Corporate net zero targets - a new form of greenwashing?
Why all net zero targets are not created equal.
By Asiyah Choudry
October 6, 2022
Global emissions need to decrease by 45% by 2030 and fall to net zero by 2050 to meet the Paris Agreement target of limiting warming to 1.5 degrees Celsius. Nearly one-fifth of global entities (including nations, states, cities, and companies) have established net zero targets. Because there is no uniform standard for net zero target setting, the quality of these targets varies. A growing body of research suggests that most corporate net zero targets fail to meet a minimum standard, raising concerns that companies won’t be able to deliver on their climate targets.
The problem with net zero targets
Net zero refers to the global effort to bring greenhouse gas emissions down to zero. A company’s net zero target seeks to reduce the emissions associated with its activities. However, there is no singular standard for net zero target setting, making it easy for companies to greenwash their decarbonization efforts.
The Net Zero Stocktake report found that only one-third of companies with net zero pledges meet the UNFCCC’s Race to Zero ‘starting line’ criteria for net zero. These criteria include making a net zero pledge, developing an action plan, taking immediate action on commitments, and reporting on progress annually. The report also found that only 5% of companies meet the UNFCCC’s ‘leadership practices’ criteria, which require that companies include Scope 1, 2, and 3 emissions in their target setting and use carbon offsets only as a last resort. These findings mirror a 2021 report authored by the Energy & Climate Intelligence Unit and Oxford Net Zero that found that 40% of entities with net zero targets do not have interim targets, and 48% do not have a reporting mechanism.
How corporations use net zero to greenwash
It’s undeniably a good thing that companies are prioritizing climate action by establishing net zero targets. But there needs to be a greater focus on the quality of corporate climate targets to ensure that companies aren’t getting away with using net zero as a way of pushing a “greener” image. For example, in 2020, oil and gas company BP made a net zero commitment. However, BP’s net zero target does not encompass the entirety of its emissions impact, critically excluding fossil fuel emissions from the transportation sector, which result from burning BP’s products. BP may market itself as moving towards net zero, but this is misleading since its target does not encompass its full value chain emissions.
While net zero pledges might make a company look good, many corporations with net zero pledges aren’t on track to meet them. A report by the New Climate Institute and Carbon Market Watch evaluated the integrity of 25 multinational corporations’ climate strategies, including Apple, Amazon, and Google. It found that on average, net zero pledges would reduce emissions by only 40%, as opposed to the 100% implied by “net zero.” Of the 25 companies analyzed, only three were clearly committed to reducing 90% of value chain emissions. We need to be more critical of net zero pledges, understanding that they do not guarantee climate action.
Towards standardization - the Science Based Targets initiative
The Science Based Targets initiative (SBTi) supports corporations in establishing decarbonization targets rooted in climate science. In 2021, the SBTi released the Net-Zero Standard - a framework to support the development of science-based net zero targets. An SBTi-approved net zero target includes science-based near- and long-term 1.5-degree Celsius-aligned targets, which include Scope 1, 2, and 3 emissions. Close to one-third of the S&P 500 has developed SBTi-approved targets or plans to do so, but only 8% have SBTi-approved net zero targets.
The development of the Net-Zero Standard is beneficial for the standardization of corporate net zero targets. Adherence to the standard assures an organization’s net zero target is Paris-aligned and science-based.
What makes a good net zero target?
If you’re trying to assess whether a company has established a strong net zero target, here are five things to look out for:
1) Third-party validation:
Net zero targets that meet the SBTi’s Net-Zero Standard are 1.5 degrees Celsius-aligned and account for emissions across an organization’s entire value chain. Corporations must reduce 90-95% of emissions before neutralizing any remaining emissions through carbon offsets.
2) Interim targets:
Only 17% of companies analyzed by ClimateAction 100+ have established 1.5 degrees Celsius-aligned interim emissions targets. Interim targets help hold corporations accountable, ensuring that they are on track in the near term to meet their long-term net zero pledge.
3) Limited use of carbon offsets
Companies that rely on carbon offsets to meet their net zero target aren’t working to reduce their emissions. If a company is neutralizing the emissions it generates through carbon offsets without actually pursuing emission reductions, it is carbon neutral, not net zero.
4) Inclusion of Scope 1, 2, and 3 emissions
Scope 3 emissions are the largest contributor to overall emissions for many industries. For financial institutions, emissions from investment activities are 700 times higher than direct emissions. If a net zero target does not include Scope 3, it fails to account for the climate impact of an organization.
5) Annual reporting
Annual disclosures related to emissions and progress on net zero commitments can help validate whether a company is doing what they say they are doing.
The future of net zero
To limit warming, corporations need to achieve net zero emissions by 2050. However, companies with science-based net zero targets are still a minority. As net zero targets become more prevalent, it’s vital to assess whether they are legitimate or greenwashed. Though there has been some movement toward net zero in the private sector, net zero targets in their current state aren’t sufficient to limit global warming. The SBTi Net-Zero Standard provides a uniform target-setting methodology that helps corporations develop practical, actionable climate targets. We hope to see more companies adopt net zero targets in line with the SBTi’s standard.
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