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IMPACT

A large number of big corporations just flunked an assessment of their net-zero progress

Out of 55 major U.S. companies ranked in a new report, only three—Microsoft, PepsiCo, and Ecolab—received an overall A grade on their net-zero efforts.

A large number of big corporations just flunked an assessment of their net-zero progress

[Photo: zodebala/Getty Images]

BY Kristin Toussaint3 minute read

If we want to limit global warming to 1.5 degrees and stave off the worst effects of climate change, we need to reach net-zero emissions by 2050—and that means corporations have to do their part to cut their emissions. More and more have announced net-zero goals, but most of them aren’t making much progress. Out of 55 large U.S. companies scored in a new report, only three—Microsoft, PepsiCo, and Ecolab—received an overall A grade on their net-zero efforts.

You Sow, a nonprofit that works to promote corporate social responsibility via shareholder advocacy, has just released its ranking of 55 of the largest U.S. companies, across sectors from oil and gas to banks, on their emissions reduction progress. The report evaluated not only what disclosures companies have made about their greenhouse gas emissions but also what targets they’ve set for reducing those emissions and, crucially, how they’ve been progressing.

[Image: courtesy As You Sow]
The results show a stark misalignment between how major corporations are approaching their emissions and whatScience Based Targets, an initiative that evaluates corporate goals to reduce emissions, says is necessary to limit warming to 1.5 degrees before 2050. Around 84% of the companies received overall grades of D or F, and nearly two-thirds failed to align any greenhouse gas reduction goal with a 1.5-degree future. And while 35 of the companies studied in the report did have some sort of emissions reduction goal, just 16 had goals for both Scope 1 and Scope 2 emissions—which come directly from a company’s operations and the energy used to power those operations—that align with global goals to limit warming to 1.5 degrees.

Scope 3 emissions are also a concern; they come from up and down a company’s value chain. Only two companies—Apple and Microsoft—have set a goal to reduce their Scope 3 emissions in line with 1.5 degrees. Scope 3 emissions are necessary to consider for a net-zero future. Take Chevron (which received an overall F grade): Scope 3 emissions account for 91% of the company’s greenhouse gas emissions, so while Chevron has focused on reducing Scope 1 and 2 emissions in line with 1.5 degrees, the report notes, those reductions represent only about 9% of the company’s total emissions.

Then there’s the issue of carbon offsets. Science Based Targets, as well as Climate Action 100+, an investor-led initiative to make sure the world’s largest corporate greenhouse gas emitters are taking necessary climate action, both advise that offsets should be avoided or at least limited. “What [they both] say is that carbon offsets should not be used until it’s absolutely necessary and because it’s infeasible to do anything else, so the focus has to be on companies actually reducing their own emissions and their own value chain emissions,” says Danielle Fugere, president and chief counsel at As You Sow.

Per the report, there was not a single large corporation with a net-zero goal that covers Scopes 1, 2, and 3 emissions while also limiting carbon offsets. Though the market for carbon offsets is growing and there are verification platforms popping up, Fugere says “frankly there are not enough offsets in the world to allow companies to continue business as usual. Companies have to, in the near term, do all of their emission reductions in-house or through their supply chain.”

Microsoft and Pepsi received overall A grades, and Ecolab an A-, in part because they were some of the few companies to report Scope 3 emissions, disclose their carbon offsets and verification status (except for Ecolab), and because they actually have progress to show that they’re reducing emissions at the rate needed to meet that 1.5-degree limit (which means reducing absolute emissions at a rate of 4.2% or more per year).

The vast majority of major corporations are falling short when it comes to all three metrics: disclosures, targets, and actual performance. “Part of the problem is a lack of ambition,” Fugere says. “If you don’t set ambitious targets, if every decision in your organization is not geared toward achieving net-zero targets, you will make insufficient progress.”

Companies may be wary of setting targets that they can’t reach, but it’s still crucial they do so—and this is where shareholders and investors can play a part in demanding not only ambitious targets but also concrete plans on how companies will reach them. The Securities and Exchange Commission is looking at climate risks to the financial system and is currently considering what new rules around disclosures from companies are necessary. The report from As You Sow, Fugere says, is meant to highlight details on Scopes 1, 2, and 3; clarity on the use of offsets; specifics that show how an emission target is in line with a 1.5-degree future; and, especially, information on how well companies are progressing.

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ABOUT THE AUTHOR

Kristin Toussaint is the staff editor for Fast Company’s Impact section, covering climate change, labor, shareholder capitalism, and all sorts of innovations meant to improve the world. You can reach her at ktoussaint@fastcompany.com. More