Companies’ Climate Pledges: A New Report Unveils the Reality

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Companies’ Climate Pledges: A New Report Unveils the Reality

While no company is perfect, there are clear leaders that others should strive to follow. In the end, decarbonisation should be a common goal that can only succeed through collective efforts. And there is no sector better positioned to lead the global efforts in addressing climate change than the tech industry.

14 February 2023 – by Viktor Tachev   Comments (0)

The world’s leading companies aren’t only lagging in their sustainability and decarbonisation efforts, but they are even making misleading climate pledges. The tech industry, home to the most innovative companies, is among the biggest laggards. Without more ambitious and actionable pledges for deep and immediate decarbonisation of their entire value chains, the Paris Agreement targets risk becoming a pipe dream.

The Climate Pledges of the World’s Leading Companies 

The Corporate Climate Responsibility Monitor 2023 report by the New Climate Institute and Carbon Market Watch concludes that the climate pledges of leading companies are misleading. They also remain less than half of what is required by 2030 to limit the global temperature rise to 1.5°C.

Furthermore, most of the climate promises of the 24 companies subject to analysis are worded vaguely and covered in ambiguity. As a result, they open the door for companies to continue doing business as usual and demonstrate insufficient decarbonisation progress.

Net-Zero Pledges Break Down to Only Moderate Emission Reductions, Source: Corporate Climate Responsibility Report 2023
Net-Zero Pledges Break Down to Only Moderate Emission Reductions, Source: Corporate Climate Responsibility Report 2023

The report also finds that the long-term net-zero climate pledges of the leading companies primarily distract from the need to cut greenhouse gas emissions down significantly. The companies subject to analysis plan to reduce 15% of their entire value chain carbon emissions by 2030. Even the most optimistic scenario of up to 21% in greenhouse gas emissions reductions remains less than half of the 43% needed for the 1.5°C target.

Furthermore, just five of the 24 companies have committed to deep decarbonisation within their net-zero carbon emissions pledges.

Maersk, the best performer in the report’s 2022 edition, remains the only company with a “reasonable” climate strategy integrity rating.  

Focus On the Unambitious Climate Pledges of Tech Companies 

The expectations for the tech industry are to lead the mission to reduce carbon emissions and slow climate change down. Yet, the companies covered in the analysis have widely demonstrated disappointing results on every climate pledge.

Apple, Google and Microsoft fall in the “moderate integrity” category, while Amazon’s integrity rating is “low”. Samsung Electronics is among the worst performers in the report, falling in the “very low integrity” category.

While companies like Apple, Google and Microsoft are generally perceived as sustainability champions and climate advocates with progressive policies, the Corporate Climate Responsibility Monitor 2023 report paints a slightly different picture. The key concern is their reliance on offsetting practices, which undermine real targets and mislead consumers. The carbon neutrality claims of Apple, Google and Microsoft cover just 3% of their emissions on average. Furthermore, the fact that the vast majority of emission sources are excluded from the claims isn’t explicitly clear in the marketing materials displayed to consumers.

Companies like Microsoft, Amazon and Google all have insufficient emissions reduction plans and carbon emission elimination strategies. The strategies for achieving net zero carbon emissions and addressing Scope 3 emissions, which account for up to 77% of the carbon footprint of those companies, remain mostly unclear in their sustainability plans.

According to the authors, the good practices that Google, Amazon and Microsoft demonstrate aren’t sufficient to justify their misleading carbon neutrality claims.

Apple

With transparency and integrity rated as “reasonable” and “moderate”, Apple is among the best performers in the tech industry.

The company implements reasonably comprehensive emissions reduction measures, prioritising deep decarbonisation in the medium term.

The report highlights Apple’s dedication to helping its suppliers decarbonise their operations. One of the company’s main practices is making high-quality renewable energy procurement options accessible to its suppliers. Furthermore, the company also actively implements measures to extend the life of its devices.

The proportion of Full Value Chain GHG Emissions that Companies Commit to Reduce Between 2019 and 2030, Source: Corporate Climate Responsibility Monitor 2023
The Proportion of Full Value Chain GHG Emissions that Companies Commit to Reduce Between 2019 and 2030, Source: Corporate Climate Responsibility Monitor 2023

However, the authors identified several red flags. For example, they describe Apple’s current and planned carbon neutrality claims as “potentially misleading exaggerations”. To become carbon neutral by 2030, the company aims for a 63% emissions reduction, with the remaining emissions to be offset. However, Apple’s announcements lack a clear explanation or additional emissions reduction plans beyond 2030.

Microsoft

Like Apple, Microsoft has a “reasonable” rating for its transparency efforts. The integrity of its commitments falls in the “moderate” category.

According to the authors, the company demonstrates leadership in the transparency of its emissions disclosure and its offset credit use. It is also very proactive in testing innovative emissions-reduction technologies. Microsoft plans to commit to relying on 100% local renewable energy with 24/7 matching. 

Alongside Google, Microsoft is singled out as a best-practice example for other companies to follow when reducing their Scope 2 energy-related emissions, effectively tracking location and market-based emissions and investing in additional renewable energy projects in the local grid. 

However, the report concludes that its targets lack integrity and are seriously undermined by a large reliance on contentious CO2 removals. While Microsoft claims that it has been “carbon neutral since 2012” and will become “carbon negative by 2030”, it hasn’t committed to reducing emissions by more than 38% of 2019 levels. Furthermore, the carbon neutrality target excludes most emissions sources. The company also doesn’t plan for further emissions reductions beyond 2030. 

Google

Google’s overall transparency and integrity ratings fall in the “moderate” category. The company’s net-zero target for 2030 is a 37% emissions reduction. It hasn’t committed to deeper decarbonisation beyond 2030.

The authors note that while the company’s plans for decarbonising its electricity-related emissions are comprehensive and innovative, it is unclear if the targets for other emission sources, especially Scope 3, would be sufficient. Currently, they represent the majority of Google’s emission footprint.

Proportion of Full Value Chain GHG Emissions that Companies Commit to Reduce with their Net-Zero Pledges, Source: Corporate Climate Responsibility Monitor 2023
The Proportion of Full Value Chain GHG Emissions that Companies Commit to Reduce with their Net-Zero Pledges, Source: Corporate Climate Responsibility Monitor 2023

On the bright side, the report singles out Google’s leadership in innovative sustainability practices, like 24/7 monitoring and matching renewable energy generation with consumption. The company has also recognised the limitations of different renewable energy procurement options. Last but not least, the Google.org initiative is consistently investing in advancing innovative climate solutions.

Amazon

Amazon is among the worst performers in the report. The authors note that since the past edition, the company has made little progress in its climate pledges.

Amazon’s “net-zero carbon by 2040” pledge currently remains unsubstantiated. It is unclear which GHG emissions are included and what parts of the value chain the pledge covers. 

In addition, the report notes that Amazon’s efforts to reduce emissions from electricity use lack transparency. Compared to its peers, the company provides fewer details on its plans for decarbonising downstream Scope 3 emissions.

On the bright side, Amazon was the world’s leading corporate buyer of clean energy in 2021. 

Implications of Tech Companies’ Weak Climate Pledges 

As the pillar of innovation, tech companies should rise to the occasion and develop more ambitious climate pledges. They should pursue roadmaps prioritising carbon neutrality in the short-term and deep decarbonisation by 2040 or 2050 at the latest.

This is imperative since the scale of some of these companies means their decarbonisation efforts, or lack thereof, have a substantial effect on a national level for the countries they are operating in.

For example, Samsung, one of the worst performers in the report, regularly takes criticism for its weak climate commitments. And while the company has started to take steps in the right direction, like joining the RE100 initiative, it needs to catch up to others regarding renewable energy adoption. This is a significant problem for South Korea since the company is the leading electricity consumer in the country. As such, it significantly contributes to the growing emissions.

TSMC, a global leader in chip production and Taiwan’s biggest electricity consumer, is another example. Due to the scale of its operations, the company can single-handedly affect the decarbonisation of its home country. While TSMC’s electricity consumption and emissions continue to rise, the company uses just a 9.2% share of clean energy to satisfy its energy demands. TSMC aims to increase this figure to 40% by 2030. Similar to Samsung, the company isn’t doing enough to lead by example and embrace renewables at scale. Instead, TSMC is persuing “carbon neutral LNG”.

While Samsung and TSMC, in part, may be limited by domestic energy market constraints, if they don’t improve their climate commitments, they will also suffer potential losses on the business side. For example, the two companies are working with Apple, which aims to decarbonise its supply chain by 2030

Tech Companies Should Rise to the Occasion

The world of the biggest companies is a world of extremes. On the one hand, some companies are investing in innovative technologies and actively working to decarbonise their entire value chains. On the other hand, climate laggards are stalling the climate progress of entire industries and countries by refusing to embrace renewables.

However, currently, the ICT sector is responsible for up to 3.9% of global GHG emissions. These figures will continue to rise with the increased demand for such products and services. Despite the claims of tech giants, the CCRM report concludes that the ICT sector is far from being “carbon neutral”.

The tech industry should be the one driving the future, not stuck in the past. To do that, companies need to scale up their ambition to meet the Paris Agreement’s goals. They should focus on deep and quick decarbonisation across the entire value chains, advocate for better local clean energy initiatives, invest in R&D and roll out new energy-efficient technologies on a broader scale.

by Viktor Tachev

Viktor has years of experience in financial markets and energy finance, working as a marketing consultant and content creator for leading institutions, NGOs, and tech startups. He is a regular contributor to knowledge hubs and magazines, tackling the latest trends in sustainability and green energy.

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