About two-thirds of the world’s largest 2,000 publicly-listed companies have set net-zero targets, yet major credibility gaps remain.
The number of publicly-listed companies setting net zero targets has risen exponentially in the past 16 months, marking a “significant milestone” in the global mission to bring greenhouse gas emissions to net zero by 2050, a new study suggested.
Between June 2022 and October 2023, 301 new company net zero targets were set, representing an increase of more than 40%, according to a report released Monday by Net Zero Tracker – an independent database of net zero commitments made by nations, regions, cities, and major companies across the world.
The study looked at 1,000 companies with net zero targets in place from the world’s largest 2,000 publicly-listed companies figuring in the Forbes Global 2000 list. It found that half of the world’s largest companies are now covered by net zero targets, a clear indication that “net zero is now a corporate norm,” as Dr. Takeshi Kuramochi, Senior Climate Policy Researcher at NewClimate Institute put it.
Nevertheless, despite half of the world’s largest companies having committed to net zero by mid-century, the study found that only a small fraction of them follow United Nations guidelines for what constitutes a quality net-zero pledge in line with the Paris Agreement’s 1.5C threshold. This, Kuramochi says, is due to the fact that most targets are based on self-defined emission boundaries.
“Many companies need to urgently refine their pledges and implementation strategies in line with the UN Expert Group’s recent markers of credibility and other Paris-aligned standards,” he said.
In their latest Net Zero Stocktake report, published in June 2023, Net Zero Tracker found that just 4% of company net zero commitments meet the UN ‘Starting Line criteria’, which define procedural steps for all actors in the Race to Zero, from setting a specific net zero target and clear conditions for the use of offsets to implementing immediate emission-cutting measures and regularly reporting on interim and long-term progress.
Moreover, it was found that only 37% of corporate net zero targets fully cover Scope 3 emissions, emissions that occur indirectly from activities related to an organisation’s operations, such as from the supply chain, distribution of goods, customer use of products, and disposal of waste. In many cases, this type of emissions represents the biggest proportion of a company’s total greenhouse gases output.
June’s report also highlighted major flaws in corporates’ carbon offsetting projects, finding that as little as 13% of corporate net zero targets include transparent and quality conditions under which offsets would be used.
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“Net zero commitments can provide a useful framework to guide companies, including their value chains and investors, through an orderly, efficient transition – but only if commitments are set with robustness and transparency,” said Natasha Lutz, co-data lead at Net Zero Tracker. “Weaker targets hinder companies’ ability to implement effective emissions reductions, and cause greater exposure to climate and reputational risk, and stakeholder mistrust.”
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