- Analysis of corporate climate targets suggests they need a step change to achieve Paris agreement
- Progress on target-setting since 2020 ‘cools’ European economy by 0.3°C, to 2.4°C
- Asian and North American companies fare worse, at 3.1°C and 2.9°C respectively
- In Canada – the worst in G7 – under half of corporate emissions covered by targets.
September 6, 2022 (Berlin): Global leaders will meet in Sharm el-Sheikh in November to keep the Paris agreement’s 1.5°C target alive, but climate ambition in G7 economies and beyond is putting the COP27 vision out of reach, according to new analysis by non-profit CDP and global management consultancy Oliver Wyman.
Based on current emissions reduction targets set by companies, no G7 country has a corporate sector likely to decarbonize fast enough to meet the 1.5°C goal.
On aggregate across the G7, corporate emissions targets are calculated as aligned with 2.7°C of global warming.[1]
The report shows companies in Germany and Italy have the most ambitious targets to reduce emissions in the G7, where collective emissions are expected to match the pace of decarbonization required to limit global warming to 2.2°C.
The two leading countries are followed by France (2.3°C), the United Kingdom (2.6°C) and the United States (2.8°C).
Canadian companies fare worst in the G7, with targets aligned with 3.1°C of warming on average.
Temperature ratings in the study reflect corporate ambition, rather than national climate policies or Nationally Determined Contributions (NDCs). However, with COP27 approaching, the gap between what is promised by policymakers and the real economy is considerable.
The analysis is based on CDP temperature ratings, which translate companies’ emissions reduction targets into a global warming outcome using scientific pathways. The ratings, which include all emissions in company value chains (Scope 1-3), reflect the likely temperature rise if global emissions would fall at the same speed as the companies’ targets.
For each country’s temperature, ratings for individual companies were aggregated and weighted by total emissions.
The analysis shows a clear and consistent outperformance by European companies over North American and Asian peers across all industries.
The European power generation sector, for example, is ahead of all sectors globally on 1.9°C of warming. That compares to 2.1°C for North American companies and 3°C for Asian companies. Target-setting in the industry in Europe is much more advanced, with around 80% of all emissions covered by a valid 2°C target or better.
On the whole, the European corporate sector improved from 2.7°C in 2020 to 2.4°C in 2022, explained in part by a rapid 85% rise in companies with science-based targets during 2021.[2]
Science-based targets (SBTs), seen as the gold standard for targets as they are independently assessed against scientific pathways, are a key driver of lower temperature targets.
Collectively, companies with science-based targets have reduced emissions 25% since 2015, compared to an increase of 3.4% in global emissions from energy and industry.
The high temperature ratings seen in countries like Canada and the United States are largely the result of companies completely lacking targets, rather than targets that lack ambition.
In Canada, under half (43%) of all reported Scope 1 and 2 emissions are covered by a target, compared to France and Germany, for example, where over 90% of reported Scope 1 and 2 corporate emissions are from companies with disclosed targets.
The Paris climate agreement targets a 1.5°C limit to global warming – a goal that the United Nations Intergovernmental Panel on Climate Change (IPCC) says must be met to avoid even more catastrophic impacts of climate change.
The difference between 1.5°C and 2°C, for example, includes a 10x increased likelihood of ice-free arctic summers, a 2.6x increase in the number of people exposed to extreme heat events, and twice the impact on marine fisheries and crop yields, according to the IPCC. [3]
Laurent Babikian, Global Director Capital Markets, CDP, said:
“The most important driver of rapid emissions reductions in line with the Paris agreement is ambitious target setting. It is not acceptable for any country, let alone the world’s most advanced economies, to have industries displaying so little collective ambition. Armed with this information, governments, regulators, investors and the public must demand more from high-impact companies without climate targets. Momentum is growing, but as we approach COP27, we must get our 1.5°C goal off of life support. High-impact companies, and their investors and lenders, must immediately set and honour targets with credible transition plans to allow us to meet this goal.”
James Davis, Partner, Financial Services at Oliver Wyman, said:
“The analysis highlights big differences in ambition and willingness across companies to take a lead with their targets, and the urgent need to spread best practices further and faster if we are to have a chance of reducing emissions to achieve 1.5°C – a goal whose importance has only been underscored by recent extreme weather. Supportive government policy is crucial, as well as resolving the structural challenges in some sectors and regions. As the financial system commits to net zero and seeks to steer capital towards those pioneering the low carbon economy, there will be growing scrutiny on corporate emissions, targets and transition plans, underpinned by the move towards mandatory disclosures in many key jurisdictions.”
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About CDP
CDP is a global non-profit that runs the world’s environmental disclosure system for companies, cities, states and regions. Founded in 2000 and working with more than 680 financial institutions with over $130 trillion in assets, CDP pioneered using capital markets and corporate procurement to motivate companies to disclose their environmental impacts, and to reduce greenhouse gas emissions, safeguard water resources and protect forests. Over 14,000 organizations around the world disclosed data through CDP in 2021, including more than 13,000 companies worth over 64% of global market capitalization, and over 1,200 cities, states and regions. Fully TCFD aligned, CDP holds the largest environmental database in the world, and CDP scores are widely used to drive investment and procurement decisions towards a zero carbon, sustainable and resilient economy. CDP is a founding member of the Science Based Targets initiative, We Mean Business Coalition, The Investor Agenda and the Net Zero Asset Managers initiative. Visit cdp.net or follow us @CDP to find out more.
About Oliver Wyman
Oliver Wyman is a global leader in management consulting. With offices in more than 70 cities across 30 countries, Oliver Wyman combines deep industry knowledge with specialized expertise in strategy, operations, risk management, and organization transformation. The firm has more than 5,700 professionals around the world who work with clients to optimize their business, improve their operations and risk profile, and accelerate their organizational performance to seize the most attractive opportunities. Oliver Wyman is a business of Marsh McLennan [NYSE: MMC].
For more information, visit www.oliverwyman.com. Follow Oliver Wyman on Twitter @OliverWyman.
Press contacts
- CDP - Joshua Snodin, +4917645910909, Joshua.snodin@cdp.net
- Oliver Wyman – Patricia Romero, +44 (0) 7825 193311, patricia.romero@oliverwyman.com
[1] Analysis based on 11,345 companies in CDP’s temperature ratings dataset. Companies without valid targets are assigned a default temperature score of 3.2°C.
[2] Data from CDP – Oliver Wyman Now For Nature report, February 2022.