Companies can, and should, do more to reduce their emissions, finds The World Economic Forum.
Major corporations play a disproportionate role in contributing to greenhouse gas emissions. A 2017 study by CDP, the non-governmental organisation that collates the voluntary emissions disclosures from more than 7,000 large businesses, suggests that just 100 large conglomerates (including ExxonMobil, Shell, BP and Chevron) are responsible for a massive 71% of total global emissions.
But how well industries are responding to the task of reducing their carbon footprints was the subject of a new 2020 report, The Net Zero Challenge, compiled by The World Economic Forum in partnership with Boston Consulting Group.
It further analysed data from CDP, to gauge the extent of corporate progress on climate change. Unfortunately, its findings do not make for comfortable reading.
Thanks in part to global demand for energy rising by 2.3% in 2018, the report found that “only a few countries have a roadmap and robust policies to deliver on a net-zero economy by 2050” – the timeline the Intergovernmental Panel on Climate Change (IPCC) identifies as being necessary to ensure global temperature rises do not exceed 1.5 degrees above pre-industrial levels. And not only are governments failing to act (see chart, below), this inertia is trickling down to include companies. “The apparent failure of governments to act increases the responsibility for corporations to fill the void,” says the report.
But, it adds, businesses are failing to even declare their emissions data to the CDP, and if they don’t even report, there is little hope they will take actions to make a difference. “Just under 7,000 companies actually disclose their data. Of these, only a third provide full disclosure; only a quarter set any type of emissions target and only an eighth actually reduce their emissions year-on-year.”
Analysing industry sectors, it finds that of the 6,937 responding companies, agrifood/forestry and light manufacturing are worst for emissions disclosures (74% of firms in these sectors give no or partial disclosure). Sectors not far behind include services (72% of firms give no or partial disclosure), followed by construction & infrastructure (71%) and transport (70%).
The table shows that of the 11 sectors measured, fewer than 15% of companies have even set reduction targets. By far the best performing sector was finance. Globally, more than a third (34%) of reporting companies were making emissions reductions. The next best sectors for reporting reductions were consumer/retail, and energy (18% each).
More commitment needed
The report claims this current level of corporate action is “about half of what is needed for a 1.5 degree centigrade world”, but it’s also critical of a lack of scrutiny of business supply chains. It says: “Fewer than one in 10 companies overall has a target on emissions. But companies are even less rigorous in tracking and addressing the indirect emissions produced by their value chains. Corporations have potentially enormous leverage on supplier behaviour.”
Sectors The Net Zero Challenge report highlights as being particularly destructive are the energy, transport and building sectors, where current emissions trajectories far exceed those required by 2050. It reveals volume growth in emissions-intensive sectors such as a projected 30% growth in cement by 2040, and 10%-15% in the steel sector.
The report concedes that some sectors – notably transport and aviation – have “hard to abate” emissions trajectories. However, it is critical of companies not seeking low-carbon alternatives and argues “most companies, even in energy-intensive sectors, can realise energy and process gains in the range of 20% at little or no cost”. It cites that the most energy-efficient oil and gas companies are already demonstrating 70% less methane intensity than the upstream average for the sector. The report argues several sectors, including cement, steel, aviation and oil & gas, can realise significant efficiencies.
Beyond their own activities, the report urges firms to do “more to decarbonise their supply chains.” It says: “By leveraging their significant buying power, many large corporations are able to reduce volumes of GHG (greenhouse gas) emissions.”
Source: The Net Zero Challenge – WEF in collaboration with Boston Consulting Group