Comment: We can't afford to let perfection be the enemy of companies taking climate action

February 14 - There will be plenty of business leaders reflecting on the start of 2023, who would agree with Kermit the Frog: “It’s not easy being green.” Recent weeks have seen a series of reports taking aim at companies for their climate action efforts. Accountability is key and businesses must deliver against their commitments. Yet the implication that all corporate climate action is tantamount to greenwashing is simply wrong. Many companies are making incredible progress and charting the course for others to follow.

I regularly hear from corporate leaders just how challenging it is to develop a credible decarbonisation strategy and plan. Companies are, voluntarily, engaging with the Science Based Targets initiative (SBTi), and pouring incredible amounts of time and resources into their sustainability efforts.

We simply don’t have time for the crossfire of inconsistent government policies, different legislation across borders, activist investors, consumer scepticism around marketing claims and greenwashing attacks, when emissions must be cut in half by 2030.

I would rather see a million companies worldwide roll up their sleeves and getting on with delivery of imperfect climate plans today, rather than lose another decade arguing with the few thousand companies already underway to get their plans to be faultless.

To reach such scale will ultimately need governments to introduce regulation that compels companies to act. However, those companies pioneering emissions reductions today are paving the way for others to follow. The structures and initiatives that the We Mean Business Coalition have helped to build, including SBTi, the SME Climate Hub and others, may not be perfect, but they get better every day and are driving progress.

The experience of thousands of companies, big and small over many years demonstrates what every company needs to do: ambition – measure emissions and set science-based targets; action – create and deliver on a climate transition action plan; advocacy – call for policies and regulation that will help accelerate action; and accountability – report audited emissions and progress.

Here are just a few priority interventions to address the most serious obstacles to even more effective corporate climate progress.

Upgrade the global rules on measuring emissions

To cut emissions at the speed and scale necessary we need to understand where emissions are coming from. More than 20,000 companies are already reporting their emissions on a voluntary basis through CDP. Companies are getting better at understanding their own (Scope 1 and 2) emissions, but it remains difficult to measure and therefore to act to cut emissions within their value chain (Scope 3). These account for as much as 90% of their emissions, and cover more than a dozen categories, from purchased goods and services to employee commuting. In 2021 70% of public companies and just 29% of private companies that report to CDP reported any category of Scope 3 emissions.

Yet to truly deliver net zero across whole industries and economies, every company must be reporting accurate emissions data. The International Sustainability Standards Board (ISSB) is due early this year to finalise its draft of credible emissions disclosure standards, which would be comparable across different jurisdictions. Local legislators must now get on and make reporting to these standards mandatory.

Use voluntary carbon markets responsibly

Whatever their historical flaws, there is no credible route to halving global emissions this decade and halting biodiversity loss, without well-functioning voluntary carbon markets. For many companies, the solutions simply do not exist to allow them to cut their emissions to zero, so carbon markets offer a means to make progress while the necessary technology matures.

Companies cannot “count” any investments in nature-based solutions outside of their value chains towards science-based emission reduction targets. Yet it would be a huge lost opportunity to ignore the potential of carbon markets to help companies go further right now. A We Mean Business Coalition study showed that if the world’s 1,700 biggest emitters compensated each year for just 10% of the emissions they have not yet cut, through investments in nature, it would mitigate nearly 30 gigatons of emissions and mobilise up to $1 trillion in climate finance by 2030.

While voluntary carbon markets have previously been a lawless space, the rules are now becoming much clearer. Initiatives such as Voluntary Carbon Markets Initiative (VCMI) and Integrity Council for the Voluntary Carbon Market (ICVM) are creating the rules that will help distinguish the good from the bad. This will make it easier to spot greenwashing and filter out low quality carbon credits.

Transparency and honesty will be key

Companies at the vanguard of corporate climate action have stood up and shown leadership by making commitments and starting to act. It is right that they should face scrutiny, and indeed it is welcome where it helps them improve. Companies must always make sure their marketing efforts are honest and aligned with the complex reality of cutting emissions.

Greater transparency in emissions data from all companies will reveal those that are avoiding scrutiny and shirking their responsibilities. Once those business leaders feel the consumer and regulatory pressure to begin their climate journey, I’m sure they will be grateful for the trailblazing efforts of those companies already underway.

It may not be easy, but as national and international regulation increasingly comes into force there will ultimately be no alternative. In the meantime, those companies that recognise the scientific necessity and incredible business opportunity of climate action are charting a course.

These companies are delivering complex and challenging decarbonisation efforts while the rules of the game – across emissions accounting, voluntary carbon markets and reporting – are still being developed. Those willing to voluntarily act in a responsible way in such uncertain conditions are true leaders.

Ultimately, for the hundreds of millions of people, communities and species currently vulnerable to the escalating impacts of climate change, their success could not be more important.