Scrutiny Of Corporate Climate Pledges Is Key To Credible Action

A new report examining the quality and delivery of 25 corporate net zero targets is welcome scrutiny of meaningful progress at a time when there has been an explosion in corporate climate commitments and a lack of regulatory oversight over the varying strategies to achieve them. The findings and learnings in the report form part of a constructive dialogue that is essential to trigger more robust, consistent, and ambitious accountability standards and criteria. 

The Corporate Climate Responsibility Monitor (CCRM), conducted by the NewClimate Institute in collaboration with Carbon Market Watch, evaluated the transparency and integrity of 25 major corporate pledges. Only one – Maersk, a Danish freight shipping company – was found to have a net zero pledge with “reasonable integrity.”

The CCRM report is highly critical of corporate commitments on several fronts. It highlights a lack of overall progress in commitment delivery and calls out the language that some corporates use to describe their net zero commitments as being either over-exaggerated or misleading. Global Citizen recently summarized the report and highlighted key findings. 

Such reports, critical as they may be, play a necessary role in improving the consistency and rigor of standards and criteria associated with voluntary climate action taken by companies. This is especially essential given the absence of significant government oversight in many jurisdictions beyond the most basic of public disclosure requirements. 

In many ways, the CCRM report builds on and even reinforces the necessity of the Science Based Target initiative (SBTi). First launched in 2015 in a bid to address growing concerns around greenwashing, the concept of science-based targets provided companies with a minimum benchmark to adhere to in their climate policies. Last month, I outlined how and why “science based targets could be distinguished from the many self-defined and offset dominated, net-zero pledges that are marketed by carbon intensive companies.” Reportedly, companies with validated science based targets have managed to cut emissions by 25% between 2015-2020. 

After extensive consultations and feedback, as well as more than five years of constant fine-tuning and updating of what constitutes best practice, SBTi launched its Net Zero standard in October, 2021, in part to address many of the gaps identified by the CCRM report with respect to the integrity of corporate pledges. 

At the crux of science based net zero policies is the requirement for companies to commit to actual emission reduction targets across their value chains; generally of 45-50% by 2030 and 90-95% by 2050 – in line with what is needed globally to avoid temperature rises greater than 1.5°C. In other words, beyond allowing for a very minimal amount of residual emissions, a science based net zero target cannot and should not be met simply through offsetting, a practice the CCRM report quite rightly suggests is currently being too heavily relied upon by companies as a substitute for slashing emissions. 

It is worth noting that only one of the 25 companies analyzed in the CCRM report – that made by CVS Health – has validated its targets against the SBTi Net Zero Standard. In spite of this apparent success, CVS came under fire by critics for only achieving its seemingly ambitious 2030 emissions target (50% reductions) by using an abnormally high emissions year – 2019 – as its starting point. SBTi responded to critics by saying, “There are many legitimate reasons for a company’s base year having higher emissions than surrounding years, including but not limited to years with unusual activity (e.g. the COVID-19 pandemic), mergers and acquisitions and business expansion.”

Moving forward, there may be other learnings and gaps identified in the CCRM report that could be used to bolster and tighten SBTi standards further for all corporations. The Race to Zero Campaign’s recently launched annual consultation process represents another opportunity to address additional questions. SBTi, for instance, can better define what emissions are required to be included in emission reduction targets, as well as drive a deeper consensus around what should constitute a fair share of halving emissions by 2030. 

SBTi could also provide clearer guidance on the circumstances in which, and what types of, offsets should be permissible in fulfillment of science based net zero targets. There is a credible case for instance – for reasons that will be discussed in a forthcoming article – that residual emissions should only be allowed to be offset by activities that actually permanently remove carbon from the atmosphere. Going further, arguably companies ought to be required by SBTi standards to ramp up investments in carbon removal activities in addition to cutting emissions even before they meet their targets – given the need for both large-scale carbon removal and emissions abatement to avoid catastrophic climate change. Similarly, recognizing that older science based targets were based on best practices at a prior point in time, companies should be encouraged to update their standards against the new science based net zero standard.

Merely improving the integrity of corporate climate pledges, however, is by itself insufficient. A further challenge the CCRM report highlights is the inevitable difficulty of enforcing compliance against entirely voluntary targets, even if they are standardized. The only sure way to address this enforcement gap would be for governments to develop and implement strong, ambitious regulatory frameworks.

The reality is though that we no longer have the time or ability to rely on governments to act. After all, on our current trajectory, the world has just 8 years left to begin to make the radical and deep cuts necessary to even have a shot at avoiding temperature rises above 1.5 degrees. With 10,000 publicly listed businesses alone responsible for 40% of all climate warming emissions, all actors must begin decarbonizing now and we need to deploy every tool at our disposal to achieve this.

This is why the ongoing work of the Race to Zero campaign, SBTi, and their partners is so crucial. They provide the only credible minimum standards for voluntary action, driving action towards actual emission reduction cuts as opposed to offsets. They are the closest we have to best practice on corporate climate policy and have shown an ongoing willingness to update their requirements based on learnings and identified gaps. 

As a case in point and in recognition that the absence of accountability will hinder delivery, the Race to Zero campaign recently announced it will be launching an accountability mechanism to take actions against non-compliant members who do not make enough progress towards their targets. Steps like this from third parties and coalition groups will help improve the fulfillment of targets across the sector while keeping corporations honest. Watchdog organizations, activists, and advocates focused on pushing for robust and legitimate corporate action are essential to this process, but so too must be acknowledging the wins where they exist. 

Ultimately, the transition to a low carbon future will be one of the hardest challenges humanity will ever have to overcome and there is no one route, path, or policy that will get us there by itself. Businesses need to be at the forefront of this transformation and individual corporate actions will have to continue in the absence of governance, oversight, or enforcement mechanisms. Ongoing scrutiny, more accurate reporting, and stronger accountability – preferably in the form of regulatory oversight – are all essential to accelerate the delivery of best practice and help us all win the race to zero. But as we wait for such policies, so too are the voices of corporate clients and customers. It is important that we use them.