L’Età del Carbonio is a monthly series exploring rapidly evolving climate transition scenarios and emerging carbon issues in the world of politics, business and finance. The Carbon Age is produced by Carbonsink for EticaNews and is published monthly with the ET Climate 2022.
October 2022 –
October 2022 – South Pole, a global leader in climate solutions and mitigation projects, of which Carbonsink has been a part since January 2022, has recently released a new report that offers an in-depth analysis of how the international private sector is doing on climate, with a focus on net-zero commitments. The new Net Zero and Beyond includes interviews with more than 1,200 sustainability executives from large climate-conscious companies to understand what drives them to commit, what risks they see, what solutions they are turning to, and how they are guiding their organisations towards a net-zero path. For a more comprehensive view, the analysis also includes data from South Pole’s proprietary database of 68,000 more or less climate proactive companies, giving us a more realistic picture of how the private sector is, albeit too slowly, moving towards net-zero.
Interviews with sustainability leaders in climate proactive companies reveal three main trends. Corporate sustainability leaders set the pace and lead by example. 87% of climate-conscious companies have set a net-zero target, with more science-based targets for emissions reductions, and are driven by ambitious timelines. Forty per cent of the climate leaders surveyed who do not yet have a net-zero target plan to set one by the end of 2023. Moreover, regardless of the gloomy economic outlook, almost three quarters of the companies surveyed (74%) are investing more to reach their targets.
Although these figures are very encouraging, the sharp increase in the climate ambition of companies, including those that identify themselves as ‘big emitters’, raises some concerns about the feasibility of such commitments. Do companies, even those leading the pack, fully realise the magnitude of reducing all emissions along the entire value chain?
Almost a quarter (23%) of companies working towards net-zero decide not to publicise their progress. While corporate greenwashing has been widely denounced, this year’s research reveals another emerging practice among companies: ‘climate silence’ (transl. ‘green-hushing’). This is a worrying trend, as less public communication makes targets more difficult to assess and limits knowledge sharing, precluding opportunities for collaboration and diminishing the leading role of climate leaders in the eyes of the public.
New business opportunities and the need to increase resilience push companies towards net-zero goals. Consumer demand continues to top the list of reasons for companies surveyed to pursue ambitious climate goals (44%), followed closely by the opportunity to strengthen brand leadership on net-zero (43%). For the first time since 2020, the need to manage external shocks was also ranked by 37% of companies as one of the top three drivers for pursuing net-zero goals. In addition, 23% see net-zero as a way to manage reputational risk, in a context where consumers and civil society are placing increasing scrutiny on companies’ climate performance.
THE GLOBAL SCENE
Representing only the most sustainability-oriented companies, this data does not give us a complete view. In order to give the study a broader perspective, South Pole analysed its proprietary database of 68,000 companies, including the Global Fortune 500, the major stock indices and all the companies that refer to Cdp and Gri. Comparing the database analysis with the survey results reveals a decidedly less rosy landscape.
Fewer net-zero targets. Of these 68,000 companies, only 7 per cent set a net-zero target, a 90 per cent drop compared to the companies of the sustainability leaders surveyed. However, it is promising that most of these net-zero targets among the companies in the database (60%) are supported by science-based emission reduction targets.
Extended time horizons to achieve net-zero. While two-thirds of the companies surveyed aim to reach net-zero targets by 2030, only 16% of the companies in the database are committed to achieving net-zero by that date. 59% allow themselves a longer time horizon, aiming for 2041-2050.
Regarding the regional momentum for zero emissions, the database indicates that most of the commitments to zero emissions come from companies in the UK, the US and the Dach region.
The discrepancy between the interviews with climate leaders and the data from the ‘mixed’ database can be traced to the fact that, by virtue of having dedicated sustainability teams, the companies interviewed put climate action at the top of their agendas, compared to the companies in the database. In essence, those who have already started moving towards climate action are accelerating, while those who have lagged behind are struggling to get going.
South Pole’s research, Net Zero and Beyond, finds that still too few companies worldwide are setting credible, science-based climate targets, a finding in line with the Italian perspective provided by Carbonsink’s Net Zero Readiness Index. Companies that do so seem to be concerned about communicating their climate actions and fear provoking a backlash among key stakeholders, including customers, the media and NGOs.
Despite the global uncertainty that continues to dominate the corporate climate action landscape, climate action today is possible. To successfully embed a net-zero target within the corporate climate strategy, a clear pathway aligned with Sbti science is needed, making the most of currently available solutions to decarbonise, and proactively investing in technological innovations to remove residual carbon.
- Reduce: plan an emissions reduction trajectory along the entire value chain. Establish a net-zero target based on scientific data, with milestones on how to achieve it.
- Compensate residual emissions: become climate neutral by purchasing high-quality carbon credits to finance climate change mitigation projects that avoid or remove emissions and support sustainable community development.
- Neutralise: once emissions have been reduced to near-zero levels, eliminate unavoidable residual emissions through carbon absorption to achieve net zero.
According to the current trajectory, rising temperatures could reduce global GDP by 14% (USD 23 trillion) by 2050, compared to a world without climate change. Given the rising costs of climate inaction, 2022 is the most cost-effective year to start pursuing net-zero.