Context

Recently,  The Corporate Climate Responsibility Monitor 2024 report was released by the non-profit New Climate Institute with assistance from Carbon Market Watch.

Corporate Climate Responsibility Monitor Report 2024

• The report evaluated climate targets of 51 major corporate companies worldwide.
• These companies collectively generated $6.1 trillion revenue in 2022 and reported emitting 8.8 gigatonnes of CO2 equivalent, roughly equal to India, Russia, and Brazil combined.
  • This accounts for approximately 16% of global greenhouse gas emissions in 2022.

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About Corporate Climate Responsibility Monitor (CCRM)

• CCRM stands for Corporate Climate Responsibility Monitor (CCRM). 
• It assigns Integrity scores ranging from “High” to “Very Poor” on a 5-point scale based on this evaluation.

• Key Areas of Corporate Climate Action:

• • Emissions Tracking and Disclosure: This involves monitoring and revealing emissions data.
  • Setting Emission Reduction Targets: Companies establish goals to reduce carbon emissions.
  • Reducing Own Emissions: Actions are taken to decrease a company’s own emissions.
  • Addressing Unabated and Residual Emissions: Efforts are made to manage and take responsibility for emissions that cannot be eliminated. 

Key findings From the Corporate Climate Responsibility Monitor Report

• Emission Reduction Targets Fall Short:

  • 30% emission by 2030: The 51 largest companies assessed by CCRM are only on track to reduce emissions by 30% by 2030, relative to 2019 levels.
    • This falls short of the significant reductions required to limit global warming to 1.5 degrees Celsius.
  • 50% emission by 2030:Only 7 out of 51 companies have targets that aim for a reduction of more than 50% by 2030.

• Corporate Companies Performance in Emission Reduction Plans:

• • The CCRM’s Integrity Score shows no company achieving the highest level of transparency and accountability for meeting their targets.
    • Danone, Iberdrola, Mars, and Volvo Group demonstrate stronger plans compared to others.
    • H&M, Nike, and Inditex have plans but it is inadequate to achieve their targets.
    • Walmart hasn’t updated targets since 2016, and Volkswagen dropped its interim 2025 target without a replacement.

• Challenges in Meeting Climate Targets:

  • Controversial Solutions: The report reveals that many countries rely on controversial methods to meet their targets, such as carbon capture, transitional fuels, and bioenergy.
  • Slow Progress: While companies are making gradual progress on their climate goals, they are falling short of achieving the necessary emissions reduction to limit global temperature rise to 1.5 degrees Celsius.
  • Risk of Accountability Evasion: There’s a danger that companies might avoid responsibility by using carbon offsets. 
    • A proposed framework for offsetting Scope 3 emissions could exacerbate this issue.

• Risk of Offsets Loophole:

  • The report identifies a potential loophole in carbon offsetting methodologies that could weaken accountability for Scope 3 emissions (those from the supply chain).
  • The offsets loophole

• • • Scope 1 Emissions: These come from a company’s direct activities, like its own production processes, causing emissions.
    • Scope 2 Emissions: This relates to a company’s energy usage, such as the electricity it consumes.
    • Scope 3 Emissions: These stem from sources outside a company’s direct control, like emissions produced when customers use its products.
      • Importance of Scope 3: Scope 3 emissions make up most emissions across various industries.

• Proposed Changes in Carbon Offsetting:

  • VCMI Proposal: VCMI introduced a “beta Scope 3 Flexibility Claim,” allowing companies to offset up to 50% of their Scope 3 emissions.
  • Acceptance by SBTi: SBTi, a major validator of corporate targets, agreed to consider carbon offsetting as a means to address Scope 3 emissions.
    • However, it is unclear if the VCMI proposal will be linked to SBTi.

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• Over reliance on Voluntary Reporting:

  • Voluntary Nature: Climate targets set by corporate companies are voluntary and assessed by standard-setting bodies to determine their robustness.
  • Validation Frameworks: Bodies like SBTi, Transition Pathways Initiative, and MSCI Net Zero Tracker validate these targets, lending legitimacy to company goals.
  • Shortcomings of the System: While over 1,000 companies have outlined emission reduction plans under this voluntary system, there are gaps in progressing towards these targets and ensuring accountability.