New Study by the NewClimate Institute: Companies Still Fall Far Short of Climate Ambition Targets

One year after their first report 2022 Corporate Climate Responsibility Monitor, the think tanks NewClimate Institute and Carbon Market Watch propose A new analysis of the climate commitments and actions of 24 multinational companies.

Study Summary

Note: This section is essentially a translation of their executive summary.

These companies, which account for 4% of global emissions, are notable for proclaiming themselves “leaders” on climate issues. As potential role models for many companies around the world, the two think tanks felt it was essential to ensure they maintained the highest standards of integrity.

Of the 24 companies analyzed, 15 have integrity strategies that were rated "weak" to "very weak."

Alarming Shortfall in the 2030 Goals

The NewClimate/Carbon Market Watch report criticizes the lack of ambition and reliability in companies’ 2030 targets. Most of the targets cover only a limited portion of their Scope 1, 2, and 3 emissions. Some others, which misleadingly combine emissions reductions and carbon offsets to meet the target, are unclear.

But the most troubling aspect of these 2030 targets is that very few of them translate into actual reductions in emissions. While the IPCC calls for a reduction in global emissions of between 43% and 48% by 2030, the 22 companies with a 2030 target plan, on average, to reduce their absolute emissions by 15% to 21% over that period.

Net-Zero Goals: Persistent Uncertainty; Only a Minority of Companies Are Making Credible Commitments

Although all 24 companies analyzed have committed to a “net-zero” goal, only 5 are truly on a path toward deep decarbonization—that is, equivalent to an absolute 90% reduction in their emissions. This is due to the inherent ambiguity of carbon neutrality claims, which—by mixing various different approaches (emissions reduction, offsetting, reliance on immature technologies, etc.)—create uncertainty about the company’s true transformation goals. Overall, the expected absolute reduction for these 24 companies averages around -36%, whereas the standard should be closer to -90%.

Carbon offsetting must urgently transition to a contribution-based model

The “contribution” approach in corporate claims— that is, the use of carbon finance no longer as a means of offsetting emissions, but as a way to demonstrate a company’s contribution to accelerating the global transition, saw significant growth in 2022 (creation of a “mitigation contribution” in Article 6.4 of the Paris Agreement at COP27, the abandonment by certain offset operators of “carbon neutrality” labels, etc.). However, the corporate world does not yet seem to have fully embraced this shift: only 4 of the 24 companies reported activities that could be considered part of this type of model.

A thorough and alarming analysis

The soundness of the methodology used by the NewClimate Institute and Carbon Market Watch can hardly be questioned. Their criteria appear to be fully in line with those recommended by the Net Zero Initiative and are divided into four main categories:

• Emissions Monitoring and Transparency :
  • Broadcast History
  • Breakdown by scope and gas type
• Setting specific and well-supported goals
  • Short- and Medium-Term Objectives
  • Long-Term Goals
• Existence of reduction measures
  • Pure decarbonization measures
  • Measures Related to the Purchase of Renewable Energy
• Climate Contributions and Offsetting
  • Funding emissions reductions outside the value chain, without claiming that this offsets the company’s emissions
  • Use of Offset and Integrity of Associated Claims

To fully align with NZI, the only criterion that could be added to this list would be emissions avoided through products and services, in order to determine the extent to which companies position themselves as providers of solutions for the transition.

Overall, the analytical framework proposed by the two think tanks is very much in line with the Net Zero Initiative framework, to which at least two of the report’s authors—Thomas Day and Carsten Warnecke—contributed as members of the scientific advisory board in 2021.

This report provides further evidence that the private sector is falling far short of its climate goals. If there was one thing we were already certain of, it was that promises are binding only on those who believe them; unfortunately, this report shows us that the the promises themselves are not up to par.

Photo credit: carbonclick