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November 10, 2022 · By Embedding Project
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Are your climate goals keeping pace with rising expectations and the latest climate science?
Rapid decarbonisation is vital to the survival of communities, the environment, and economies, and a wide range of efforts to do so are occurring across the globe. Societal expectations are mounting, new regulations and standards are emerging, and individual countries are introducing their own regulations around disclosure and emissions. But how is industry meeting these new expectations and responsibilities?
Nearly a third of organisations surveyed by the EY Global Climate Risk Barometer report on climate impacts in their financial statements, and nearly half have conducted scenario analysis, but what is the status of climate goals?
In light of concerns that a majority of climate targets are “alarmingly weak,” we took a look at the climate change-related goals we assessed over the past year to see where companies are rising to the challenge and where further work is needed.
When we first began our assessment of corporate sustainability goals a few years ago, the more ambitious climate change-related goals primarily focused on steep reductions in absolute emissions. This quickly gave way to science-based targets (initially aligned with the IPCC’s recommendation for achieving a maximum 2°C increase in global temperatures by 2100, and more recently, achieving a maximum 1.5°C increase in global temperatures).
These days, the focus is on net-zero emissions.
More than 3,800 companies worldwide have set emissions reduction targets through the Science Based Targets initiative (SBTi), and of those, some 1,400 have made net-zero commitments. This includes one in three of the world’s 2,000 largest companies, up from one in five in 2021, as you’ll see in the Net Zero Tracker.
While climate commitments are on the rise, it remains to be seen if these goals will achieve the level of action required to prevent catastrophic climate outcomes. Far too many organisations are setting goals without providing adequate detail for how they will credibly achieve them. We also find that far too many companies are overly relying on carbon offsets or future technological innovations. Nevertheless, organisations that transparently and genuinely commit to – and champion – ambitious goals like net-zero by 2040 or event climate-positive and who fall somewhat short are still likely to do more good than those who set conservative targets that would never be enough to meet the pace of change that is required.
Another positive trend that we have observed is that a growing number of the climate goals we have assessed over the past year have included at least some explanation of how the organisation intends to reach their target – through new decisions, investments in research and innovation, changes in products and services, new partnerships and projects, and more.
We have also noticed a rise in the number of goals that include short- and mid-term interim targets. For example, when it comes to net-zero goals, many organisations present a combination of absolute reduction milestones and some analysis that helps the reader to better understand the steps they would need to take to credibly address emissions.
It is still the case that most of the climate goals we assess are related to Scope 1 and 2 emissions (direct emissions and purchased electricity, steam, heat, or cooling).
The good news is that a growing number of organisations are setting Scope 3 (value chain) goal and committing to support value chain members in operating within climate-related thresholds. This includes supporting partners to pursue renewable energy, such as providing financing to partners through insetting projects, providing lower-carbon offerings to customers, and aligning their investment portfolio with their net-zero goal.
Few companies explain how their targets link to their business strategy and key business drivers. To think this through, consider the following questions:
What impacts to your business and to the stability of the social and environmental systems around you may arise from failing to set – and deliver upon – goals aligned with 1.5°C limits? What opportunities may be realized by pursuing them?
Will achieving your climate goals require changes in how you operate? What about to the goods and services you produce? And the goods and services you procure?
What investments will need to be made?
Providing these kinds of details can help your audience to understand how your goals will support your organisation’s long-term strategy and success, and will strengthen the credibility of your commitment to achieving them.
Many of the goals we review are measurable and time-bound and include interim targets, but few goals explain the motivating factors that instigated and influenced the creation of the goal in the first place.
Why are you setting a climate change goal? Why now? How did you determine what it looks like to do your part?
Have you recently added a value chain goal – why did you make the decision to do this? How did you determine the scale of action needed to address the issue?
A climate change goal that explains the rationale for its creation, as well as the assumptions and knowledge that informed it, will be considerably more credible than a goal that emerges from a vacuum.
Explaining this process of development and implementation should not be an onerous undertaking; rather, it simply involves transparently disclosing the hard work you have already accomplished behind the scenes.
Climate change is a systemic issue and it cannot be prevented by any one organisation or industry. This is why it is crucial for companies to acknowledge the importance of intersectional (and intersectoral) efforts to address climate change and to set credible goals that will contribute to systems resilience.
Net-zero goals are necessary – so, too, are goals that enshrine and advance climate justice, that help communities to grow their resilience, and encourage and empower policy makers and policy influencers to support progressive climate change-related laws and regulations.
A good starting point for organisations is to set goals that outline how they will enable social and environmental resilience, such as by sharing knowledge, convening other actors, or leveraging unique resources.
For more information and analyses on climate change goals or other sustainability goals, we recommend visiting our free Goals Database. You can also read our blog with more advice on setting credible goals.
Image by saiko3p on Shutterstock.