Report: Fifth of world’s largest companies now have net zero target

New report by the Energy and Climate Intelligence Unit and Oxford Net Zero analyses net zero commitments

By George Smeeton

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At least one fifth (21%) of the world’s 2,000 largest public companies, representing sales of nearly $14 trillion, now have net zero commitments according to a new report by the Energy and Climate Intelligence Unit (ECIU) and Oxford Net Zero.

Majorities of those companies (by sales) also have interim targets, a published plan and a reporting mechanism, with just over a quarter meeting a full set of ‘robustness criteria’. Authors warn that companies risk leaving themselves open to allegations of greenwashing if they do not complement targets with proper governance and transparency mechanisms, including how much offsetting they rely on.

The report, Taking Stock: A global assessment of net zero targets, is the first systematic analysis of net zero commitments across countries, sub-national governments and major companies. It also finds that 61% countries, 9% of states & regions in the largest emitting countries and 13% of cities over 500k in population have now committed to net zero [2].

The report quantifies the extent to which these net zero targets reach a certain minimum set of robustness criteria, or ‘starting line’, as set out by the UN Race to Zero Campaign. Already, 20% of existing net zero targets meet this starting line, although this leaves much more work to be done before COP26.

Senior Associate at ECIU and lead author of the report Richard Black said: “Although net zero as a concept is still in its infancy, it is already driving policy change. Clearly though, to keep the world on track to global climate targets we need more countries, states, regions and companies to sign up to targets and existing pledges to be improved.

“There is logic to setting a target and then building a plan and reporting mechanisms to meet that, but companies and countries alike will need to make progress on this in the run-up to COP. Countries such as Japan and the US will need to back their net zero ambitions with nearer-term 2030 emissions targets.”

The report also identifies a lack of clarity around how countries and companies alike will use offsetting to meet targets, warning that planetary limits on nature-based offsets mean that they cannot be heavily relied upon.

Co-author Dr Thomas Hale from the Blavatnik School of Government, University of Oxford said: “While the rapid uptake of net zero targets is encouraging, we need much more clarity from actors on how they plan to get there. It’s particularly important that actors clarify their approach to offsetting. Although some offsetting may be needed for so-called “residual emissions” in certain sectors, the most important priority is immediate emissions reductions. If every company and country relies on offsets and not enough on actual emission cuts, we simply won’t be able to accommodate these globally.”

Countries with net zero targets together represent 61% of global emissions, 68% of global Gross Domestic Product (in PPP terms) and 52% of the global population. Governments must also, say the report authors, back up their pledges with reporting mechanisms, published plans and credible interim targets. With 124 countries now committed to or considering net zero, those without targets such as Australia and Russia are in the minority and look increasingly isolated, it notes.

In the lead up to the COP26 climate summit in Glasgow, focus will intensify on the number of entities making net zero pledges and their potential to help keep climate change within ‘safe’ limits, as well as on renewed pledges for 2030 under the Paris Agreement (known as Nationally Determined Contributions, or NDCs). While the report records if countries have interim targets, further research is needed to interrogate how compatible these interim targets are with net zero goals.

Co-author Kate Cullen, Net Zero Policy Researcher at the University of Oxford, said: “Setting targets is the first step and these must be used as the starting point for how countries, states and companies develop detailed emissions reductions plans, particularly in the short term.

“Work like this is therefore of vital importance in helping to set a baseline for net zero targets globally so that it is possible to better track and measure these, and also to help develop criteria for measuring how robust plans are. Net zero is already a useful lens through which to view progress on climate change; robust monitoring, evaluation and assessment will help improve it.”

Co-author Dr Steve Smith, from the Smith School of Enterprise and the Environment, University of Oxford, said: “Net zero isn't only a clear and simple target, it's what the planet needs in order to halt the rise in temperatures. Net zero targets are most useful when they include a focus on near-term ambition, clear plans, and reporting and other governance mechanisms that will help actors stay on track.”

The report, Taking Stock: A global assessment of net zero targets, is available here.