Despite the net zero targets of major global companies, their headline climate pledges do not align with their net zero greenhouse gas (GHG) emission reduction measures.
According to a report that assesses 25 of the world’s largest companies, 13 commit to reduce their full value chain emissions from 2019 by 40 per cent on average. The remaining 12 do not have specific emissions’ reduction commitments for their net zero target year.
The Corporate Climate Responsibility Monitor 2022 report, recently published by the NewClimate Institute in collaboration with the Carbon Market Watch, saw a total of 25 major companies assessed to determine the transparency and integrity of their headline
The 25 companies contribute to about five per cent of global GHG emissions. Among them, only one company’s net zero pledge was evaluated as having “reasonable integrity”. Three were evaluated as “moderate”, 10 as “low”, and the remaining 12 were rated as having “very low” integrity.
MISLEADING REPORTS OF EMISSIONS
For a complete and transparent disclosure, companies should report all direct emissions (scope 1), indirect energy-use emissions (scope 2), and other upstream/downstream indirect emissions (scope 3), said the report.
However, only seven of the 25 assessed companies disclose full details on all scope 3 emission sources. Most companies reported at least some scope 3 emissions, but the information presented does not cover all of their emissions sources. In some cases, only minor sources were reported, creating a misleading impression of the companies’ overall footprint.
The report urges companies to disclose methodologies and assumptions involved in the calculation of emissions to avoid misleading readers.
The exclusion of carbon intensive subsidiaries can also present a misleading presentation of a company’s environmental footprint, such as in the energy industry where fossil fuel related infrastructure is sold off or passed on to subsidiaries and joint ventures.
Out of the 25 companies assessed, all but one will likely rely on offsetting credits of varying quality, said the report. At least two-thirds rely on carbon dioxide removals from forestry and nature-based solutions to offset their future emissions.
However, these approaches are deemed unsuitable by the report, given that they can be reversed such as by cutting and burning forests. The report also highlights the global requirement to reduce emissions and increase carbon storage, not one or the other.
In addition, the report noted that claims of carbon neutrality are often misleading. Based on the 25 companies assessed, all of the carbon neutrality claims are subject to limited emission coverage, inconsistent messaging or procurement of low-quality carbon credits.
LEADERSHIP AND GOOD PRACTICE
A number of companies are showing promising signs with regards to nuances of renewable electricity quality, noted the report.
Among the 25 companies assessed, six of them largely source electricity from higher quality power purchase agreements (PPAs) and own-generation. Meanwhile, some companies are exploring other ways to further improve the integrity of renewable
The report highlighted a number of promising examples of companies reducing emissions with renewable electricity, such as procuring electricity through PPAs, own installations, and equity in renewable electricity projects as well as investing in development of alternative fuels such as e-methanol.
While a few companies demonstrate leadership in sourcing renewable electricity, the overall integrity of renewable electricity procurement remains low.
Unbundled renewable energy certificates (RECs) are used by most of the companies in the report for limited climate impact and reduction in electricity-related emissions, but there are signification limitations to this. One such limitation is that the certificates can be generated from old hydropower plants that have not contributed to the energy transition.
RECs can also be generated from wind parks that produce electricity at a different location or different point in time.
The report noted that companies have a central role in finding solutions to the climate crisis. However, they must also be subject to scrutiny and regulation to confirm the credibility of their pledges and claims. If not, they should be made accountable, added the report.