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Two Steps Forward

As COP28 begins, let's take stock of corporate climate efforts

The latest indicators suggest that companies’ climate ambitions are significantly off-track. But there are signs of hope.

Climate temperature stripes overlaid with EKG heartbeat

Image by GreenBiz Group

Next week, I'll be in Dubai for COP28, the annual United Nations climate conference, along with some 70,000 other souls from across the globe. Among the big stories this year: a "global stocktake," U.N.-speak for an accounting by each of the 196 signatory countries to the 2015 Paris Agreement on how well they are doing to keep the worst of the climate crisis in check.

You probably don’t need to spring for a roundtrip ticket to a Middle East oil kingdom to know the answer.

Much as with countries, companies are significantly off-track.

The world is "woefully off track" on 41 of 42 indicators of climate progress — across power, buildings, industry transport, forests and land, food and agriculture, technological carbon removal and climate finance, according to State of Climate Action 2023, published last month by six environmental groups, including the Bezos Earth Fund, New Climate Institute and World Resources Institute. Another six indicators are “heading in the wrong direction entirely.”

And forget 1.5 degrees Celsius, the maximum hoped-for temperature rise stated in the Paris accord. We’re well on our way to nearly 3 degrees rise by the end of the century, according to a new United Nations report, a once-unthinkable level of warming expected to have devastating impacts on pretty much every aspect of life, globally.

What about corporates?

Meanwhile, while national delegations are taking stock of one another, I've been doing a "corporate stocktake." Are companies doing what needs to be done to confront the climate crisis?

Spoiler alert: Much as with countries, the world's companies are significantly off-track.

"Businesses are far, far ahead of where they were three, five or 10 years ago," Aron Cramer, president and CEO of the nonprofit consultancy BSR, told me. "And it's equally true that it’s not enough."

"The progress that's being made is undeniable," he continued. "The investment, the innovation, the commitment and, in most cases, good-faith efforts to make things happen — that is all substantially ahead of where we were. But we're not getting where we need to go."

Cramer’s concerns are buttressed by a spate of reports on corporate performance published in the past few weeks. A sampling:

Emissions are still rising. Publicly listed companies are likely to pump 12.4 gigatons of greenhouse gas emissions into the atmosphere this year, up 11 percent from 2022, according to MSCI. It found that at their current rate of emissions, these companies "would use up their share of the global carbon budget for keeping the rise in global temperatures below 1.5 degrees by April 2026" — three months sooner than MSCI projected earlier this year.

Climate action is waning. An EY survey of chief sustainability officers found that progress on sustainability initiatives is slowing "as early phases focused on ‘low-hanging fruit’ come to an end." It found a decline in company greenhouse gas emission reduction ambitions, from a median of 30 percent last year to 20 percent today, and a delay in the target year to achieve those ambitions, from a median of 2036 last year to 2050. Only 40 percent of executives say it’s either "likely" or "very likely" that their company will meet its decarbonization targets for the year ahead, according to recent Siemens research.

We’re losing ground. "The net-zero transition is not on track and the world is at risk of falling even further behind," a report from McKinsey concluded. "Current rates of emission reductions show that substantial progress is still necessary relative to where sectors need to be today to reach net zero by 2050.” Part of what’s needed: "a huge and concerted effort, particularly related to supply chain scale-up, capital allocation and citizen and consumer support."

Investors are wary. As the world’s largest investors scrutinize corporate progress, they’re not particularly impressed. A whopping 94 percent believe corporate sustainability reporting contains at least some unsupported claims, according to a report from PwC. Still, 69 percent of investors said they would be willing to increase their level of investment in companies "that successfully manage sustainability issues relevant to the business’s performance and prospects."

Greenhushing is rampant. A study by the Swiss carbon finance consultancy South Pole found that companies have become increasingly skittish about promoting their climate commitments for fear of greenwashing, legal risks "or simply not wanting to promote something that competitors also offer." A quarter of 1,200 companies surveyed say they would not publicize their science-based net-zero-emissions targets at all.

Policy engagement is lacking. InfluenceMap found that corporate net-zero targets are rarely matched with support for government climate policy, with about six in 10 companies from the Forbes 2,000 found to be at risk of "net zero greenwash" — that is, a company that "has announced a net-zero or similar target but is not sufficiently supportive of policy to deliver the Paris Agreement."

Elephant in the room

There are some encouraging signs. The C-suite is increasingly getting on board, according to Capgemini. Its recent survey found that executive attitudes have become more positive towards sustainability, with 63 percent saying the sustainability business case is clear, up threefold since just last year. The percentage who claim that the cost of sustainability initiatives outweighs the benefits dropped more than half this year, from 53 percent to 24 percent.

But amid all this, the elephant in the room is capitalism’s growth model, said BSR’s Cramer, in which companies’ emissions intensity — greenhouse gases per widget sold or dollar of revenue — are offset by companies’ inexorable growth, leading to an increase in overall emissions. Curbing the consumption mindset that has delivered higher living standards over the past 125 years "is really hard to solve and we’re all complicit in that," he said.

Still, he added, "We're seeing more openness to this kind of thinking than ever before. The rise of circular business models, while still incremental, is a sign that you can reconceptualize how businesses actually work and how value is delivered. But I think it's going to be a long road on that front."

I’ll hazard a guess here, but that topic won’t be on the COP28 agenda.

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