2 December, 2022
More than a third of the world’s 2000 largest companies now have net zero commitments in place.
But are these commitments “little more than empty slogans and hype”, as a recent article in the Financial Times suggests? There’s at least some validity to this claim, as we have explored in previous Friday 5 articles.
During COP27, UN secretary-general Antonio Guterres stated the lack of robust rules in place relating to corporate net zero claims had left “loopholes wide enough to drive a diesel truck through”, meaning businesses can claim to be net zero whilst continuing to build or finance new supplies of fossil fuels.
It’s clear that guardrails are needed. In a hope to address this, discussions at COP27 led to calls for companies to base their net zero plans on absolute emissions reductions, rather than lowering carbon intensity, or emissions per unit of output. Additionally, and arguably most importantly, there were calls for companies to report annually on their decarbonising progress in legally mandated disclosures.
However, this prompted a mixed response, particularly from business executives who are frustrated at yet another hurdle that they need to overcome. So, are we provoking a business backlash to net zero by implementing unnecessary disclosure requirements for businesses?
The reality is good guardrails are needed if we are to avoid exploitation of loopholes and achieve global carbon reduction goals. But importantly, if businesses and “struggling sustainability executives” are frustrated, as the article suggests, we need to recognise and address this. Calls for mandatory reporting on a business’ decarbonisation process may seem daunting while the exact requirements are yet to be defined. The onus will be on regulators to ensure that any additional reporting requirements have a clear rationale and process, to ensure that companies trying to do the right thing are not dismayed by more convoluted reporting processes. And for those companies attempting to benefit from loopholes, this might be a much-needed wake-up call to identify where additional support, knowledge and resources are required to ensure progress towards net zero commitments.
If you’re one of those struggling sustainability do executives, you know where to find us.
By Budd Nicholson