Science

Why corporate climate pledges don’t always stand up to scrutiny

Firms are often doing little to tackle the more voluminous emissions generated by their products or their suppliers

Extinction Rebellion activists demonstrating outside an office of Shell Netherlands in Rotterdam. Photograph: Robin Van Lonkuijsen/Getty Images

Jeremy Deaton
Thu Feb 16 2023 - 00:01

Under pressure from customers and investors, big businesses are increasingly targeting net-zero emissions but many seemingly ambitious corporate climate pledges are overlooking major sources of carbon.

Last year ExxonMobil set forth a goal of net-zero emissions by 2050, declaring it would seek to run its business on renewable power and halt the release of natural gas at drilling sites, its net-zero target applied only to its own operations. The company had little to say about curbing emissions from burning the oil and gas it sells.

More than 80 per cent of the oil and gas industry’s emissions come from the use of its fuels. By failing to account for their impact, the Union of Concerned Scientists believes, Exxon is “shifting blame for the bulk of its emissions on to consumers who are using its products exactly as the company intended”. Exxon did not respond to a request for comment.

Like Exxon, companies from Walmart to Samsung have announced deep cuts to emissions from their own operations or their power supply, what are known as Scope 1 and Scope 2 emissions, respectively. But firms are often doing little to tackle the far more voluminous emissions generated by their products or their suppliers, what are known as Scope 3 emissions.

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To reach its aim of net zero emissions by 2050, McDonald’s is seeking to outfit its restaurants with LED lighting and power its operations with renewable electricity, but its plans to cut emissions from beef remain hazy. Globally, McDonald’s is responsible for about as much carbon pollution as the Republic of Ireland, and beef accounts for about a third of its carbon footprint – belching cows are a prolific font of heat-trapping gas – but the company is doing little to clean up its supply chain or update its menu to sell less beef, a Bloomberg investigation found.

“If McDonald’s changed its menu immediately it would make a big difference, but waiting until 2050 is insufficient to avoid climate catastrophe,” Jennifer Molido of the Center for Biological Diversity said in a statement. McDonald’s did not respond to a request for comment.

To keep warming to 1.5 degrees, the stated aim of the Paris Agreement, emissions will need to drop nearly by half by 2030 and reach net zero by 2050. A new report looks at 24 major corporations aiming for net zero – including Apple, Google, Samsung, Nestlé, Walmart and Volkswagen – finding that nearly all had set interim 2030 targets. When accounting for the impact of their products and their suppliers, however, companies had committed to cutting their emissions by just 15 per cent, on average, by the end of this decade.

“We might start to wonder if net-zero targets are not a very helpful concept for corporations,” according to Sybrig Smit, an analyst at the German-based NewClimate Institute (NCI), which produced the report. “They might be hiding behind these net-zero targets – which are far in the future and don’t mean a lot – and they don’t act right now.”

BP has said it’s aiming for net zero by 2050, but it recently scaled back its 2030 goal of slashing Scope 3 emissions by up to 40 per cent. After seeing record profits in 2022, it’s now targeting a 20-30 per cent cut.

One of the firms highlighted in the NCI report, meat processor JBS, is aiming to cut its emissions by 30 per cent by 2030, but this target does not account for emissions from cattle. If cattle are included in its calculus its – 2030 goal amounts to just a 3 per cent drop in emissions, the report concludes.

For the average company, supply-chain emissions are about 11 times greater than operational emissions, according to an estimate from the UK-based Carbon Disclosure Project. But in some industries the difference is starker. In retail and apparel, supply-chain emissions can be 25 times operational emissions or more.

“I always see these big companies as part of an hourglass figure. They’re in the smallest part of the hourglass, but they have control over both upstream and downstream,” Smit adds. “They have a lot of control over what they procure, but also what they put out in the world – what they produce.”

For H&M, the large majority of its emissions come from suppliers who produce its garments and the customers who throw them away – clothes that are burned in an incinerator or decompose in a landfill unleash heat-trapping gas. But while the company is seeking to curb these emissions, its plans lack integrity, the NewClimate Institute report found.

H&M is aiming for 100 per cent of its suppliers to run on renewables, but that aim applies only to suppliers with access to renewable power. The company is also looking to reduce waste by offering repair and rental services and through the sale of second-hand clothes, initiatives that “will play a big role in shaping the business of tomorrow,” a spokesperson said. The NewClimate Institute found no evidence that the company is ultimately shifting away from fast fashion and seeking to sell more long-lasting apparel, however.

Companies that fail to deal persuasively with Scope 3 emissions could face legal or regulatory backlash. Royal Dutch Shell is among the companies that have said it is aiming for net zero, but in 2021 a Dutch court said its carbon-cutting plans were “intangible” and “undefined” and ruled that by continuing to propel climate change Shell was violating human rights. It ordered the company to slash its emissions by 45 per cent by the end of this decade. It noted that 85 per cent of Shell’s emissions fall in Scope 3 and asserted that companies must take responsibility for these emissions, fossil fuel companies in particular. Shell has appealed the ruling. Despite earning record profits in 2022, it has said it will not increase its spending on low-carbon technologies.

The possibility that courts or regulators will force carbon-intensive companies to tackle Scope 3 poses a potential risk to investors, says Sanjith Gopalakrishnan, an assistant professor of operations management at McGill University in Montreal. “In order for investors to get the full picture they should be aware of what Scope 3 emissions are.”

Offsets figure prominently in the net-zero plans of Amazon, Shell and many other firms, but experts are sceptical of these schemes, which would likely require foresting vast tracts of land

In November, the European Council approved new rules that will require about 50,000 large companies to report emissions from their own operations as well as their suppliers. The United States and UK are now weighing similar rules to require Scope 3 reporting.

Proponents of tracking Scope 3 emissions say large firms are well positioned to clean up their supply chains. “Bigger businesses can afford to measure emissions and can better afford to reduce emissions,” notes John Lang, project lead at the non-profit Net Zero Tracker.

Even small changes can ripple through the supply chain. A study commissioned by Finnish beverage maker Altia found the company could trim Scope 3 emissions from OP Anderson Aquavit, one of its spirits, by switching to lighter bottles. Suppliers would have to mine less sand to produce the bottles and distributors would have to burn less fuel to ship them. Altia is now investing in lightweight glass containers that reportedly promise to shrink the carbon footprint of OP Anderson Aquavit by 22 per cent.

For companies that sell carbon-intensive products, such as fossil fuels, cutting Scope 3 emissions poses a larger challenge. Reaching net zero will mean either overhauling their businesses or offsetting their pollution, for instance by planting trees. Offsets figure prominently in the net-zero plans of Amazon, Shell and many other firms, but experts are sceptical of these schemes, which would likely require foresting vast tracts of land. An Oxfam analysis suggests Shell would need an area more than three times the size of Ireland to reach its net-zero target.

Of the companies evaluated in the NCI report, most relied on tree planting or other land-intensive means of offsetting emissions. If firms globally took the same approach as those studied, the report found, their offset projects would sprawl across as many as four Earths. Experts warn that relying too heavily on dubious carbon offsets threatens to distract from the urgent task of cutting emissions. “The first thing you should do with your climate strategy is reduce emissions,” Smit adds. “As long as that’s not happening, we are really on a fast path to exceeding 1.5 or even two degrees of warming.”

In contrast with Shell and other firms, Danish energy company Ørsted has largely eschewed offsets, instead pivoting away from oil and gas and into renewable energy. Ørsted is planning to cut its total emissions by 99 per cent, saving offsets for only the last 1 per cent, the company said in a blog post. It added that its focus on curbing emissions from Scope 3 “means there’s no risk of overlooking any emissions by claiming they’re somebody else’s problem”.

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