With corporate climate neutrality claims derided by some as the ‘new world peace’, Mike Scott reports on efforts to call out greenwash and promote scientifically credible action
Sustainability has a new buzz word. Over the past year, companies in sectors ranging from cement to steel, from aviation to oil and gas, have announced they plan to become “net-zero”, usually by 2050. “Net-zero targets are the new ‘world peace’,” says Johan Frijns, director of the NGO BankTrack. “Everyone wants it, but what does it mean?”
The net-zero movement has blown up very quickly, in part because of increased concern from consumers and investors, but mostly because of the 2018 IPCC report, says Thomas Day, a partner at the NewClimate Institute.
In 2018, the Intergovernmental Panel on Climate Change published a report on the impacts of global warming above 1.5C, which warned that to limit average temperature rises to 1.5C above pre-industrial times, net global CO2 emissions need to come down by about 45% from 2010 levels by 2030 and reach “net-zero” by around 2050.
Sub-national governments and corporates have responded with some agility and net-zero has really started to fly
“It became clear that this was the way we were heading,” says Day. “If you look at the momentum, it has suddenly gone through the roof. Sub-national governments and corporates have responded with some agility and net-zero has really started to fly. As soon as one company goes for this, the others follow suit.”
The number of net-zero pledges from cities regions and companies has roughly doubled in less than a year since late 2019. As of October, they cover at least 826 cities, 103 regions, and 1,565 companies across all continents, according to a report from the NewClimate Institute.
Even companies in emissions-intensive and hard-to-abate industries, such as fossil fuels, materials and transportation services, are setting ambitious targets, the institute says.
The problem is that implementation has yet to follow suit, the NewClimate Institute points out. “Only a limited number of subnational governments and companies have developed action plans towards their net-zero targets or incorporated them into binding legislation.”
Only 8% of companies’ net-zero goals include interim targets to chart a decarbonisation pathway, with just a fifth making use of onsite renewable energy generation and 70% relying on renewable energy certificates, which have little impact on the energy transition.
The findings are born out elsewhere. A recent poll of C-suite executives and sustainability professionals by project developer and consultancy South Pole found “a major chasm” between net- zero ambition and concrete action. “Aspirations are high, but action is concerningly low,” says Renat Heuberger, CEO of South Pole. “It’s a big issue that 2050 is 30 years away. There is a risk that announcing targets without corresponding measures starting in 2020 just kicks the can down the road.”
While around 50% of companies in the South Pole survey had a net-zero target (NZT), only 11% had set a science-based target through the Science Based Targets Initiative (SBTi), the research found. “It is worrisome that many more companies are setting NZTs instead of SBTs, as this may be an indication that they are not looking at the science-based steps needed to reach their targets,” he says, adding: “Civil society, customers, employees and investors should be holding companies to account.”
Unless the target comes with an operational plan, you just have a goal decades out, and it’s not going to be enough
Peter Bakker, CEO of the World Business Council for Sustainable Development, agrees that simply announcing a net-zero target for 2050 is meaningless. “That’s five CEOs away,” he points out.
“Unless the target comes with an operational plan on how to achieve an interim target by 2030, you just have a goal decades out, and it’s not going to be enough.”
This autumn, the WBCSD, which includes more than 200 of the world’s biggest companies, updated its membership criteria, announcing that from 2022 signatories will have to make a range of commitments, including to become a net-zero company by no later than 2050. Crucially, companies must “have a science-informed plan” to achieve those targets and “set ambitious, science-informed, short and mid-term environmental goals that contribute to nature/biodiversity recovery by 2050.”
This is consistent with the Science Based Targets Initiative’s Business Ambition for 1.5C campaign, asking companies to commit to halving their emissions by 2030, and hitting net-zero emissions by 2050, along with committing to an ongoing validation process. So far, 318 of the 526 companies that have validated SBTi targets have signed up.
It is easy to see why some companies struggle initially with balancing the concept of net-zero with the reality, says Bakker.
“Net-zero targets are based on what needs to be done, not what the company thinks is possible. It leads to a completely different way of thinking. If you are an auto company, an industrial or in the energy sector, setting a target is admitting that your business model needs to undergo radical change,” says Bakker.
There are companies that are not doing any emissions reduction work, they’re just buying offsets as if they were an indulgence
Nigel Topping, the UN Framework Convention on Climate Change’s (UNFCCC) high-level climate action champion, who is coordinating non-state actors’ involvement in COP26, says reliance on buying offsets rather than doing the hard work of cutting emissions in their own supply chains is the litmus test for net-zero commitments.
“There are companies that are not doing any emissions reduction work, they’re just buying offsets as if they were an indulgence.” (See Giving nature it's due place in race to save the planet)
Giles Gibbons, CEO of consultancy Good Business, highlights the risk of net-zero washing in the absence of protocols for how to develop a net-zero plan. “We’re working with food retailers and they all have a net-zero commitment, but they’re all working to different timescales. ... It’s a bit like the Wild West at the moment.”
The problem is that having a target approved by the Science Based Targets Initiative only gets companies so far on the road to net-zero, with companies required to set targets to decarbonise five and 10 years out.
And, more crucially, there is currently no one holding companies’ feet to the fire to ensure they follow through on their commitments: no requirement to report progress on meeting their targets, in a transparent way, to investors and other stakeholders.
Cynthia Cummis, director of private sector climate mitigation at the World Resources Institute, is on the steering committee for the Science Based Targets Initiative. She says when the partnership between CDP, UN Global Compact, WRI and the WWF was established in the build up to the 2015 Paris climate talks, it was intended only to provide detailed guidance for companies seeking to set targets in line with keeping warming below 2C.
We’re looking to see how we can have a dashboard to help stakeholders understand whether companies are on track to meet their targets
Although they were aware that there would be a need for some kind of monitoring and evaluation system, they didn’t expect the initiative to last longer than five years, and anticipated ‒ wrongly, as it turns out ‒ that another organisation would take up the task of holding companies to account.
“Since that hasn’t happened and we're seeing the need for [SBTi] to exist more long term, there’s lots more work that needs to be done,” she says.
In October, SBTi launched a multi-stakeholder process to develop the first global standard for corporate net-zero targets, setting out the conceptual foundations for the standard in a detailed paper “to ensure that the growing momentum behind net-zero translates into action that is consistent with achieving a net-zero world by no later than 2050”.
It is aiming to publish a standard in 12 months, ahead of COP26 in Glasgow. It has also launched a project to develop a monitoring and evaluation system. Cummis says: “We’re looking to see how we can have a dashboard to help stakeholders understand whether companies are on track to meet their targets. We’re also exploring processes to see if we can validate when companies have met their targets when they get to their target year.”
Dexter Galvin is global director for corporations and supply chains at CDP, a member of the SBTi secretariat, and is working on the Business Ambition for 1.5C project. CDP has just released its annual A-list of companies that perform most strongly on addressing risks of climate change, deforestation and water scarcity and pollution.
This year, 313 companies made the A-list, from 5,800 that report to CDP, a doubling in the past year alone. Galvin says 60% of A-listers also have validated science-based targets “though I’d like to see more set 1.5C targets”.
He points out that large organisations like Amazon and Facebook, which both recently announced ambitious and high profile carbon-neutral plans, are among the 3,700 “laggards” that don’t disclose information to CDP, and were targeted by more than 100 investors in CDP’s 2020 Non-Disclosure Campaign. While both have submitted targets to join the SBTi, they have not yet had their applications validated.
if we are clear that there is a demand for clean heat, it will encourage the supply to come through
"I’m wary of organisations with commitments that aren’t doing standardised reporting,” Galvin says.
Michael Alexander is global head of water, environment, agriculture and sustainability at drinks group Diageo, one of the signatories to the SBTi’s Business Ambition for 1.5C campaign, and a double CDP A-lister on water and climate risk.
He welcomes the alignment of SBTi with net-zero. “Companies desperately need the Science Based Targets as that north star that will enable them to contextualise their own strategy to reduce carbon and to align that with the trajectory needed to keep to a 1.5C target.”
“We have mapped out a roadmap for the next 10 years but there is much more certainty on what will happen in three to five years than afterwards. We have an innovation gap where we don’t know what will be available.”
Another signatory to the 1.5C campaign and double A-lister is AstraZeneca, which in January released its ambition zero carbon strategy, with a target to be zero carbon by 2025 and carbon negative by 2030. Jason Snape, head of environment, AstraZeneca, says: “We’ve brought our timescale forward by a decade to 2030 because we have a sense of urgency about what is happening to the planet, but we also see what is happening in the market as well.”
Executive and board-level ownership is a crucial element of the strategy, as is collaboration both within the value chain and with other companies, Snape says. “A lot of the innovation we’re going to need is not going to come in pharma – advances in clean heat are likely to come from the water or energy sectors, for example. But if we are clear that there is a demand for clean heat, it will encourage the supply to come through.”
Bakker of WBCSD says that kind of collaboration is critical. While many companies see net-zero as a route to gaining competitive advantage, “no matter how mighty the company, you can’t do this on your own. You’re going to have to do things together, whether that is agreeing standards for charging electric cars, sharing data that helps develop autonomous driving or developing rules for disclosure.”
He emphasises the urgent need for action now. “If you’re an industrial company, unless the majority of your R&D is going into solutions that help you meet your target, you’re going to fall behind,” says Bakker. “If you wait two or three years, you will be out of business.”
Mike Scott is a former Financial Times journalist who is now a freelance writer specialising in business and sustainability. He has written for The Guardian, the Daily Telegraph, The Times, Forbes, Fortune and Bloomberg.
Additional reporting from Terry Slavin
This article is part of the in-depth Race to net zero briefing. See also: