The total greenhouse gases big companies can emit, while meeting the global target of a 1.5 C rise in temperatures, would run out in just five years at current rates. Business needs to wake up
OPINION: Businesses, globally and locally, are fundamentally failing to respond to the climate crisis. Some are setting inadequate goals to reduce their emissions. But many of those are failing to deliver. Very few companies set big enough cuts and then deliver on them.
Meanwhile, the climate crisis escalates by the hour, as the UN’s latest assessment recently reported in unequivocal detail. Some ways we can respond as individuals was the subject of my column last week. This week’s is about the corporate response.
The climate failure of companies was laid bare in recent analysis by MSCI, the global investment analytics company famous for its global stock market indices.
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Its MSCI ACWI Investable Market Index covers 9,300 listed companies, representing 99 percent of the tradeable global equities. MSCI estimates those companies emitted 11.3 billion tonnes of greenhouse gases (CO2e) in 2019, which was 19 percent of human-induced emissions that year.
If we’re going to keep the rise in temperature to 1.5C, a level at which changes in climate and ecosystems will still be major but manageable by humanity, then those 9,300 companies can only emit another 61.4 billion tonnes of CO2e in total — ever.
Their emissions this year will be 10.9 billion tonnes, MSCI estimates, a reduction of a mere 3.5 percent in two years. And these are only their own direct emissions, knows as Scope 1. They do not include Scope 2, which is the energy they buy, or Scope 3, which is their indirect emissions across their entire value chain from suppliers to customers.
If those companies maintained their feeble efforts to reduce emissions, they would use up their entire remaining share of humanity’s carbon budget in five years and eight months – by the end of 2027. This is on top of the 57 billion tonnes they’ve blown through since the signing of the Paris climate agreement in 2015.
You could drastically ease the goal to a maximum 2C rise in temperature. Then the carbon budget for those 9,300 companies expands substantially. At their current rate, they’d run out of carbon in 21 years and five months.
Given the very leisurely pace of corporate emissions cuts globally, corporate investors, directors, staff, and customers must think they have oodles of time left to solve the climate crisis. If so, they are ignoring the dire analysis by climate scientists of the irreparable damage our 2C rise would do to the Earth systems on which our lives depend.
So, 1.5C has to be the goal. But of the 15 largest publicly listed companies in the world, the MSCI reports can find only two that fully disclose their Scope 1-3 emissions – Procter & Gamble, the US global consumer goods company, and ASML Holdings, the Dutch multinational supplier of equipment to the semiconductor industry.
Australian banks are two of the worst outliers in this select group which claim to report multiple scopes. They are Westpac and Commonwealth Bank, which respectively only report 2 percent and less than 1 percent of what MSCI estimates to be their total Scope 1-3 emissions.
MSCI also identifies the 10 largest emitters in its global index that fail to disclose any emissions data at all. The largest is Coal India with more than 1 bn tonnes of estimated emissions a year, followed by mostly Chinese and Russia energy companies.
Elsewhere, there is a lot of other loose talk by corporate leaders. For example, in the recent northern hemisphere reporting season more than 150 major companies talked of their net zero targets, and chief executives of some two dozen spoke of their 1.5C targets. But pressure on them to actually deliver is ramping up from activist shareholders and from litigation, with Exxon-Mobil and Royal Dutch Shell being just two recent examples.
So far major New Zealand corporates have had an easy ride. More than a dozen of them, for example, have signed up to Science Based Targets, which sets their emission reduction goals based on climate science. They are among some 1,700 companies worldwide that have committed to this process.
But there are some glaring anomalies among them. For example, Fonterra has set goals only to cut energy emissions from transport and manufacturing. Those, though, are only 9 percent of its total emissions. The other 91 percent are from farming. But it has yet to commit to any reduction in them.
Likewise, Auckland International Airport has committed to cutting its own emissions but not those of the passengers it serves. Yet they, particularly the overseas ones, burn considerable carbon to be the airport’s customers.
In a similar vein, Genesis and Contact have set such SBTs on their emission reductions. But current events in the electricity sector, notably rising levels of coal and gas burning and blackouts, raise severe doubts they can deliver sufficient clean energy. They are failing to articulate how corporate strategy and government policy can give their sector the shakeup it has to have to meet the nation’s climate and energy needs.
These vast climate challenges, though, are not just the responsibility of the big end of town. Even the smallest business can play a useful role, just as individuals can. Every bit of carbon saved counts towards our nation’s overarching climate goals.
There’s plenty of excellent, practical advice from organisations such as the Sustainable Business Network, the Sustainable Business Council, ECCA, Toitu Envirocare and ThinkStep to name a few.
When even the smallest companies engage their staff, suppliers and customers on the journey to greater sustainability, they invariably find this unleashes innovation, creativity and commitment that makes them much better businesses.
Small companies can also be big leaders. For example, this week Blenheim-based Sounds Air committed to buying three 19-seater electric aircraft from Heart Aerospace, a Swedish company.
With an expected range of 400km, these ES-19 aircraft will likely save some 75 percent on fuel costs and 50 percent on maintenance costs compared with fossil-fuelled aircraft. Sounds Air expects to take delivery of them in 2026. Big customers overseas include United Airlines in the US, which has ordered 100.
To help drive these vast transformations, we urgently need, for New Zealand companies, the same sort of carbon budget analysis that MSCI has done for global companies. The outcome might vary but the basic conclusion would not. We have precious little carbon left to squander.