Vast numbers of businesses, governments, cities, and regions now have net zero goals in place, but few have clear plans for how to effectively manage offsets and decarbonise supply chains, analysis shows
The strength and breadth of net zero emissions goals across businesses, nations, and cities continued to grow in both the run-up to COP26 and the Summit’s aftermath, but serious concerns over the credibility of supporting climate strategies and the use of carbon offsets still urgently need addressing.
That is the core conclusion of the latest update to the influential Net Zero Tracker report today, which provides a snapshot of the global landscape for net zero targets and strategies from more than 4,000 entities, including nations, states and regions, cities, and corporations.
In its first major update since the Glasgow Climate Pact was agreed by 196 countries at the COP26 UN Climate Summit earlier this month, the Net Zero Tracker shows around 90 per cent of the world’s GDP is now covered by a net zero target of some kind, including public companies that collectively boast just over $19.5tr of annual revenues.
However, there are huge variations in the robustness and credibility of these targets, according to the Energy and Climate Intelligence Unit (ECIU) think tank, which leads the Net Zero Tracker initiative alongside the Data-Driven EnviroLab, NewClimate Institute, and the University of Oxford’s Net Zero Initiative.
The analysis shows the share of revenue from publicly-traded corporate net zero targets which adhere to their minimum procedural standards – such as the addition of short term goals, transparent reporting mechanisms, and published decarbonisation plans – for setting and delivering on climate goals has increased four-fold within a year, as the spotlight on the global climate crisis shone brighter than ever before in the run up to the COP26 Summit.
But they warned that firms – as well as governments and cities – still needed to urgently strengthen their efforts, by providing further details on how they planned to rapid emissions reductions, setting out ambitious plans to decarbonise supply chains, and explaining how they intend to credibly utilise carbon offset credits that deliver real world emissions reductions as part of their climate strategies.
Dr Takeshi Kuramochi, senior climate policy researcher at NewClimate Institute, said that following COP26 the acceptance of the need to deliver net zero emissions was now “almost universal”. But he said both governments and corporates now needed to shift these targets onto a stronger footing so as “to operationalise net zero and drive rapid short-term emissions cuts”.
“The message is getting through, but we have a long way to go,” he said. “If governments, or corporates have set out a fully-fledged plan, they must quickly clarify how they will reach their targets.”
The analysis points to the glaring lack of detailed plans underpinning the vast majority of net zero targets, particularly for tackling emissions across the corporate value chain – known as Scope 3 emissions in the jargon – and for the use of carbon offsets and removals.
The report details how 91 per cent of country net zero targets, 79 per cent of city targets, 78 per cent of regional targets, and 48 per cent of public company targets fail to adequately specify if – and how – offsets will be used in their decarbonisation plans, according to the research.
Moreover, the study shows that companies that account for 43 per cent of the revenue of the world’s 632 largest public firms plan to use offsets in order to deliver net zero, yet 66 per cent of these organisations fail to specify any conditions on the use of such carbon credits. The proportion is even greater for states and regions, with 91 per cent of those assessed having no specified conditions for the use of offsets, the research shows.
Just 10 per cent of firms assessed have committed to avoiding the use of any offsetting to meet their net zero targets whatsoever, according to the research, despite widespread concerns over both the ability of offset schemes to reliably deliver promised emissions reductions and the extent to which the offset market can scale up to meet soaring future demand from businesses and governments that are overly reliant on offsets to meet their net zero targets.
Several initiatives, including a programme led by former Bank of England Governor Mark Carney, have sought to draw up robust rules and guidelines for voluntary carbon market trading in a bid to enhance the credibility of carbon offset schemes. Meanwhile, the recently unveiled net zero standard from the influential Science Based Targets initiative has argued companies’ net zero target should rely on offsets for no more than 10 per cent of their emissions, falling to five per cent in those industries that are relatively easy to decarbonise. But many green campaigners remain hugely critical of the carbon offset market, and in some cases the entire net zero concept, arguing that it provides cover for firms to continue polluting even as they purport to be working to reduce their emissions.
Commenting on the Net Zero Tracker findings, Dr Steve Smith, executive director at Oxford Net Zero, urged policymakers and businesses to prioritise cutting their own emissions and to set out clear rules and limits to any offsetting activity.
“We are seeing a huge number of net zero plans that keep the door open to buying offset credits,” he explained. “That is worrying, because the market is awash with cheap credits of dubious quality. We can’t offset all the way to real, global net zero.”
Similarly, despite the growing number of net zero targets from businesses around the world, only a small proportion of companies have set out robust targets to tackle emissions that are not just from their core business, but also originate in their wider supply chains and through the use of their products and services.
Just under a third – 32 per cent – of corporate net zero targets cover the entirety of their Scope 3 emissions, while a quarter only partially cover Scope 3, the analysis found. However, 76 per cent have included their Scope 1 and 2 emissions from their core business and purchased electricity in their net zero plans.
Yet Scope 3 emissions often account for the largest chunk of a company’s carbon footprint, according to Professor Angel Hsu, director of the Data-Driven EnviroLab. “Given Scope 3 reporting is hard and it’s currently voluntary, most firms take an ‘à la carte’ approach to carbon reporting and action – choosing the lowest hanging fruit and ignoring potentially the largest emissions sources in their value chain,” she said. “To realise net-zero, firms must urgently shift to the ‘set menu’ – tracking and tackling Scope 3 emissions, where the broadest opportunities for greenhouse gas emission reductions lie.”
The latest Net Zero Tracker analysis comes hot on the heels of the crucial COP26 Summit in Glasgow, which saw UN Secretary-General Antonio Guterres announce plans to establish a group of experts tasked with analysing private sector net zero commitments in a bid to impose stricter standards and combat ‘greenwash’. Further details on the initiative are expected to be announced in the coming weeks.
Also emerging from the Summit, the Glasgow Climate Pact itself includes a raft of fresh market signals, such as calling on countries to come forward next year with strengthened national climate plans and emphasising the need to shift away from coal and fossil fuel subsidies. In addition it finalised the Paris Agreement ‘rulebook’ after six years of negotiations, providing clear rules for trading carbon allowances between countries and guidelines for reporting accurately on national emissions.
But a group of global climate experts today warned that the UN summit’s failure to deliver significant progress on climate finance for developing nations, after a high profile target to mobilise $100bn of climate finance a year from 2020 was missed, meant there was a serious risk of trust in the international system being damaged.
The Climate Crisis Advisory Group (CCAG), a group of influential experts led by the UK government’s former chief scientific adviser Sir David King, warned there had been a “fundamental breach of trust between rich and poor nations, with potentially catastrophic consequences for the world”.
“Without a recalibration from developed nations on how they approach their relations with poorer countries, change at the scale and pace required to ensure global warming is limited to 1.5C is nigh on impossible,” he said. “Central to the notion of trust is ensuring that the powerful are held to account, and we must seize the opportunity of the moment post-COP26 to hold both governments’ and nations’ feet to the fire.”
In the wake of COP26, most of the global economy is now covered by net zero goals, signalling widespread support for the accelerating transition and growing momentum behind global decarbonisation efforts. Yet the summit also underscored the deep mistrust and credibility concerns which stak the net zero movement. Building confidence in the net zero mission remains one of the biggest hurdles to overcome for governments and businesses alike if they are to attract the support they need for rapid climate action in the 2020s.