As warnings have intensified about the massive damage that climate change will have on the world in the coming decades, big business has started to make commitments to reduce carbon emissions.
But are these companies making a genuine attempt to fight global warming, or simply “greenwashing” their brands to try to divert criticism while still reaping huge profits from their carbon-based industries?
With the COP26 summit in Glasgow coming after the UN warned the world was barrelling towards “climate catastrophe”, analyses by consultants and think tanks show there is still much more that can be done.
The omissions of ‘net zero’ emissions
The International Energy Agency (IEA) says that industry accounts for almost 40 per cent of the world’s energy consumption and still overwhelming uses fossil fuels: oil, gas and particularly coal, which all hugely contribute to human-induced global warming.
The IEA said that “a number of companies around the world have set ambitious targets, but their potential impact remains uneven”.
Out of 1,300 companies surveyed by the Boston Consulting Group, only 11 per cent said they had reached their carbon emission targets over the last five years. And just nine per cent accurately measured their emissions.
The InfluenceMap think tank’s “A-List” assessed the climate ambitions of hundreds of companies, but found just 15 were sufficient. Twelve of the 15 companies were European, with Unilever, Ikea, Nestlé and Tesla among the few industry heavy-hitters using their corporate clout to push for ambitious policies.
InfluenceMap’s Kendra Haven said that “large parts of the corporate world appear to remain ambivalent or actively opposed to bold climate action”. The London-based think tank disqualified companies that maintain memberships to “obstructive lobby groups”, so firms like Microsoft and Siemens AG did not make the cut because they are associated with either the National Association of Manufacturers or the US Chamber of Commerce.
The number of companies that have said they aim to reduce emissions to “net zero” in the future has increased more than sixfold since 2019 to over 3,000, BP said in a July report. However, the phrase “net-zero” can hide many emissions, depending on how the company chooses to define it.
Many firms have said their direct emissions would hit net zero in the coming decades – but depending on what they produce, their indirect emissions could be far larger. For example, major oil producers could commit to zero direct emissions while not including the vast carbon consequences of the oil they supply.
“Carbon offsets”, such as support for reforesting projects, can also be abused to bend the figure towards zero. However, for a transition in line with the targets of the Paris climate agreement, companies can get certified by the Science-Based Targets initiative, which brings together experts, NGOs and the UN Global Compact.
‘Greenwashing’
There are also steps the financial sector could take to help, including better tracking of the environmental performance of investments that are labeled as carbon neutral. Out of 16,500 investment funds analysed by the Carbon Disclosure Project, only 0.5 per cent are currently in line with the goals of the Paris agreement.
Of 16,500 investment funds analysed by the Carbon Disclosure Project, only 0.5% are in line with the Paris agreement
“The reality of traditional climate investing strategies does not live up to the promises,” a study by the French Edhec business school’s scientific beta research chair found, lashing out at “greenwashing”. “Speaking of climate investment when the companies’ climate performance only accounts on average for 12 per cent of the weight of their stocks in the portfolios is at best a misnomer and at worst misinformation.”
When it comes to the fossil fuel industry, IEA executive director Fatih Birol said that attention has so far been on American and European energy companies, but producers in the rest of the world also need to be put under pressure. “All these companies should be reporting in a transparent way how much investment they are putting on clean energy, how much emissions they are responsible for and what are their plans to face this,” said Birol.
Saying that “greenwashing” has posed a challenge, he added that the IEA has been tracking how these companies invest in clean energy. “Two years ago, one per cent of all their investments were going to clean energy, and this year it’s five per cent. So there is an increase,” Birol said. “But 95 per cent is still going to their usual practices”.