North America CEO, William Theisen shares thoughts highlights from our 2022 Corporate Climate Performance Report on the performance of the DOW companies scored.
Last month, we released our 12th Annual Corporate Climate Reporting Performance Report analyzing the world’s largest listed companies’ activities in tackling climate-related sustainability challenges and disclosing their progress. Our findings concluded that the largest US Corporations demonstrate more commitment than ever to achieving net-zero ambitions but are struggling to turn ambition into climate-oriented business strategy and substantive emissions reduction.
Overall, there is still a gap in what companies are currently reporting and what the regulatory disclosures will likely require, especially in reporting climate related risks and business resiliency.
This year’s expanded study compares the progress of the top 20 organisations by capitalization from the CAC, DAX, DOW, FTSE, FTSE MIB and IBEX, in four thematic categories:
- Emissions measurement and Reporting
- Ambition and Emissions reduction targets
- Strategy, Governance and Action plan
DOW net-zero commitments stand out
Last year, our report revealed that the number of DOW companies committing to net-zero had more than doubled since 2020 (63%), but only 17% achieved a reduction of Scope 3 emissions in line with limiting global warming to 1.5°C. This year, DOW companies showed stronger climate commitments leading all indices in setting net-zero targets before 2040, in companies setting a 1.5°C-aligned validated science-based near-term Scope 1 and 2 targets, and in commitments to offset residual emissions via carbon removal. The US also took the lead in some reporting categories, beating the 16% international average with 25% scoring an A in CDP, and well eclipsing the 13% global average with 30% reporting all relevant Scope 3 emissions categories, almost double from 2021.
Cisco distinguished itself in this year’s rankings, leaping 12 spots to number one of the DOW companies and number four overall with its ambitious SBTi-verified net-zero target. Microsoft, Nike, and Apple follow Cisco at the top of the list, while United Health (+16), Disney (+8), and McDonalds (+8) made the biggest advances in the rankings since last year.
We need all hands on deck to stay within a 1.5°C trajectory
The report found that the companies we looked at demonstrated ambition and commitment to reporting and reducing emissions but failed to deliver the real emissions reductions required to limit temperature rise to 1.5°C. 70% are committed to net-zero, but the progress is negligible when considering that commitments are not always science-aligned, and most are short-term strategies. Even companies’ most ambitious net-zero reduction targets fall short of the 90% reduction required for the new Science Based Targets Initiative (SBTi)’s Corporate Net-Zero Standard’s framework for science-aligned targeting.
The largest companies around the world are not demonstrating leadership on climate risk management. Thirty-four per cent of the world’s corporations demonstrated the highest level of best practice risk reporting, while a meagre 15% of DOW largest companies met the standards. DOW largest companies also scored the lowest of all indices in the implementation of an internal price on carbon to incentivize emissions reduction and in use of renewable energy sources.
At the international level, the corporations topping the rankings include Telefónica, Sanofi, E.ON, Cisco, and GSK. Although corporations have improved in target setting, the rising bar of best practice has proven challenging to reach. Just over a third (35%) of large companies have a 1.5oC aligned validated science-based target (SBT) for Scope 1 and 2 emissions and just 8% have one for the critical Scope 3 emissions that come from their supply chains. Further, the majority of companies have not demonstrated adequate emissions reductions over the course of last year as the economy recovered from COVID-19, with some even increasing emissions.
The past few years of our study confirms the vast potential large corporations have to move the needle on reducing carbon emissions while also demonstrating the possibility for gaining competitive advantage through action on sustainability.
Our findings highlighted how the largest DOW companies are surprisingly strong in both short-term ambition and target setting considering the absence of the legislative drivers seen in Europe. However, there is still a lack of adequate long-term ambitious target setting and assessing climate risk in public disclosures that is needed. Close to a quarter (22%) of companies in our international research do not publicly view climate change as a principal risk to their organizations. Given disclosure requirements in the US are becoming more and more apparent, for example the pending SEC ruling, we hope to see more companies prioritizing their disclosures on risk ahead of legislative action to help transform their businesses and the planet.
To learn more about EcoAct and its solutions to help effectively tackle the challenges of climate change, visit www.eco-act.com. Download the full 12th Annual Corporate Climate Reporting Performance Report here.