‘Misleading’ net-zero pledges build misunderstanding of short-term needs
The long-term climate pledges of major global companies are ambiguous and distract from the urgent need to reduce greenhouse gas emissions this decade, a new study shows.
Net-zero pledges by some of the world’s largest “climate leaders” are “mired by ambiguity” as their strategy for the end of this decade is largely insufficient to cap temperature rises at 1.5°C, a report by the NewClimate Institute and Carbon Market Watch has found.
This new edition of the Corporate Climate Responsibility Monitor (CCRM) covers eight high-emitting sectors and examines the climate goals of 24 of the biggest firms that bring out their climate leadership credentials as members of a Race to Zero initiative.
“It's not the companies that are making the loudest, boldest climate pledges that are necessarily those at the forefront of climate action,” Thomas Day, expert in corporate climate action and carbon markets at NewClimate Institute and lead author of the report, told journalists in a briefing, citing little progress since last year’s study.
In aggregate, the companies assessed pledged to cut absolute emissions of their full value chain by 15% between 2019 and 2030, when a decline of at least 43% is necessary to limit global warming in line with the Paris Agreement, the report stated.
“The plans proposed are insufficient to drive the transformative change that we need,” Silke Mooldijk, specialist in climate policy and corporate climate responsibility at the NewClimate Institute, added in the call. “Many reduction plans are rather fake and do not include concrete commitments to decarbonise.”
“This long-term ambiguity … is serving to distract from a much more pressing problem,” Day stated. “We find that companies’ 2030 pledges fall far short of what's needed, and they're being inappropriately certified by third-party initiatives.”
As set out by the Science Based Targets initiative’s (SBTi) Net-Zero Standard, carbon neutrality asks for a minimum 90% cut in 2019 emissions by mid-century. Yet, only a minority of net-zero pledges represent credible decarbonisation commitments, the report suggested, as they only cover a 36% reduction in the 24 multinationals’ combined greenhouse gas (GHG) emission footprint by net-zero target year.
“Their targets are framed as voluntary targets, but we see that nearly all companies are making these pledges … as a response to consumer and investor pressure,” Day pointed out. “By making these voluntary targets, they’re also making the case to regulators that they do not need to be regulated.”
These firms, however, play a major role in writing “the rule books” for climate action, he flagged. “They set the example for the … millions of other companies that are currently trying to navigate the nuances of corporate climate responsibility.”
Nearly all companies are making these pledges … as a response to consumer and investor pressure.
Emission omissions
Out of the 24 companies, which in 2021 had combined revenues of $3.16tn, eight were rated at a “moderate” level of integrity – a measure of the quality, credibility and comprehensiveness of their approach to comply with a 1.5°C trajectory – and 15 had a rating of “low” or “very low” integrity.
For the authors of the study, all targets should be explicit in their coverage of the complete spectrum of emission sources to avoid misleading communication, especially when exclusions can take various forms.
Some corporations appear to remove major emission sources from specific regions or businesses or exclude the indirect result of their activities, known as Scope 3 emissions. Carrefour, for instance, has integrated in its reporting less than 20% of its stores worldwide, the report claimed.
“Our external ratings attest to the seriousness of our approach,” the group reacted in an email to Net Zero Investor, adding it was recognised on CDP’s climate “A list”. The French retailer said it had made clear its carbon neutrality goal only concerned Scopes 1 and 2 emissions, while it eyed a 29% reduction in GHG emissions for Scope 3.
Day also pointed out that offsetting claims remained “extremely contentious”, partly allowing Nestlé to translate a 50% reduction of its emissions by the end of the decade into a decline of just 16% to 21% of its full value chain emissions from 2019 levels.
The world’s biggest food group, which was not immediately available to respond, writes on its website that its brands must reduce their GHG emissions before offsetting the remainder “through high-quality, verified schemes”.
A significant portion of its emissions, however, are suggested in the report to be offset under the “guise” of “insetting”, a terminology with no universally accepted definition.
Mooldijk said in the briefing that not only did companies often rely on offset credits from forestry projects that were unlikely to be permanent, but that their plans to offset up to 45% of combined emission footprint to claim net-zero in the future were implausible.
“If everyone were to follow their example, we would need two to four planet Earths,” she said.
As in 2022, only Danish logistics company Maersk’s climate strategy integrity was rated “reasonable”, boosted by investments in new fuels; an interesting example for Mooldijk, as the shipping sector is relatively difficult to transition.
Although she pointed to room for improvement, the group has “potentially credible” goals for deep decarbonisation along with Stellantis, but both are lumped together with lower-rated firms which “prominently refer to their SBTi certifications to defend climate strategies that actually amount to very limited levels of emission reduction commitments”, the report said.
None of the companies assessed reached a “high integrity” rating.
If everyone were to follow their example, we would need two to four planet Earths.
Consumer confusion
The report showed that the carbon neutrality claims of 11 of the 24 firms in question covered just 3% of their emissions footprint on average, “although consumers could be misled into understanding the claims apply to a company’s entire business”.
For Gilles Dufrasne, policy officer at Carbon Market Watch, it is “unrealistic” to expect consumers to understand their claims, even though some of those are directly targeting them.
“The first thing that struck me with this study is the amount of work it required … to simply understand what these companies are saying,” he said in the media call. “The message is relatively basic, like net zero or carbon neutrality, and yet it takes several weeks, if not months, to just understand all the details that are underneath those claims.”
This makes it much harder to grasp the reason to adopt behavioural changes, edit policies or make costly investments, he added. “It does directly impact the speed at which we can transition into a more climate-safe society.”
Mooldijk underlined that many companies focused on “marginal changes” instead of committing to adapting their business model. But for Dufrasne, “the law should not be based on how attractive a marketing technique is”.
“You’re never going to see an advertisement that's trying to sell cancer-neutral cigarettes because there is no scientific evidence … and consumers would just not understand at all what it means,” he explained. “And in many ways, carbon-neutral products are similar to cancer-neutral cigarettes.”
Dufrasne recommended stronger rules to clarify existing legislation on consumer protection, a better enforcement of both existing and future rules and, ultimately, more collaboration between governments, the civil society and companies themselves to improve communication in corporations’ efforts to fight climate change.
“It's neither an efficient nor a realistic way of enforcing rules than to expect civil society to take companies to court, and so that's why we need a better, more stringent regulator to enforce existing laws,” he added.
