The net-zero challenge for business
The pressure is mounting on business to prove it is seriously tackling the issue of carbon emissions and climate change
There is mounting concern about our ability to reduce carbon emissions and keep global warming to 1.5°C above pre-industrial levels. The IPCC has warmed time and again that businesses and the government must go further and much faster if we are to avoid the worst of the climate crisis.
Businesses focus on cutting emissions
UK businesses are heeding the call to shift to net-zero emissions. Data released by the UK Government ahead of the COP26 climate summit in November last year claimed that more than half of the UK’s largest businesses have committed to eliminate their contribution to carbon emissions by 2050, representing a total market capital of more than £1.2tn and combined annual turnover of £700bn.
Business and industry minister Lee Rowley says: “Businesses both large and small, across all sectors of the global economy, have a crucial role to play in both reducing their environmental impact and developing the green technologies that will set us on the path to net zero.
“With over 2,500 UK companies joining the ‘race to zero’, including the majority of our largest firms, the UK is leading the way in showing how going green doesn’t just make sense for the planet - it makes business sense too.”
Globally, more than 5,200 companies of all sizes have joined the UN Race to Zero across sectors including transport, retail, finance and manufacturing. They join more than 1,000 cities, 67 regions, 441 investors and more than 1,000 higher education institutions which collectively cover nearly 25% of global CO2 emissions and 50% of global GPD.
If the world is to achieve net zero by 2050, business must step up. And many of the biggest companies in the UK are. The likes of BT, Legal and General, and Ocado are aiming to be net zero in their own operations (known as scope one emissions) by 2030, while Barratts and Reckitt Benckiser are aiming for 2040.
Emma Walmsley, GSK CEO, says: “The science is clear that nature loss and climate change are already harming human health. So we must act now to protect and restore the planet’s health if we are to protect and improve people’s health. That’s why GSK has committed to have a net zero impact on climate and net positive impact on nature by 2030.
“For GSK, our sustainability commitments are an integral part of our strategy, making our business more resilient, protecting our operations and helping us to achieve health impact on a global scale while delivering returns for our shareholders.”
The challenge of meeting net zero
Achieving net-zero emissions across the full supply chain (including scope three emissions) is proving harder. BT is aiming for 2040 across its supply chain and customer emissions, as is Ocado, while Sainsbury’s believes it will be 2050 before it is net zero across its value chain.
Despite the pledges, research by the Corporate Climate Responsibility Monitor suggests that companies are “behind” on their plans. Having analysed promises made by 25 major firms, it suggests that businesses are only on course to reduce emissions by 40%.
“We set out to uncover as many replicable good practices as possible, but we were frankly surprised and disappointed at the overall integrity of the companies’ claims,” says Thomas Day of NewClimate Institute and the lead author of the study.
“As pressure on companies to act on climate change rises, their 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.”
Reducing emissions in the supply chain in particular remains a major challenge. The CDP, a non-profit that helps companies disclose their environmental impact, found that more than half (56%) of suppliers had no climate targets in 2021, while just 28% have a low-carbon transition plan in place.
Companies are also insufficiently tracking scope three emissions, with only 38% saying they engage with suppliers on climate change and 16% on water security.
Sonya Bhonsle, global head of value chains and regional director corporations at the CDP, says: “Our data shows that corporate environmental ambition is still far from being ambitious enough. Alongside that, companies have blinkers on when it comes to assessing their indirect impacts and engaging with suppliers to reduce them.
“Companies must act urgently to cascade action and manage environmental impacts throughout their supply chains to scale the level of action to secure a 1.5°C future. This is essential for the transition towards a sustainable net-zero, deforestation-free and water-secure economy.”
The CDP also found that while 71% of suppliers are reporting scope on emissions, just 55% report scope two and 20% scope three. This despite the fact that greenhouse gas emissions from a company’s supply chain are, on average, 11.4 times higher than operational emissions.
What business needs to hit climate goals
To hit climate goals, companies say they need more clarity from governments and policy makers. Almost half (49%) of CEOs globally say they are not clear how they should operate in order to hit the 1.5°C warming target, with that number rising to 70% in Oceania. Just 18% say they are clear on this overall, rising to 34% in Asia.
This Earth Day, there will be much talk of small things people can do to make a difference. These might include planting a tree, carrying a reusable water bottles or coffee cup, or walking to work.
But consumers are looking for more from business. Where once it might have been ok to pay sustainability lip service, now consumers are looking for companies to walk the talk, with 24% of UK adults believe brands should take a stand on climate change.
And it is becoming ever-clearer that human-induced climate change is, in the words of the IPCC, causing “dangerous and widespread disruption in nature and affecting the lives of billions of people around the world”.
The world can hope to stave off the worst impacts of climate change but we are facing a “now or never” moment, with emissions needing to peak by and nearly halve this decade.
Jim Skea, a professor at Imperial College London and co-chair of the working group behind the IPCC report, says: “It’s now or never, if we want to limit global warming to 1.5°C. Without immediate and deep emissions reductions across all sectors, it will be impossible.”