Net zero targets are becoming the norm for major corporations, according to findings from the ECIU (Energy and Climate Intelligence Unit) and Oxford University’s net zero tracker. The research finds that the proportion of major companies setting net zero goals has increased considerably over the past two and a half years. In total, the number of companies on the Forbes Global 2000 list that have made climate pledges has more than doubled- growing from 417 in 2020 to 909 in 2023. They note: “Net zero is a corporate norm, with almost two-thirds (65%) of the annual revenue of the world’s largest 2000 companies now covered by a net zero target.”[i] The annual revenue covered by net zero targets has also increased considerably- growing from $3.8 trillion in December 2020 to $26.4 trillion today.
However, the study also revealed that despite progress in the number of net zero targets being set, corporations are failing to make these credible, with issues including a lack of detail, up-to-date scientific basis for targets, as well as provision for long-term tracking. Lack of integrity can be displayed by the fact that just 4% of company net zero commitments meet the UN’s revised ‘Starting Line criteria’, announced in June 2022 as part of the UN Race to Zero campaign. This included procedural steps for all actors moving to net zero (for example, setting a specific net zero target, coverage of all emission scopes for companies, and clear conditions set for the use of offsets), as well as a requirement for members to phase down and ultimately phase out all unabated fossil fuel usage[ii]. ECIU’s data reveals that only a third (37%) of corporate net zero targets fully cover scope 3 emissions, and just 13% specify quality conditions under which any offsets would be used[iii].
The research singled out fossil fuel companies as having largely ‘meaningless’ climate pledges in place. It found that most of the 75 fossil fuel companies net zero targets do not fully cover, or do not clarify coverage, of Scope 3 emissions- the largest scope of emissions by far for these companies. Further, it found that whilst two-thirds (67%) of fossil fuel firms have net zero commitments, there is a distinct lack of oil & gas phase-out plans, thus leaving these targets misaligned with the scientific and policy consensus. This is despite clear UN guidelines that state, to be credible, net zero targets must include "specific targets aimed at ending the use of and/or support for fossil fuels.”[iv][v]
On the matter, Dr Steve Smith, Executive Director of Oxford Net Zero and CO2RE said: “Expecting fossil fuel companies to go net zero might seem like asking turkeys to vote for Christmas. But even in a fossil-free world we will need clean energy for all and the ability to sequester residual carbon. People in fossil fuel companies have the skills to build the future. By falling prey to the status quo, these companies are either delaying the net zero transition or losing out on the industries of tomorrow and increasingly today.”[vi]
The findings come as oil-giant Shell saw its recent AGM disrupted by climate activists, with protestors trying to take to the stage, leading to the meeting being delayed by over an hour. The corporation is also having to contend with an increasingly vocal minority of shareholders who are pushing for faster progress in tackling climate change. According to RTE, preliminary figures showed that a fifth of Shell shareholders voted in favour of a resolution submitted by the activist group Follow This. The measure called on Shell to set more ambitious emissions targets[vii] however, this measure was subsequently rejected by the board.
The findings from the net zero tracker contrast with the increasing investor pressure on corporations to show they are taking action and ‘walking the walk’. We have already seen companies link carbon targets to remuneration, with PWC recently reporting that almost 80% of major European companies are linking executive pay to ESG metrics. This trend also extends to lobbying, where in May last year, we noted how an investor network worth more than $130 trillion launched a new global standard for climate lobbying. At the time, we discussed the trend for companies to face increased pressure to align their activity with their in-house sustainability goals. This is amid fears of a growing mismatch between firms' publicly stated decarbonisation ambitions and how they seek to influence legislation and regulation behind closed doors.
There are financial opportunities for companies acting as sustainability leaders, where a study from EY last year found that companies leading on climate action are more than twice as likely to exceed financial targets. The research, which surveyed more than 500 companies, each with a valuation of $1bn or more, looked at the measures taken to reduce emissions across the value chain. It found that of those classed as pacesetters (displaying high action on sustainability),[viii] 52% have captured significantly higher financial value than expected over the past year. Further, 93% of the surveyed companies had made public commitments to climate action. Typically, these were found to have a specific emissions reduction target, but just 11% had more ambitious goals like achieving net-zero emissions[ix].
[i] Net zero targets among world's largest companies… | Net Zero Tracker
[iii] Net zero targets among world's largest companies… | Net Zero Tracker
[iv] Net zero targets among world's largest companies… | Net Zero Tracker
[v] high-level_expert_group_n7b.pdf (un.org)
[vi] Net zero targets among world's largest companies… | Net Zero Tracker
[vii] Shell CEO shielded by security amid AGM protests (rte.ie)
[ix] Ibid
Lauren has extensive experience as an analyst and market researcher in the digital technology and travel sectors. She has a background in researching and forecasting emerging technologies, with a particular passion for the Videogames and eSports industries. She joined the Critical Information Group as Head of Reports and Market Research at GRC World Forums, and leads the content and data research team at the Zero Carbon Academy. “What drew me to the academy is the opportunity to add content and commentary around sustainability across a wealth of industries and sectors.”
