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7 February 2022

Are companies tricking us with their net-zero claims?

Businesses are good at claiming climate action but greenwashing shouldn't be part of their playbook.

By Philippa Nuttall

Google doesn’t hold back on expounding its climate-protecting, carbon-reducing credentials, insisting that it is the first major company to become carbon neutral, to derive 100 per cent of its electricity use from renewable energy and to be carbon-free by 2030. Many other companies make similar claims. Most of them do not stack up, according to research published today.

The world’s 25 largest companies are committed to reduce emissions by only 40 per cent on average by their target dates, not the 100 per cent claimed by their “net-zero” and “carbon neutral” announcements. This is the conclusion of the report, Corporate Climate Responsibility Monitor, by the NewClimate Institute, based in Germany, and Carbon Market Watch in Brussels. 

“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,” says Thomas Day of NewClimate Institute, the lead author. “Even companies doing relatively well exaggerate their actions.”

Bottom of the pile were companies including Accenture, BMW, Carrefour, Deutsche Post, Nestlé, Novartis and Unilever. Others, such as Amazon, GlaxoSmithKline, Google, Hitachi, IKEA, Volkswagen and Walmart, were only a notch better. Maersk, Vodafone and Deutsche Telekom were the only three companies to clearly commit to deep decarbonisation by cutting 90 per cent of emissions across the whole value chain of their businesses, concludes the report.

A few common problems lie behind much of the discrepancy between the claims and reality, says the report, such as the exclusion of up or downstream emissions or certain market segments from companies' net-zero plans. The age-old problem of offsetting is also highlighted as troublesome. Two-thirds of the companies rely on carbon removals by forests and other natural processes, which can easily be reversed by, for example, a forest fire, says the report. “Nestlé and Unilever distance themselves from the practice of offsetting at the level of the parent company, but allow and encourage their individual brands to pursue offsetting to sell carbon-neutral labelled products,” it states. 

“Governments and regulatory bodies need to step up and put an end to this greenwashing trend,” says Gilles Dufrasne from Carbon Market Watch.

These findings all sound pretty devastating. If companies don't achieve their promised emissions reductions on time, we all lose. Yet María Mendiluce, chief executive of the We Mean Business Coalition, which works with leading companies on climate action, is right to point out that the firms highlighted in the report are corporate pioneers, even if their actions are to some degree flawed or, at best, poorly explained. "There are hundreds of thousands of businesses, including many major global companies, that are not taking any action," she says.

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“Every business that has made a net-zero commitment is part of an unprecedented global experiment. There is no blueprint to follow and every action or decision is effectively breaking new ground. It is not surprising that companies moving first and fastest will need to course correct over time. This is not a reason to stop or slow down but rather to learn and move forward as quickly and effectively as possible."

This indeed seems to be the spirit in which Unilever is taking the findings. “While we share different perspectives on some elements of this report, we welcome external analysis of our progress and have begun a productive dialogue with the NewClimate Institute to see how we can meaningfully evolve our approach," says the company.

Coming back to Google, the company seems a little more put out by the report, vigorously defending its climate action. “We’re proud of the progress we’re making," Alex Joseph, a spokesperson, said. "In 2020 we achieved 67 per cent carbon-free on an hourly basis across our data centres, up from 61 per cent in 2019."

In terms of offsets, Google insists that when used, they are “truly additive”, meaning that projects reduce greenhouse gas emissions that would not be impacted by other incentives. The company likewise invests in "additional" renewable energy projects, funding new wind and solar farms rather than simply buying green electricity that is already being generated. And, contrary to what the report states, Google says it has a clear target to “reduce the majority of our absolute emissions against a 2019 baseline by 2030, and invest in nature-based and technology-based carbon removal solutions to neutralise our remaining emissions". 

Such language is fairly impenetrable and wouldn't help most consumers to understand whether the company they rely on for their films, facial scrub or furniture is fully committed to climate action or is playing fast and loose with the truth.

Given this dilemma, as Clare Shine, director and chief executive of the University of Cambridge Institute for Sustainability Leadership, says: “As the climate debate moves from the ‘why’ to the ‘how', warm words and strategic plans for sustainability need to face close and ongoing scrutiny — alongside better metrics, standards and collective ambition, rooted in evidence-based approaches.”

James Dyke, a professor at the University of Exeter, agrees with Dufrasne that the state needs to step in to ensure long-term pledges are turned into deliverable actions. “Carbon credits and offsetting is a bit of a Wild West at the moment," he says. "There are good schemes, there are terrible schemes. It would be very difficult, if not impossible, for a consumer to have any real assurance that the offsetting scheme they are contributing to is part of a fair and just climate solution. Regulation is the only way this situation can be fixed. There must be a role for governmental and non-governmental agencies to act as certifiers for these schemes.”

Overall, the report shows that “it is relatively easy to declare a net-zero target and much harder to translate that into actual reductions of greenhouse gases", says Dyke. He has previously expressed scepticism that the net-zero concept can encourage climate action in the short window of time still left to drastically reduce emissions.

“Net zero is, in principle, a very powerful climate policy framing,” he says, but it comes with two big problems. "First, companies and governments are proposing mid-century targets. That’s kicking the can down the road and assuming our children will fix the problems we are causing today. Second, by offering the promise of future carbon removal we give policy makers a way out of making the required greenhouse gas reductions now.”

These issues don't have to mean ditching net zero as an ambition, but require action to be significantly intensified. “It is extremely unlikely the required changes for 1.5°C will be met," says Dyke, referring to the international target to limit global warming. "But we can avoid 3°C, even get it under 2°C.” Companies, however, will have to truly lead the way for the worst effects to be avoided and will have to be able to demonstrate in practice, not just on paper, that business as usual is no longer an option.

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