3 emissions are important to understanding actual impact, because Scope 3 emissions include a company's entire value chain and are, for most industries, the largest category of emissions.
Additionally, only 20 percent of the companies analyzed have set medium-term emissions reduction targets that cover all scopes and that align with a 1.5 degrees Celsius warming scenario. Only 10 percent of the companies have established short-term emissions reductions targets that align with that 1.5-degree limit, which scientists agree is critical to avoid the worst impacts of climate change.
“Companies are making net-zero commitments, but investors want those companies to turn intentions into concrete short- and medium-term actions to provide the confidence they can get to net-zero,” said Rebecca Mikula-Wright, CEO of AIGCC and IGCC and current vice-chair of the Climate Action 100+ steering committee, in a statement. Only 19 percent of companies have created quantified decarbonization strategies. Additionally, the assessment found that many of the companies' climate engagement tactics and trade association affiliations impede the creation of a robust climate policy.
The new assessment from Climate Action 100+ comes on the heels of a different review from nonprofit Carbon Tracker that found 98 percent of high-emissions companies did not adequately report effects from climate-related risks and net-zero emissions plans into their financial statements, keeping essential decision-making information from investors.
“Of the 107 companies that we reviewed, over 70 percent did not indicate that they had considered climate matters when preparing their 2020 financial statements," Carbon Tracker found. "This is despite the fact that significant institutional investors have identified these companies as highly carbon exposed, and most are included among the Climate Action 100+ investor focus list.”
Carbon Tracker also noted that auditors responsible for assessing the financial statements of the companies in question did not adequately consider climate-related risk or potential effects from net-zero commitments.
The Climate Action 100+ assessment highlighted some of the key failures of specific industries. Only 17 percent of automobile companies are on track to produce enough electric cars to meet net-zero by 2050 commitments. No companies in the steel, aviation or cement industries are in line with scenarios that limit warming to below 2 degrees Celsius. Less than a third of electric utilities have coal phase-out plans aligned with limiting warming to less than 2 degrees Celsius, and 94 percent of these utility companies do not have plans to build out renewable power capacity. At current emission intensities, the global warming pathway of the utilities in focus is greater than 2.7 degrees Celsius.
While the report notes that an increasing number of companies are making climate disclosures and net-zero commitments, the number of companies that are aligning their actions and strategies to their public statements remains low. Without relevant, transparent interim targets on their journey to net-zero and appropriate climate-related financial disclosures, investors and consumers will not be able to hold the biggest corporate polluters accountable. Companies must grow the speed and scale of their decarbonization process to keep the goal of limiting warming to 1.5 degree Celsius alive.
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Mary Riddle is a writer and sustainability consultant based in Florence, Italy. As a former farmer and farm educator, she is passionate about regenerative agriculture and sustainable food systems. Currently, she and her husband also own and operate Italy in Season, a subscription box company with a mission to support small-scale Italian artisans and traditional craftsmanship.