Report: Companies overhyping net zero commitments

The report by sustainability groups NewClimate Institute and Carbon Market Watch found of 25 major companies operating across different sectors and geographies, only 13 commit to reduce their full value chain emissions from 2019 by 40 percent on average—not 100 percent as suggested by their “net zero” and “carbon neutral” claims.

The “Corporate Climate Responsibility Monitor” found many company pledges are “undermined by contentious plans to reduce emissions elsewhere, hidden critical information, and accounting tricks.”

A press release accompanying the report added most companies with net zero or carbon neutrality pledges fail to put forward ambitious targets that “may lead to very little short-term action.”

Only one company’s net zero pledge—Danish shipping firm Maersk—was evaluated as having “reasonable integrity.” Along with telecoms Deutsche Telekom and Vodafone, the three companies were rated as the only ones in the study to be clearly committed to removing 90 percent of carbon emissions from their production and supply chains.

At least five of the companies in the study would only reduce their emissions by less than 15 percent, often by excluding downstream or upstream emissions in their value chain, which can account for more than 90 percent of the emissions under their control.

Energy provider E.ON, for example, may exclude market segments that account for more than 40 percent of its energy sales, while French supermarket chain Carrefour appears to exclude locations that account for more than 80 percent of its branded stores, the report analyzed.

“It’s not unusual to see companies that are doing the right things end up being accused of greenwashing because they’re not using data properly or reporting it correctly.”

Dan Thomas, Partner and Head of Corporates, KPMG UK

Thomas Day, lead author of the study for the NewClimate Institute, said companies’ “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. Even companies that are doing relatively well exaggerate their actions.”

Carrefour and Amazon both disputed the report’s figures to Compliance Week and reasserted their commitment to addressing their environmental impact.

One of the biggest criticisms in the report is that 19 of the companies plan to neutralize their carbon footprint mainly by “offsetting” their emissions through planting trees rather than taking a meaningful approach to reduce greenhouse gas emissions in their operations and supply chains. Only one company explicitly plans not to offset.

“There is a global requirement to reduce emissions and increase carbon storage, not one or the other,” said the report.

Challenge areas

Under the Greenhouse Gas Protocol, which is the accepted global measurement and reporting standard that forms the basis of carbon emissions reporting, companies are meant to disclose information under three “scopes.”

Scope 1 focuses on emissions from inside the business, like fuel combustion and company vehicles. Scope 2 is concerned with the amount of renewable energy the company purchases.

Scope 3 centers on emissions within the supply chain—the most difficult to quantify. Scope 3 often accounts for the majority of an organization’s carbon footprint as it could involve collecting data from hundreds of companies operating all over the globe.

Perhaps unsurprisingly, many companies simply ignore reporting under this requirement or “soft soap” the data, according to experts.

“Businesses of all sizes are making commitments to reach net zero, but for many, these claims will only cover Scope 1 and Scope 2,” said Daniel Usifoh, co-founder of sustainability software vendor Gateway Procurement.

“It’s conceivable that many businesses will claim to have achieved net zero but completely exclude their Scope 3 supply chain emissions from the calculation, and it is these that can make up 80 percent or more of a company’s carbon footprint,” he added.

Dan Thomas, partner and head of corporates at KPMG UK, believes “companies often sleepwalk into greenwashing territory”—rather than try to deliberately mislead—because their assumptions are based on poor or unchecked data.

“It’s not unusual to see companies that are doing the right things end up being accused of greenwashing because they’re not using data properly or reporting it correctly,” said Thomas. He added companies often fall foul of such criticism because “they don’t recognize the rigor they need to apply to meet their own targets or standards.”

Despite the studied companies’ failings in their green reporting, the report also credited some firms for pursuing promising examples of climate leadership.

For example, Google is singled out for developing innovative tools to procure high-quality renewable energy in real time that other companies are beginning to adopt. Meanwhile, Maersk and postal delivery firm Deutsche Post are praised for making major investments in decarbonization technologies for transport and logistics.