Report highlights need for more consistency, calls for clarity on use of carbon offsets.
While one fifth (21%) of the world’s 2,000 largest public companies have made net-zero greenhouse gas emissions commitments, only a quarter of these meet the full set of “robustness criteria”, according to quantitative analysis by the Energy and Climate Intelligence Unit (ECIU) and the University of Oxford’s interdisciplinary research initiative Oxford Net Zero.
The ‘Taking Stock: A Global Assessment of Net-Zero Targets’ report has identified inconsistencies within the net-zero pledges of all companies in the Forbes Global 2000 list. The report also assessed all states and regions in the 25 highest-emitting countries and cities with a population above 500,000.
Corporate commitments varied hugely in their quality, largely falling short of meeting the minimum set of robustness criteria originally set out by the United Nation’s Race to Zero Campaign, the report said.
The majority of assessed corporates with existing net-zero commitments have implemented interim net-zero targets (60%) and emissions reporting mechanisms (62%), but only 44% have officially published their plans. The assessed firms represent annual sales of nearly US$14 trillion.
“Some commitments contain key details such as the greenhouse gases covered, clarity on use of offsets, and (for businesses) whether they cover emissions from the company’s operations, value chain and/or products. However, many entities have not published these details yet,” the report said.
In particular, ECIU and Oxford Net Zero highlighted the lack of clarity around carbon offsetting, meaning that companies aren’t explaining how they plan to take responsibility for ‘unavoidable’ carbon emissions by removing emissions of an equivalent amount elsewhere.
“All entities, especially companies, need to disclose how, and to what extent, they plan to use offsets,” the report noted.
The report warned that offsetting cannot be a substitute for significant emissions cuts.
Investors are paying more attention to corporate net-zero pledges and will want to see the existence of a net-zero plan, or, at the very least, evidence that the company is working towards developing one, the report highlighted.
For the researchers to consider a net-zero commitment fully robust and credible, corporates need to set nearer term targets to ensure action proceeds, commit to publishing annual progress reports and provide further clarity around activities and emissions covered in each Scope.
While Scope 1 emissions refers to the direct emissions of company-owned or controlled resources, Scope 2 refers to indirect emissions caused by purchased energy from a utility provider, for example. Scope 3 is the hardest to measure, covering all indirect emissions that occur throughout the value chain of the reporting company.
“Robust net-zero plans, with interim targets, commensurate policies and a governance mechanism are not only essential for reducing emissions, but can also create sustainable employment and prosperity via the unequivocal signals they send to businesses and investors,” the report said.
This follows the launch of the Climate Action 100+ Net-Zero Company Benchmark, which revealed a quarter of assessed global companies made net-zero pledges that didn’t cover the full scope of their most material emissions.