The financial sector performs poorly in the EcoAct climate report
EcoActan Atos company, has today released its 12th Annual Results report for corporate climate reporting. Despite rapid progress in 2021 ahead of COP26, the 2022 report, which assesses how international businesses across the FTSE, DOW, DAX, CAC, FTSE MIB and IBEX are tackling climate-related sustainability challenges, found that less than half (48%) of FTSE 100 companies achieved Scope 1 & 2 emissions reductions in line with 1.5°C, compared to 72% in 2021.
According to the Intergovernmental Panel on Climate Change (IPCC), emissions must peak within just three years and be cut by 43% by 2030. However, EcoAct’s research found that 52% of FTSE 100 companies have not reduced emissions on the 1.5°C pathway, and some actually increased emissions.
Similarly, FTSE 100 net zero commitments appear to have slowed, with many businesses missing long-term emissions reduction targets. While 66% of businesses committed to net zero last year compared to 45% in 2020, this percentage only rose to 75% this year.
According to the Science Based Targets initiative’s (SBTi) Corporate Net-Zero Standard, the world’s first framework for science-based net-zero targets, most companies are required to have long-term targets of emission reductions of at least 90-95% by 2050. Almost all (97 %) FTSE 100 companies, however, do not have long-term emission reduction targets for Scope 1 and 2 emissions, and similarly 96% lack a long-term reduction plan for Scope 3. All of this shows a fundamental lack of understanding of what it takes to deliver net zero in practice.
The largest 20 FTSE companies are performing in line with other indices on short-term targets, with two in five (40%) setting 1.5°C-adjusted validated scope 1 and 2 emission reduction targets, compared with 50% for the DOW, and 40% for DAX and CAC. More positively, they outperform their peers when it comes to validated targets for Scope 3 emissions with one in four (25%) businesses having a science-based target (SBT) adjusted to 1.5°C, compared to just one in ten ( 10%) for DAX and DOW, and only one in twenty (5%) for IBEX.
Commenting on the findings, Stuart Lemmon Managing Director of EcoAct, and Managing Director of the Net Zero Transformation practice at Atos so: “It is positive that three out of four businesses intend to reach net zero, and the FTSE 100’s leadership on Scope 3 emissions is remarkable. But today’s climate reality means that this positive intention does not go far enough, there is a need for deep emission cuts across all businesses in all industries. Many businesses have become well versed in the climate disclosure requirements, but ultimately most fail to act across Scopes 1, 2 and 3 in a way that will limit temperature rise to 1.5°C.
Last year, COP26 built phenomenal momentum, but this progress appears to have stalled. Far fewer companies achieved emission reductions this year, after we saw significant reductions as a result of covid-19. Businesses now have a new set of economic and geopolitical challenges to face. However, these can be a further stimulus for action. Accelerating decarbonisation across all sectors must become an imperative for businesses, not only to limit climate catastrophe, but to reduce widespread economic losses.”
Across the indices, there was a noticeable drop in scores this year, as companies fail to keep up with the rising bar for climate best practice and deliver emissions reductions in line with Paris Agreement targets. Just over a third (35%) of the international businesses assessed have a validated (SBT) for Scope 1 and 2 emissions and only 8% have one for Scope 3 supply chain emissions.
In the UK, GSK secured number one on this year’s FTSE 100 leaderboard, having risen rapidly through the ranks over the past two years. It was closely followed by Burberry Group, Landsec and AstraZeneca. Together, this means that biopharmaceuticals, personal care and cleaning products and the information, technology and telecommunications (IT&T) industry top the leaderboard this year.
As an international climate leader, Maya Ormazabal Herrero, Environment and Human Rights Director, Telefónica SAso “At Telefónica, we have integrated climate change into our business strategy for twenty years. We expect short-, near- and long-term emission reduction targets across our wider value chain. Our goals are also in line with what climate science now requires of companies to act on climate change and limit global warming to 1.5 °C.
“Leading EcoActs 2022 Corporate Climate Reporting Performance Report confirms the need to develop long-term climate action strategies that align business growth with decarbonisation. Ahead of COP27, the urgency to reduce our emissions is undeniable. The telecommunications sector has become an important ally in the transformation of other industries, and shows that the benefits of connectivity and digitization are key in the net-zero transition.”
At the international level, some sectors, such as the IT&T sector, despite accelerated growth during the pandemic, achieved higher emissions reductions across their activities compared to other sectors, such as biopharmaceutical, financial, retail and real estate. In particular, Cisco, whose climate strategy focuses on waste reduction and supplier engagement, and Microsoft, which uses 100% renewable energy to reduce Scope 2 emissions, show that best climate practices can go hand in hand with business growth.
