As pressure on companies to act on climate change rises, their ambitious-sounding headline claims all too often lack real substance. Even companies that are doing relatively well exaggerate their actions.
Opinion: New Zealand companies have no place left to hide in the climate crisis. From this moment on, they will face increasing pressure from the government and public, and from their customers, suppliers and competitors to deliver big cuts in their emissions.
Why now? On Monday Climate Change Minister James Shaw will deliver a speech on New Zealand’s low-carbon future. In it he will give an overview of how the government has built its Emissions Reduction Plan for the nation in response to recommendations from our independent Climate Change Commission.
On May 19 Finance Minister Grant Robertson will deliver the government’s 2022 Budget, which will include the launch of the multi-billion dollar Climate Emergency Response Fund to help decarbonise the economy; and on May 31 the government will release the ERP itself. It will only be a high-level strategy document. But it will be the framework on which we will begin to build our low-carbon future.
“Listed companies need to cut their carbon intensity by 10 percent each year on average between now and 2050 to align with a 1.5°C rise in temperature. But from 2016 to 2020, less than a quarter of the world’s listed companies managed that feat.” – MSCI
Yes, this is a complex task. But a single number tells us precisely what we must achieve. We have to reduce our emissions so they are consistent with only a 1.5C rise in global temperature, the maximum humankind can allow if we are to keep changes in the Earth’s climate relatively manageable.
Thanks to humanity’s very limited climate progress to date, we’re perilously close to losing our last chance to do so, the United Nation’s latest assessment tells us. If you think, we might as well settle for 2C instead, run your eye down this graphic from Australia’s Climate Council. Look how much greater the damage is at 2C.
Impact at 1.5c v 2C of warming
If we’re committed to the 1.5C target, climate science tells us precisely how few tonnes more of greenhouse gases humanity can pump into the atmosphere.
The share of corporate emissions is even tighter.
In fact, companies listed on global stock markets will blow through their entire share of the 1.5C budget in just five years and three months at their current emission rates, MSCI, the global investment data company, calculated last August. But that’s now down to just four years and seven months of carbon budget left for those corporates.
Achieving 1.5C goal will “demand a pivot without precedent,” MSCI says. “Listed companies need to cut their carbon intensity by 10 percent each year on average between now and 2050 to align with a 1.5°C rise in temperature. But from 2016 to 2020, less than a quarter of the world’s listed companies managed that feat.”
No surprise then that many companies are suggesting the 2C goal is good enough. After all, that carbon budget for all listed companies in the world would last 20 years and nine months, as of last August. But humanity would pay a devastating cost in terms of vastly greater climate damage.
Almost all companies make two very big mistakes in all this. First, they believe they have plenty of time left so they set only modest goals; worse, many are still refusing to set any goals at all.
But simple climate physics is running the clock – more carbon causes higher temperatures. That’s why the timetable corporates have left to meet to fulfil their societal obligations is excruciatingly tight.
“As pressure on companies to act on climate change rises, their ambitious-sounding headline claims all too often lack real substance, which can mislead both consumers and the regulators that are core to guiding their strategic direction. Even companies that are doing relatively well exaggerate their actions.” – Thomas Day, New Climate Institute
Second, they set modest goals because they think that’s all their current and near-term technology will enable them to do. But in reality, they must set audacious goals in order to focus their energy, investment and collaboration on achieving the unprecedented scale and speed of change we must have.
Companies committed to that can turn for help to the Science Based Targets Initiative, a coalition of international climate organisations, to set such demanding goals and then monitors their progress. It has signed up nearly 3,000 companies from around the world, of which 1,032 have committed to meeting net-zero emissions and 1,356 have set climate science-based targets.
But there are only 19 New Zealand companies among them, of which only eight have committed to 1.5C. They are: Fisher & Paykel Healthcare, Genesis Energy, Contact Energy, NZ Post, Spark, Synlait Milk, thinkstep-anz, and Toitu Envirocare.
Toitū, a subsidiary of Manaaki Whenua – Landcare Research, the Crown Research Institute – is an internationally renowned adviser to corporates on their climate and environmental performance. Its next free, online webinar on how to set and meet meaningful climate targets is May 12. Information about the session and how to register for it are here.
Time is fast running out for any sizeable New Zealand company that thinks it can get away with setting goals with no credible or transparent way of delivering on them. Increasingly their customers, investors and bankers will demand more evidence from them, as will the government.
If they want a glimpse of their future, they should take note of the accountability already demanded of major global corporates. The Corporate Climate Responsibility Monitor released in February showed that 25 of the world’s largest companies in reality have only committed to reduce their emissions by 40 percent on average, not the 100 percent they suggest in their “net zero” and “carbon neutral” claims. The Monitor is the work of the New Climate Institute in collaboration with Carbon Market Watch.
“We set out to uncover as many replicable good practices as possible, but we were frankly surprised and disappointed at the overall integrity of the companies’ claims,” said Thomas Day of the New Climate Institute, lead author of the study.
“As pressure on companies to act on climate change rises, their ambitious-sounding headline claims all too often lack real substance, which can mislead both consumers and the regulators that are core to guiding their strategic direction. Even companies that are doing relatively well exaggerate their actions.”
Of the group, 13 companies have backed their net zero headline pledges with explicit emission reduction commitments. But these on average will only reduce their full value chain emissions from 2019 by 40 percent. The other 12 have no specific emissions reduction commitments for their net zero target year.
No company met the criteria for the top category, and only Maersk, the shipping line, qualified for the next best category. The full rankings are a sorry indictment on 25 major corporates which are usually considered relatively trustworthy.
