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Corporate Climate Plans Fall Well Short of Targets, With a Few Bright Spots [1]

['Dieter Holger', 'Carbon Market Watch S Executive Director Sabine Frank']

Date: 2023-02

The climate plans of major companies continue to fall short—but there are some bright spots.

The second annual report examining the net-zero plans of climate-leading global companies found little improvement over the last year as their self-reported decarbonization plans continue to fall well behind the stated ambitions to cut their emissions. Despite concerns about their plans and the overall gap, the report also highlighted the best practices among these companies.

The Corporate Climate Responsibility Monitor 2023 published Monday found that the combined net-zero pledges of 24 industry-leading companies would reduce their total greenhouse-gas emissions by 36% by their respective target years, typically 2040 or 2050, compared with the at least 90% emission reductions needed.

The 22 companies with 2030 targets would deliver an average reduction of 15% of their real emissions, far below the 50% target the United Nations’ Race to Zero campaign endorses. The report also raised concerns about plans that rely on carbon offsets, provide misleading disclosures and exclude emission sources in supply chains.

The gap is particularly stark as these businesses are part of the U.N.-backed Race to Zero campaign. Responsible for 4% of global greenhouse-gas emissions, they span eight sectors including automobiles, fashion, food and technology and have combined yearly revenue of more than $3 trillion. The analysis was done by nonprofits NewClimate Institute and Carbon Market Watch.

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“At a time when corporations need to come clean about their climate impact and shrink their carbon footprint, many are exploiting vague and misleading ‘net zero’ pledges to greenwash their brand while continuing with business as usual,” Carbon Market Watch’s Executive Director Sabine Frank said.

The analysis echoes the findings of another report published last week by environmental nonprofit CDP that said only 81 of nearly 19,000 companies that disclose through its platform have credible climate transition plans.

Despite the shortfalls, the Corporate Climate Responsibility Monitor did identify some best practices among companies, which can serve as examples for others.

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Cover at least 90% of total emissions

To demonstrate a “commitment to deep decarbonization,” the report says a company’s net-zero plans should reduce all its emissions, including from its entire value chain—so-called scope 3—by at least 90% by their target date, typically 2040 or 2050. This aligns with the guidance from the Science Based Targets initiative that carbon-removal credits can be used to neutralize a maximum of 10% of emissions.

“At a time when corporations need to come clean about their climate impact and shrink their carbon footprint, many are exploiting vague and misleading ‘net zero’ pledges to greenwash their brand while continuing with business as usual.” — Carbon Market Watch’s Executive Director Sabine Frank

Five companies among the 24 examined in the report hit the 90% target: fast-fashion retailer H&M Hennes & Mauritz AB, cement-and-concrete maker Holcim AG , auto manufacturer Stellantis NV, shipping giant AP Moller-Maersk AS and engineering-and-steel company Thyssenkrupp AG . The net-zero plans of Holcim and H&M have also won approval from the Science Based Targets initiative. Food retailer Koninklijke Ahold Delhaize NV, carrier American Airlines Group Inc., food-and-beverage company Nestle SA and Maersk are among businesses seeking SBTi approval.

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Decent disclosure

While scope 3 emissions can be challenging to calculate and control, having net-zero plans that cover the complete value chain is best practice. In 2022, emissions disclosures for 16 of the 24 companies provided a “moderate level of transparency and integrity” for direct emissions (scope 1), energy purchases (scope 2) and value chains (scope 3), the report said.

Some companies offer more detail. Technology companies Apple Inc. and Microsoft Corp. , clothing chain Zara owner Industria de Diseno Textil SA, Holcim and Maersk break down the sources of their emissions, including from vehicles, business travel and manufacturing, the report said. Microsoft goes so far as to break down its scope 3 emissions into more than 10 categories under the Greenhouse Gas Protocol standard.

Support suppliers

Helping suppliers is crucial to advancing decarbonization plans, according to the report. Apple, iPhone manufacturer Foxconn Technology Co. and H&M were all noted for helping their suppliers to access renewable energy either with financial support, advice or connecting deals.

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Walmart Inc. was another example. The retailer has worked with suppliers to reduce packaging waste and to adopt farming practices that sequester greenhouse gases, as well as helping them access renewable energy. Last year, Walmart said it was more than halfway toward its goal of avoiding or reducing 1 gigaton—one billion metric tons—of greenhouse-gas emissions in its value chain.

24/7 power

The efforts of Google-parent Alphabet Inc. and Microsoft to pioneer 24/7 renewable energy were called out as positive examples in the report.

The companies have promised that 100% of their energy consumption will be matched with the renewable energy generation from local installations by 2030. The intermittency of wind and solar power means a big part of the challenge is building out enough batteries to store renewable energy to cover gaps in generation, when there is no wind or sun.

The report said the 24/7 ambitions would help solve the mismatch between the theoretical power consumed and the actual consumption. For instance, a company that has a power-purchase agreement with a wind park isn’t actually using renewable energy from the farm on windless days—unless it is coming from a battery.

Write to Dieter Holger at [email protected]

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[1] Url: https://www.wsj.com/amp/articles/corporate-climate-plans-fall-well-short-of-targets-with-a-few-bright-spots-d4cc6fa8

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