The companies belonging in the world’s most advanced economies, the G7, are also some of the highest fossil fuel emitters of the 20th century. Recent analysis by the CDP with Oliver Wyman finds that the worst offenders have not set targets that are ambitious enough to reach the 1.5°C pathway set out in the Paris Agreement back in 2015.
If these advanced economies and companies cannot set good enough targets and hold themselves accountable, what chance does the rest of the world have?
The CDP & Oliver Wyman report
The September 2022 study reviewed the publicly disclosed emission targets of over 4,000 global companies, revealing that:
- Current targets will only limit temperature increase to a 2.7°C pathway – well above the 1.5°C target and still above the long-term target of 2°C.
- The biggest countries are unable to set goals that meet these targets.
- North America and Asia are far behind Europe in target setting.
Why is climate target setting so difficult?
It raises the question of why this so tricky, and if there’s any room for hope for the rest of us. For me, the answer is twofold;
- Introducing regulation by established governments is slow
Firstly, the regulatory environment in these countries is only now getting its footing in most European Countries, seven years after the Paris Agreement. The slow cogs of established government and policy takes time. We’ve had to experience heightened voter education and the damaging physical toll on our environment for governments to introduce change and active climate legislation.
Regulations introduced so far:
- Germany, Italy and France (along with most other European countries) have been early policy adopters have also additionally strengthened the EU Taxonomy and revision of the Corporate Sustainability Reporting Directive (CSRD).
- The UK has now introduced its mandatory reporting of climate impacts under the Task Force on Climate-related Financial Disclosures (TCFD) through amendments to the Companies Act 2006. This means that over 1,300 of the UK’s biggest companies report, measure, manage and adapt their operations to ensure stakeholders can make better informed decisions about their actions to address climate change. This regulation should see an uptick in companies creating public targets, and grow the number of companies on a decarbonisation pathway in the UK.
- Japan and North America face a much tougher battle with little regulation in place, this year only seeing the first drafts of the Securities and Exchange Commission (SEC) carbon accounting rules. This is expected to lead to increased company activity in addressing climate change, and where there is measurement and benchmarking, companies will then begin to set targets – hopefully in alignment with the Science Based Targets initiative (SBTi) on a 1.5°C or 2°C pathway.
- Little awareness and education
The second point stems from this lack of regulation and that is around stakeholder demand and awareness. Through a lack of education and political gamesmanship, many of us are not demanding enough of companies in improving their climate performance.It was only a couple of years ago when the US withdrew from the Paris Agreement, setting the country five years behind the rest of the world in its drivers and regulation. In Europe and Asia, we have an aging population who are perhaps not as aware of the consequences of climate change, or are set in their ways about the cost of living and the cost of change to a low carbon economy. These factors were not providing enough pressure on investors and companies to grow and enhance their social consciousness in measuring and reducing their carbon footprints.
But the younger generation is now coming to the fore. Greta Thunberg, the Generation Z and passionate climate activist has inspired Millennials to no longer accept the status quo. We’re seeing Millennials creating new companies that are purpose driven, moving their pension schemes to more sustainable investments, removing conservative board members (such as the Exxon Mobile board spill in 2021), and voting out governments that won’t drive meaningful change on climate.
Whilst a lot has been done in the last seven years, there is still plenty more to do. We can acknowledge that it takes time to turn these large corporate ships around, and that many will only respond to a movement in their share price or through the regulatory environment. Nonetheless, we as individuals must additionally demand greater transparency and ambitions of the companies we support in our everyday decisions
By Daniel Gribbin, COO and VP Sustainability & ESG at Emex.
About Emex: Emex is an ESG (Environmental, Social and Governance) and EHS (Environmental, Health & Safety) management platform, purpose built to help bridge the gap between our clients’ sustainability aspirations and their effective actions. Our product is a single codebase software solution that covers all aspects of ESG and EHS, from data collection to analysis & sustainability reporting. We help our clients elevate their business efficiency and public image while maintaining or increasing their ROI to ensure long term business sustainability.
