Walking the Talk
Attention, Corporations:
Creative Accounting Will Not Save Us from the Climate Crisis

We’re seeing more ambitious corporate climate commitments than ever; and, since climate action is now largely considered a business imperative, the deluge isn’t likely to let up soon. With that is an ever-growing cache of jargon and buzz speak, much of which is being thrown around without substantive language and action to back it up. We at SB and our global community are working to make sure that companies making these pledges have the knowledge and resources they need to ensure they’re proceeding with integrity and not biting off more than they can feasibly chew — but there is still a huge learning curve, even for companies that have led in the sustainability space; and the devil is always in the details.

In keeping with these efforts comes the first Climate Corporate Responsibility Monitor — a joint report released this week by NewClimate Institute and Carbon Market Watch — which puts the climate change-mitigation pledges made by 25 of the world’s largest corporations under a microscope, and evaluates them against a set of transparent quantitative and qualitative indicators. The report goes so far as to say that, not only are the majority of the climate pledges full of loopholes and misleading claims that harm their credibility; but based on the companies’ 2030 targets, we will likely fall well short of the ambition required to align with the internationally agreed goals of the Paris Agreement and avoid the most damaging effects of climate change.

“As pressure on companies to act on climate change rises, their ambitious-sounding headline claims all too often lack real substance — which can mislead both consumers and the regulators that are core to guiding their strategic direction,” says NewClimate’s Thomas Day, lead author of the report. “Even companies that are doing relatively well exaggerate their ambitions.”

‘Net zero’ is not zero

The report alleges that the companies’ net-zero pledges amount to future emissions reductions, often decades from now, of an average of just 40 percent — with many strategies relying heavily on carbon offsetting and nebulous strategies such as “insetting” (offsetting emissions directly within a company’s own supply chain).

The report also asserts that the companies evaluated are making misleading claims — intentional or not — through a combination of loopholes, data omissions, choosing start dates when their emissions were higher, creating their own inaccurate measures of climate action, etc.

Key findings:

• For the minority of the evaluated 25 companies, their headline pledges serve as a useful long-term vision, and are substantiated by specific short term emission reduction targets. While none of the pledges have a high degree of integrity overall, Maersk came out on top, with reasonable integrity; followed by Apple, Sony and Vodafone with moderate integrity.

• Net-zero targets commit to reduce the analyzed companies’ aggregate emissions by only 40 percent on average, not 100 percent as suggested by the term “net zero.” Just 3 of the 25 companies – Maersk, Vodafone and Deutsche Telekom — clearly commit to deep decarbonization of over 90 percent of their full value-chain emissions by their respective target years of their headline pledges.

• 2030 targets fall well short of the ambition required to align with the internationally agreed goals of the Paris Agreement and avoid the most damaging effects of climate change.

• All 10 companies claiming to have achieved carbon neutrality in 2021 did so only for selected scopes, products, brands or company divisions. At least 7 of the 25 companies do not report on all value-chain (scope 3) emissions in public documentation — meaning, companies may fail to report on up to 98 percent of their emissions footprint.

• Companies will be the innovators that find the solutions to the climate crisis, but they must be subject to scrutiny and regulation Regulators should not rely on consumer and shareholder pressure to drive corporate action. Regulators and standard-setting initiatives must find ways to distinguish and segregate climate leadership from greenwashing, to support ambitious actors to innovate and accelerate decarbonization.

Governments must step in

Based on the findings of the report, Carbon Market Watch sent a package of policy recommendations to EU policymakers for promoting credible corporate sustainability leadership and combatting greenwashing, including:

• Governments must ban corporations from making “net zero” and “carbon neutrality” claims today.

• Companies must report absolute emission reductions separately from any emission reductions financed outside of their value chain, rather than one single aggregate number.

• Companies must always provide consumers and investors with the full picture.

• If companies compensate/offset their emissions, they must avoid double counting emissions reductions already accounted for by a country towards the achievement of its climate goals.

• Companies should not compensate for fossil fuel emissions with carbon stored in non-permanent carbon sinks such as forests or soil, unless permanence can be independently verified.

The bottom line

Brand loyalty or market share gained by touting inaccurate climate-mitigation claims will serve businesses very little in a climate-changed economy in which many companies can no longer operate.

“Companies must face the reality of a changing planet. What seemed acceptable a decade ago is no longer enough,” said Carbon Market Watch's Gilles Dufrasne. “Setting vague targets will get us nowhere without real action, and can be worse than doing nothing if it misleads the public. Countries have shown that we need a fresh start when adopting the Paris Agreement, and companies need to reflect this in their own actions.”