Astrazeneca, Google, Microsoft, VW and even Sainsbury’s have unveiled net-zero targets. But how seriously should we take them?
As the chief executives of 240 of the world’s largest companies were about to board their private jets to Davos earlier this month, a message popped into their inboxes. It was from Klaus Schwab, the founder and executive chairman of the World Economic Forum, who made a last-ditch plea to talk about climate change.
“We encourage you to use the opportunity of your upcoming participation to make a commitment to act on climate change,” the letter said. Schwab even suggested setting a deadline of 2030 as a target to get something done.
That letter is the reason Davos became the stage for this year’s first round of proclamations about how companies plan to help save the planet from themselves.
A coalition of major financial institutions, worth a collective $4.3 trillion, agreed to take steps to minimise carbon-heavy investments in their portfolios. Over half of the major companies present at the conference pledged to develop a series of common metrics to track environmental impact. And Salesforce CEO Marc Benioff even claimed some of the credit for US president Donald Trump signing a pledge to plant a trillion new trees around the world.
So are we likely to see a significant change in the way these companies operate? The short answer is no.
With such tepid commitments to action, Davos has simply become the enabler of the latest form of corporate “greenwashing”. The term, which was coined in the 1980s, applies to companies that issue inflated environmental claims to help hide a track-record of questionable behaviour.
An infamous example of greenwashing came from oil company Chevron, which launched commercials called “People Do” in the 80s. The TV adverts featured miniature endangered El Segundo Blue butterflies, poised lovingly on an employee’s fingertip in a picturesque setting. In reality the butterfly habitat was considered far from ideal: it was on the land of a refinery that was the focus of an 18-month legal battle from the Environmental Protection Agency over its waste water discharge.
Chevron is one example of many. More recently, forestry company Weyerhaeuser ran ads claiming that it was “serious” about caring for fish – at the same time as it was accused of destabilising salmon habitats. SeaWorld was accused of misrepresenting reality when it said it created a “fun, interesting and stimulating” environment for its captive animals, while facing several class action lawsuits over its treatment of whales.
These historic greenwashing attempts are versions of a more sinister, still-common practice of companies hiding a lack of action on climate targets by using creative corporate accounting.
The dubious tactics that companies employ to paint themselves in the best light with the least effort are widespread, says Valentin Jahn, who researches carbon performance and climate governance at the London School of Economics.
“Carbon accounting offers a lot of backdoors. For example, if a company holds a stake in a dirty coal mine, it won’t appear in the operational boundaries [of the green targets]. If companies include offsets, they can put them in the numbers [toward meeting the target].”
Emissions are split into three groups, or scopes: Scope 1 includes direct emissions from companies’ operations, such as from fleet vehicles; Scope 2 covers indirect emissions from the supply of electricity, heating or water used by the company; and Scope 3 includes all other non-power related indirect emissions, such as those associated with corporate travel, shipping and water usage.
Most targets used by businesses are not linked to specific operations, such as a supply chain or purchased energy. This means that net zero targets may ignore large parts of an organisation that are deemed too much of a problem to change.
“Some companies were setting targets for their entire footprint and some organisations were setting targets on their absolute emissions,” explains Daniel Murray, of environmental consultancy Carbon Smart. “Scope 3 emissions are definitely the elephant in the room.”
Companies’ track record for massaging environmental targets to make themselves look better is “undeniably still taking place”, says Alex Farsan of environmental group WWF.
In fact, a lot of companies that claim to be carbon neutral have done little to change internally, opting instead to purchase “carbon credits”: investing in renewable energy or sustainable projects elsewhere in the world and claiming it offsets any environmental damage they may have done. The question is whether they will continue to get away with it.
“Offsetting is what draws the ire of the climate change movement and with very good reason. There’s a lot of very low quality projects and a lot of credits that actually don’t really represent real reductions,” Farsan explains.
A 2016 report from the European Commission casts doubt on whether carbon credits are making any difference whatsoever in reducing emissions. The system allows a UK airline, for example, to offset its emissions by buying credits to build a wind farm in Thailand. The problem is that the wind farm would have probably been built anyway, even without the credits being purchased in the first place. The report argues that only two per cent of global projects funded by carbon credits are truly contributing to reducing emissions.
One of the companies relying on offsets is Google, which is among the major firms to release bold plans that could help to trigger a sea-change in corporate responsibility.
Google claims to have been “carbon neutral” for the last 12 years, but only if you count the facilities it owns and not the factories that make its products and ship them. Last year for the second time in a row, the company claims to have “matched 100pc of the electricity consumption of our global operations with renewable energy”. Much of this is done through offsets.
Last week, the search giant pledged to do more. It wants its entire operation to run on carbon free energy “24 hours a day, seven days a week”. This, it says, will make it not just carbon neutral. But if you factor in the issue of supply chain and offsets, many would argue Google has a long way to go.
The timing for Google’s new ambitions were no coincidence. They came soon after Microsoft said that it would remove “all of the carbon” from the environment that it has emitted since 1975, the year it was founded. This must be done by 2050, according to CEO Satya Nadella, who will do it by using carbon capture and storage technologies.
The logistics of how these will work and how they will be measured have yet to be revealed – but the company has already pledged $1 billion to the cause. The announcement made no reference to Microsoft’s heavily criticised partnerships with oil and gas companies.
If anything, the fact that sustainability and climate change were a major topic at Davos says one thing: businesses are afraid of being seen to do nothing.
Climate change activists and now legislators are heavily scrutinising whether companies have actions to back up their grandiose statements. Greenpeace, for example, has set up a website called WorldEconomicFailure.com to keep track of banks and insurers’ hypocritical statements on fossil fuel consumption, versus their actual investment record.
Among them is the Bank of America, which has invested $106.6bn in fossil fuels since the Paris Agreement, despite chief executive Brian Moynihan saying: “We believe we have to get off fossil fuels.”
Moynihan put his name to support this year’s Davos letter asking attendees to do more about climate change.
The reason for this panic may be partly to do with consumer and activist pressure – but businesses have a more immediate problem: investors. Backers have become an unexpected driver of change as they grapple with the reputational damage and the risk of being seen to fund pollutant companies. More importantly, if they decide to start setting their own net zero targets, they could face the wrath of their own members if portfolio figures turn out to be worse than they said.
A good example of this kind of stock-taking came earlier this month from Brunel Pension Partnership, which operates a fund worth £30bn. It called the finance sector “not fit for purpose” and said from now on, the companies that fail to meet the climate target set by the Paris agreement will face the threat of votes against the re-appointment of board members, or being removed from Brunel’s portfolios in 2022.
This kind of pressure is exactly what might move companies to spring into action.
“Investors will not be happy if companies don’t have targets they can actually achieve,” Jahn says. “It’s about convincing them that you’re a good company – you’re not the ones polluting the seas and killing the planet and doing all kinds of nasty things.”
All Rights Reserved for Natasha Bernal