As the types of goals, targets, dates, and claims about greenhouse gas (GHG) emissions proliferate, it’s also getting harder to sort out what they mean. In our latest research on the environmental sustainability aims of the largest 200 corporations on the Fortune global rankings (G200), we help separate the wheat from the chaff. For instance, we tally how many companies are setting rigorous targets to reduce their absolute operations emissions by a set percentage and by a future year, as opposed to those aiming to reduce emissions intensity or to avoid emissions. Our analysis shows that such absolute emissions reduction targets are increasingly common among leading corporations.
Still, there is significant variation even among these most rigorous targets. In recognition of the United Nations’ COP27 call to urgently reduce greenhouse gas emissions, we want to share some common shortfalls of corporate emissions reduction targets and how you can craft a target that withstands stakeholder scrutiny. When it comes to the G200 corporations that have absolute operations emissions reduction targets, we found that:
- A minority is aiming too far out. Eleven percent of G200 companies that have targets to reduce their direct emissions and indirect emissions from purchased electricity are planning to hit those targets in 2035 or later, and it’s not clear whether they have any supplementary targets that are more near-term. By comparison, the Science Based Targets initiative says that, for targets submitted in 2022, companies should set a year to achieve them no later than 2032. The Science Based Targets initiative provides the most rigorous guidance on establishing emissions reduction targets, and not all companies with targets participate in the initiative. Nevertheless, the guidance serves as a good standard against which to measure targets.
- Others widen the window by pushing back their baseline. Sixteen percent of G200 companies with operations emissions reduction targets are effectively giving themselves 16 or more years to hit their targets. Even some companies with a target year of 2030 have selected a baseline year against which to measure reduced emissions deep into the past, such as 2010 or 2013, banking historical reductions to make their current targets appear more ambitious than they are. On average, G200 companies with operations emissions targets give themselves a 12.6-year time frame to achieve their targets.
- Compound annual growth rates clarify ambitions. The average CAGR of G200 companies’ operations emissions reduction targets is minus-6.1%. Companies aren’t necessarily planning to reduce their emissions by the same percent every year; more often, they’re hoping for technological innovation and new partnerships to make greater progress as their target date approaches. Nevertheless, looking at the compound annual growth rate that would be needed to achieve the targets provides rough comparisons across corporations with different carbon footprints, absolute percent reduction targets, and target time frames. Shockingly, the CAGR of G200 companies’ operations emissions reduction targets ranges from about -1% to nearly -44%. Clearly, not all companies that tout their targets have similar ambitions. This fact will make validation from a trusted external organization even more important as the pressure for companies to establish targets increases.
Read our research to measure your organization’s sustainability goals against those of the 200 largest corporations in the world or the 50 largest in North America, and pivot accordingly. Also, consult our newly launched research theme on the green market revolution. If you aren’t yet a client, find complimentary resources on the sustainability solutions hub.