Comment: With emissions on track to rise by 2030, companies urgently need to step up climate action

January 24 - We’re now three years into what the United Nations has described as the “Decade of Action”. While there has never been a need for greater urgency to tackle climate change and nature loss, emissions continue to rise and action from companies remains far too slow. On our current trajectory we are set for a 7% rise in emissions by 2030, instead of the 43% cut needed for a 1.5 degree future.

Limiting the heating of our planet to 1.5 degrees Celsius requires the decarbonisation of the global economy at speed and scale. A significant part of hitting our climate goals rests on the shoulders of business, particularly those in sectors with high emissions.

For that reason, over the last four years, my team at CDP, the world's environmental disclosure system, has used the Assessing low-Carbon Transition (ACT) methodology and assessed 270 companies across some of the highest-emitting sectors on their journey toward decarbonisation.

Looking at everything from past and future emissions trends, to levels of low-carbon investment and transition plans, we have been able to develop a picture of companies’ decarbonisation progress from the oil and gas, electric utilities, automotive and transport sectors. The results are raising alarm bells.

The data tells a consistent story across all sectors: there is a stark lack of consistency between commitments and actions. Nearly all the companies we looked at acknowledge the reality of climate change but are failing to make changes at the speed and scale necessary to limit global warming to 1.5 degrees.

Whether focusing on net-zero targets, climate transition plans or levels of spend on research and development, companies need to act much faster.

A recent assessment we conducted, in collaboration with the World Benchmarking Alliance, looked at 90 influential companies from the transport sector and found that 49 had not set a net-zero target. They include XPO Logistics and the U.S. Postal Services, to name a few.

Of all sectors assessed, transport relied most heavily on fossil fuels with more than 90% of energy coming from crude oil-derived products. Despite this, only 7% of companies assessed have committed to phasing out their use of fossil fuels. Even companies that do set net-zero targets rarely set near-term goals that hold them accountable between now and 2050.

In 2021 we found the same when looking at 100 oil and gas companies; just three had set emissions reductions targets that contain vital elements, including covering Scope 1, 2 and 3. Meanwhile, none of those analysed pledged to stop exploration for new sources of oil and gas.

Our assessment of the automotive sector showed they also needed to step up ambition as not enough companies were underpinning their transition plans with financial commitments, and most emission targets were not ambitious enough for a 1.5C pathway.

In 2021 electric utility companies’ targets lacked rigour, coverage and frequency to drive the necessary emissions reductions, as 47 of the 50 companies assessed had not aligned their targets with a 1.5C pathway.

If there is any chance of making progress in 2023, high-emitting businesses must take immediate action in the following three areas:

First, we need accountability and action from heavy-emitting organisations and their suppliers. This is paramount. Commitments and targets made must be science-based, and ideally approved by the Science Based Targets initiative.

Second, companies must ensure they have a credible climate transition plan – a necessary tool to ensure that a company can transition and remain profitable in a 1.5C-aligned economy. A climate transition plan is a time-bound action plan that clearly outlines how an organisation will pivot its existing assets, operations and entire business model towards a trajectory that aligns with the latest and most ambitious climate science recommendations.

Third, robust and transparent disclosure that leads to tangible action is essential. In 2022, significant developments were made in this area, and we expect to see disclosure becoming mandatory in most major economies. That means that companies not disclosing will soon find themselves at risk of being left behind. It is a vital step in managing emissions and we see that companies that disclose are further along in their transition journey than those that don’t.

Despite momentum building around climate awareness, we are seeing little evidence of improved action over time. Progress made is far outrun by the decarbonisation curve.

Put simply, every further day of inaction diminishes our already unlikely chance of hitting the Paris goals. The world desperately needs more action from the companies that are responsible for emitting so much carbon.