Is criticism of climate commitments misplaced?

Food giants Nestlé and Unilever are among a number of businesses to have their net-zero claims picked apart in a new report. David Burrows reports.

When Nestlé published its net-zero plan in December 2020, the company’s CEO urged others to follow its lead. “Those who choose hesitation over action will be endangering our planet and their business,” Mark Schneider wrote in a piece for Fortune. Having read the headlines last week, some of those who did follow its lead may well be starting to regret it.

‘Climate change: top companies exaggerating their progress – study,’ ran the headline on the BBC. ‘Are companies tricking us with their net-zero claims?’ wondered New Statesman. “Many company pledges are undermined by contentious plans to reduce emissions elsewhere, hidden critical information and accounting tricks,” said the authors of the new corporate climate responsibility monitor. 

The experts, from the NewClimate Institute, based in Germany, and Carbon Market Watch in Brussels, unpicked the climate pledges of 25 of the world’s largest companies – no mean feat. Together they are responsible for 5% of global greenhouse gas emissions. 

Carbon critiques

Each company was assessed against four areas of action: tracking and disclosure of emissions; setting emission reduction targets; reducing emissions; and climate contributions and offsetting. They found only one (the shipping company Maersk) had “reasonable integrity” overall. In reality, the firms have committed to emission reductions of just 40% – far from the 90% or more now thought essential to keep temperature rises below 1.5 degrees. ‘We told you so,’ will be the cry from campaigners.

The research and its damning conclusions will take time to unpick but the damage is arguably already done. Nestlé and Unilever were in the bottom five (below Amazon and EON) and were hauled over the coals in the media. Have these leaders of the net-zero race fallen at the first hurdle? And if so where does that leave everyone else?

Maria Mendiluce, CEO at the We Mean Business Coalition, answered both questions in a post on LinkedIn: “Corporate pioneers are under understandable scrutiny […] but there are hundreds of thousands of businesses, including many major global companies, that are not taking any action at all,” she wrote. “Every business that has made a net-zero commitment is part of an unprecedented global experiment without clear roadmaps or guidelines to follow.”

In other words: give them a break and focus on those businesses that have so far kept their mouths shut. Research in September by Natural Capital Partners, which works with corporates on carbon reduction and offsetting, showed 38% of companies in the Fortune Global 500 have delivered a “significant climate milestone or are publicly committed to do so by 2030”. There should be improvements in the way businesses report their action so that it’s clear, said chief marketing officer Rebecca Fay, but the main focus should be on the 62% that aren’t taking action, she added.

It’s a fair point – and one an environment lawyer made to me last week when we discussed whether the critiques of carbon commitments could be misplaced. “I think there needs to be a bit of a readjustment allowing people to set some targets and go for them and to make the investments,” he explained. “Hold them accountable for not setting ambitious enough targets rather than delivery of them,” he added.

Press release promises

Commitments to net-zero have snowballed but few companies have produced enough detail to keep the likes of the NewClimate Institute and Carbon Market Watch happy. Whether it’s better to have a pledge deemed ‘very low integrity’ or no pledge of note (that is, a press release) is something companies will now be weighing up.

The researchers said they hoped their findings would see corporates reacting “constructively”, replicating the best practice they have identified (the report offers not only damning criticism but nuggets of wisdom and examples of how things should be done). “The difficulty of distinguishing real climate leadership from greenwashing is a key challenge that, where addressed, has the potential to unlock greater global climate change mitigation ambition,” they said. 

Some of the bad practice was certainly bad: forgetting to include scope 3 emissions, or selecting baseline years when emissions were “extraordinarily high”, for example. Using carbon neutral claims for a single brand or specific product (as Nestlé has done) was also red flagged. 

The concept of offsetting also came in for heavy criticism, not least because it distracts from actual emission reductions. The integrity of offsetting claims is also “hampered by the reality that there are currently no offset credits available from any markets that can meet all the criteria for robust environmental integrity”. Tread very carefully, was the warning from the experts who were also not fooled by companies side-stepping the term offsetting and replacing it with ‘neutralisation’, ‘netting out’ or ‘reducing the footprint’.

Still, they introduced a new phrase they would be happy with: real zero. Net-zero is unhelpful, suggested Thomas Day, one of the study authors, as it can “force” companies into offsetting or “creative emissions accounting”. Day and his fellow researchers therefore want to see pledges on specific and unambiguous emission reduction targets. 

“There may be more merit in encouraging companies to set ambitious but unambiguous emission reduction targets that go close to zero without implicitly depending on offsetting, and encouraging companies to remain transparent and take responsibility for the remaining unabated emissions through climate contributions without neutralisation claims,” they wrote. Imagine how that will go down with corporate marketing teams. 

Whether this all points to genuine greenwash or genuine misunderstanding we will likely never know. Some – perhaps many, even – of the net-zero commitments to date have been driven by CEOs eager to say something and marketing teams all too willing to play along. (One consultant I spoke to suggested the pressing need for a new breed of ‘environmental marketeers’ that can help companies develop their green targets and keep on the right side of scientific scrutiny and indeed regulation). 

This is a very steep learning curve for many businesses (especially those in food with footprints dominated by scope 3 emissions that could prove impossible to reduce to zero). Sybrig Smit from the NewClimate Institute sympathised with companies faced with the “inconsistent advice being issued by consultants and standard setting initiatives”. Indeed, there was mention of “loopholes” in the process used by the Science-Based Targets Initiative (SBTi), which was also the subject of unwelcome headlines last week. 

Silent shock

Some of the companies singled out in the report have welcomed the scrutiny and are already engaging with the authors. Others have poo-pooed the findings (There were a few ‘my parameters are different to yours’ responses). 

Both Nestlé and Unilever are engaging with the authors. Nestlé global head of climate delivery and sustainable sourcing Benjamin Ware said the report “lacks understanding of our approach and contains significant inaccuracies”, though he offered no further detail. The work that went into the company’s roadmap was “rigorous and extensive”, he added, but it represents a “starting point” and “we welcome scrutiny of our actions and commitments on climate change”.  

Mendiluce said there would inevitably be “course corrections” over time. “This is not a reason to stop or slow down but rather to learn and move forward as quickly and effectively as possible,” she wrote. It might feel like a case of one step forward (the wave of commitments in 2021), two steps back (the realisation they may not be up to scratch) but businesses should prepare for a period of scrutiny. Those that don’t or are keeping shtum are in for a big shock. 

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