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Multinationals largely fail to live up to net-zero climate pledges: study

07 February 2022 Max Tingyao Lin

Some of the world's largest multinational companies are making net-zero claims without meaningful climate action, according to a new study, which estimated they will reduce their absolute emissions by less than 20%.

Hundreds of companies have committed to some form of net-zero emissions later this century, but experts are doubtful over the pledges' climate benefits due to a lack of common standards, among other reasons.

After scrutinizing the decarbonization plans of 25 major businesses responsible for 2.7 billion metric tons (mt) of CO2e in 2019, or 5% of the global total, the Corporate Climate Responsibility Monitor report concluded that many of them have vague, misleading emissions targets with inadequate levels of integrity and transparency.

The joint study, released by European nonprofits NewClimate Institute and Carbon Market Watch (CMW) 7 February, found the companies have committed to reducing their absolute direct and indirect emissions by just 500 million mt of CO2e in total by their respective target years. The rest of the emissions are either covered by carbon offsetting methods, or left out from the companies' calculations with ambiguous accounting, according to the report.

"We were frankly surprised and disappointed at the overall integrity of the companies' claims," said NewClimate's Climate Policy Analyst Thomas Day, lead author of the study.

"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," Day added.

Separately, the study found that the companies have pledged to reduce their full value chain emissions by an average of 23% between 2019 and 2030 when those multinationals without clear interim reduction targets are excluded.

To limit global warming to 1.5 degrees Celsius above pre-industrial levels, UN scientists said global emissions need to fall by 45% from 2010 levels by 2030. This would be equivalent to a 50% drop from 2019 levels, according to the study.

The "targets for 2030 fall short of necessary ambition. Long-term, net-zero goals are only meaningful when underpinned with short-term action," said NewClimate Analyst Silke Mooldijk, another author. "Front-runner companies would probably have to cut their emissions at that rate."

Industry practice

A growing number of companies are seeking endorsement from the Science Based Targets initiative (SBTi), launched by nonprofit CDP, the UN Global Impact, the World Resources Institute, and the World Wide Fund for Nature to evaluate how a company's climate pledge aligns with the Paris Agreement.

However, for the 18 companies assessed in the study with an SBTi-approved target, NewClimate and CMW researchers believe the majority of them have a rating "either contentious or inaccurate" due to "loopholes that significantly undermine [their] plans."

One issue they identified is a conflict of interest. "Standard-setting initiatives face a challenging task, and potential conflict of interest, if performing the role of both defining the standard as well as assessing companies against their own criteria and guidelines," according to the study.

In response, the SBTi said its initial analysis found significant differences between the methodology used in the study and its criteria to validate emission reduction targets.

"Some of the key differences relate to the more flexible approach that the SBTi follows on base year selection, target year, and Scope 3 [indirect emissions] target setting," said Alberto Carrillo Pineda, managing director at SBTi. "This flexibility is important to make our criteria applicable to a wide range of company circumstances, while maintaining rigor and credibility."

"Our technical experts will spend more time in the coming weeks … considering potential actions to take," he added.

Integrity questions

NewClimate and CMW selected the world's largest companies by revenue that have net-zero pledges for its study but excluded financial firms. For a diverse sample, they allowed a maximum of five companies per country and two per sector.

The researchers measured the integrity of the 25 firms' climate plans using a five-point scale. A total of 11 companies received the worst rating "very low integrity," among them some big names like BMW, Unilever, Nestlé, and E.ON.

In an email to Net-Zero Business Daily, German car maker BMW defended its strategy after being criticized by the nonprofits for not committing to electric cars in at least 95% of its light duty vehicle sales in its main markets by 2030.

"Setting a particular year for transitioning completely to fully-electric vehicles will not help us reach our objectives, since this is tied to different conditions in markets around the world. Not all markets are developing at the same pace or with comparable charging infrastructure," the automaker said. "The decisive factor in achieving climate neutrality is that we use all available levers and technologies to reduce CO2 emissions."

Unilever said: "While we share different perspectives on some elements of this report, we welcome external analysis of our progress and have begun a productive dialogue with the NewClimate Institute to see how we can meaningfully evolve our approach."

Benjamin Ware, global head of climate delivery and sustainable sourcing at Nestlé, said his company welcomes scrutiny of its climate commitments, but argued the study contains "significant inaccuracies" without detailing them.

E.ON said that the study does not methodically follow the Greenhouse Gas Protocol in carbon accounting, which is used by many multinational firms. "This leads to completely different results, which are misleading in our view," the energy firm said.

Another 10 companies received the second worst mark of "low integrity." They included Google, IKEA, and Enel.

The report said Google's net-zero target "is not substantiated with a specific target for the reduction of [its] own emissions." Citing a blog post from CFO Ruth Porat last October, the internet giant said it has committed to reducing "the majority of our absolute emissions against a 2019 baseline by 2030."

"Had the authors of the report reached out we would've been able to point them to this public information," Google said in a statement.

IKEA said: "We welcome dialogue and scrutiny of companies' climate commitments and goals, such as net-zero targets, to secure that these are aligned with the science of 1.5 degrees Celsius. The new report by NewClimate Institute is a constructive addition to this."

The study does not take into account Enel's latest decarbonization roadmap, which advances its net-zero target by 10 years to 2040, the Italian utility said. But it added: "We welcome this assessment as an opportunity to create stronger methods for validating corporate climate targets and [improving on the] challenging pathway towards decarbonization. However, it is necessary to ensure that relevant data are the most recent available and consistent among the assessed companies."

The top-ranked performers

The study concluded that Apple, Sony, and Vodafone have "moderate integrity" in their climate promises. A.P. Moller-Maersk was judged to have "reasonable integrity," but no one was deemed having "high integrity."

In January, Maersk pledged to reduce emissions from its container shipping and port operations by 35%-50% from 2020 levels by 2030 and achieve net zero across its value chain by 2040.

NewClimate and CMW researchers said Maersk has a detailed plan for decarbonizing marine fuels, but it could have clearer plans for Scope 2 (electricity consumption) and Scope 3 emissions reduction.

The Danish shipping group recently won praise from some environmentalists.

"Maersk continues to lead the cargo shipping sector by setting industry-leading commitments and taking the necessary steps toward actualizing a zero-emissions future," said Kendra Ulrich, shipping campaigns director at Stand.earth. "Maersk's commitment sends a signal to major cargo shipping customers like Amazon, Target, Walmart, and IKEA that they must aim higher to both set and meet clean shipping goals this decade."

Tougher regulation

Based on the study's findings, CMW is calling on governments to ban net-zero claims and mandate much more rigorous emissions reporting standards in the private sector.

Companies should be required to report absolute emissions reduction figures separate from net figures that include carbon offsets, set targets that cover all of the emissions within their value chain, and not use nonpermanent carbon sinks such as forests or soil to offset their emissions, according to the nonprofit.

"Misleading advertisements by companies have real impacts on consumers and policymakers. We're fooled into believing that these companies are taking sufficient action, when the reality is far from it." said Gilles Dufrasne, a policy officer from CMW. "Without more regulation, this will continue. We need governments and regulatory bodies to step up and put an end to this greenwashing trend.

"Setting vague targets will get us nowhere without real action and can be worse than doing nothing if it misleads the public," he added.

Posted 07 February 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability

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