Axios Climate Truths: Race to net zero

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Companies have been volunteering in droves to cut their greenhouse gas emissions to "net zero" within the next two to three decades.

Yes, but: A lack of a standard definition of what "net zero" actually means for corporations — and the absence of a regulatory entity that can enforce the pledges — means investors, government officials and consumers are unable to discern greenwashing from genuine commitments. 

In broad terms, "net zero" means the point at which the emissions from an entity, be it a company or a country, equals the amount of greenhouse gases being taken out of the atmosphere.

By the numbers: At least 695 of the world's largest publicly traded firms have set such targets as of early 2022 to be reached in or before 2050.

Companies are responding to the increasingly clear and dangerous effects of climate change, which in many cases are directly affecting their operations.

The C-suites of these companies are also motivated by consumer sentiment and investor pressure, along with the knowledge that regulators are likely to act on this issue in the near future.

The big picture: The most recent U.N. Intergovernmental Panel on Climate Change reports show that globally, the net zero goal needs to be reached by 2050 in order to limit warming to 1.5°C above preindustrial levels — the target needed to prevent the most catastrophic effects of climate change.

In the past few years, culminating with the COP26 climate summit in Glasgow late last year, companies have latched onto this goal just as countries have.

"Net Zero is an attractively clear and simple tagline," Steve Smith, the executive director of the Oxford Net Zero Initiative, which evaluates individual companies' targets and their progress toward meeting them, told Axios.  "Zero is a nice round number. Net Zero is is catchy."

But reports on the corporate sector's emissions targets indicate that much more progress needs to be made for net zero targets to be met.

Between the lines: While the definition of net zero is clear on a global level, for an organization it can be murkier.

For example, Smith said, the lack of a formal definition means it's not clear whether net zero for companies applies to just CO2 or all greenhouse gases.

Simon Fischweicher of the nonprofit Carbon Disclosure Project said it's also unclear whether offsets — such as investing in forest restoration projects — can make up the bulk of a company's emissions reductions, or whether they need to make real cuts in their own emissions plus those of other companies within their supply chain. 

Environmental groups and climate scientists view offsets warily, since many don't actually result in removing carbon emissions from the atmosphere. In their view, the top priority has to be actual emissions cuts.

Here's how a few notable companies have handled their pledges:

Stanley Black & Decker is out ahead of the pack in setting a science-based emissions reduction target that is consistent with reaching net zero by mid-century, according to Fischweicher. 

It aims to cut its Scope 3 emissions by 35% by 2030. Such emissions come mostly from the materials used to make their products, the energy consumed by the products when they're used, and the transportation of the products.

Stanley Black & Decker is also seeking to cut its own emissions (Scope 1 and 2) by 100% by 2030, while engaging suppliers (Scope 3) to reduce their carbon footprint. Ultimately, it is aiming to reach a point where the company will be sequestering more carbon than it will be emitting.

Google says it went carbon neutral in 2007, and the company is working to get its data centers and campuses to run 24/7 on carbon-free electricity by the year 2030. 

It also aims to reach net zero emissions "across all our operations and value chain" by 2030, but will use nature-based and technology-based carbon removal solutions to offset some of its emissions.

Notably, though, the company has not yet set a science-based target under the Science Based Targets Initiative. However, Google will have new sustainability announcements in April, a company spokesman told Axios.  

The Science Based Targets Initiative consists of companies whose emissions reduction plans are aligned with achieving the Paris Agreement's temperature goals. 

Microsoft has a strategy to become ”carbon negative” by 2030. In its most recent sustainability report, published March 10, the company lays out the successes and difficulties it has encountered in meeting its targets.

For example, its Scope 3 emissions — which mainly come from the use of its products — increased by 23% compared to 2020, even though it cut its emissions from its offices, manufacturing plants and stores.

Microsoft chief environmental officer Luca Joppa told Axios the company is "making progress" on its emissions from its operations and energy consumption, and "putting in place the fundamental tools and processes that will allow us to more reliably and accurately measure Scope 3 emissions and make the necessary reductions moving forward." 

ExxonMobil Corp. set its own net zero target late last year, aiming for 2050. However, it did not account for the carbon emissions that occur when its products are burned for generating energy. 

Exxon spokesman Casey Norton said the company is working to increase its supply of products that have lower life cycle greenhouse gas emissions, which in turn could reduce emissions from using its products. 

"In cases where our products are used instead of a higher-emissions alternative, the result is a net overall emission reduction for society," Norton said via email.

1. The race to net zero emissions

Why it's hard to discern greenwashing from genuine commitments.

Illustration of a man in a suit pledging, and his head is a smokestack.

Climate truths

Climate Truths

Companies have been volunteering in droves to cut their greenhouse gas emissions to &quot;net zero&quot; within the next two to three decades.Yes, but: A lack of a standard definition of what &quot;net zero&quot; actually means for corporations — and the absence of a regulatory entity that can enforce the pledges — means investors, government officials and consumers are unable to discern greenwashing from genuine commitments.

Ominous forecasts about the impact of climate change serve as the backdrop for the world — led by U.S. lawmakers and companies — to debate big action on the problem, which could upend energy systems and our way of life.

Energy & Environment

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

More and more companies are crafting emissions plans designed to be consistent with the Paris climate agreement. 

This chart captures the rise in companies working with the Science Based Targets initiative, which rigorously vets corporate climate plans.

2. A rise in science-based climate pledges

Companies are increasingly making the pledges in response to climate warnings.

More and more companies are crafting emissions plans designed to be consistent with the Paris climate agreement. <ul><li>This chart captures the rise in companies working with the Science Based Targets initiative, which rigorously vets corporate climate plans.</li></ul>

Over the past decade, net zero emissions targets have become mandatory for a company to be taken seriously on sustainability. 

Why it matters: Net zero targets could produce real progress toward reducing greenhouse gas emissions within the next few decades — assuming the targets will actually be met and not leave out important factors like the emissions from using a company's products.  

The big picture: Getting to net zero emissions — the point at which a company's emissions equal the amount of its greenhouse gases being absorbed by the land, sea, and if proven to work at scale, carbon capture devices — is a relatively new goal. 

The U.N. Intergovernmental Panel on Climate Change (IPCC) gave this concept a major boost with a special report in 2018.

This report looked at the feasibility and implications of holding global warming to the more ambitious target under the Paris Climate Agreement, which is 1.5°C of warming compared to preindustrial levels by 2100. 

The report contained stark findings, namely that to meet the target, the world would have to cut emissions by 45% by the end of this current decade, down to zero by 2050, and then go to net negative emissions by the end of the century. 

By the numbers: Net zero corporate pledges have taken off since 2018, as the IPCC report spurred an uptick in investor activism.

This takes the form of proxy battles at annual shareholder meetings, with investors urging companies to disclose more about their climate risks and efforts to cut emissions.

Investors are also threatening to pull money out of companies, or in the case of Exxon, elect new board members who are more aggressive on the topic of climate action.

One measure of the enthusiasm for net zero commitments is to examine trends in the Climate Action 100+, an initiative that works with heavy-emitting companies to advance their decarbonization strategies. 

As of September, 111 out of 167 "focus companies," which are some of the biggest corporate polluters, had made net-zero commitments. This number first started to increase in October 2018 and took off starting in the summer of 2019. 

Companies like Shell, BP, Delta Airlines, American Airlines and BASF have all pledged net-zero emissions by 2050.

If these commitments are met, they would remove 9.8 billion metric tons of carbon dioxide emissions annually, according to an analysis by BloombergNEF. 

That works out to more than 20% of global annual emissions. 

Between the lines: There are more stringent initiatives whose goal is to raise the level of climate ambition further, beyond net zero goals. For example, the Renewable 100 (RE100) had a record year in 2021, with 67 new companies pledging to get 100% of their power from renewable sources. 

Similarly, the Science Based Targets Initiative, which aligns company emissions targets with the goals of the Paris Agreement, also saw a record surge in signups in 2021, according to BloombergNEF. 

What we're watching: The extent to which regulatory agencies hold companies accountable for meeting their targets is not yet clear, but at the very least, the first draft of the SEC's disclosure rules is coming as soon as March 21.

Another trend is the extent to which investors themselves are goal-driven, with their own net zero targets they need to meet. This introduces a pressure point for companies lagging behind on their emissions reduction plans. 

3. Why companies are rushing to set net zero targets

They've become mandatory for a company to be taken seriously on sustainability.

Illustrated collage of measurement lines and targets highlighted by abstract circles.

Over the past decade, net zero emissions targets have become mandatory for a company to be taken seriously on sustainability. Why it matters: Net zero targets could produce real progress toward reducing greenhouse gas emissions within the next few decades — assuming the targets will actually be met and not leave out important factors like the emissions from using a company&#x27;s products.

There isn't much consistency in how companies measure their targets. A lot of them rely on carbon offsets — but that doesn't reduce the actual emissions they create.

4. Video: How companies' net zero pledges really work

There isn't much consistency in how they measure their targets.

There isn&#x27;t much consistency in how companies measure their targets. A lot of them rely on carbon offsets — but that doesn&#x27;t reduce the actual emissions they create.

Pro Rata

Axios Pro Rata

New climate disclosure regimes are being put in place around the world, setting expectations for how companies will do business as climate change threatens everyone and everything on the planet.

Why it matters: A company's role in spewing more greenhouse gas emissions and its exposures to climate risks are becoming key metrics in the evaluations conducted by investors, customers, and the public.

Driving the news: The U.S. Securities and Exchange Commission is likely to vote Monday on an initial proposal to require climate-related disclosures for publicly-traded companies.

It's likely to apply to emissions from a company's operations and the energy it consumes, but it's not yet clear what it will propose as far as emissions from a company's supply chain. 

The big picture: The U.S. is quite behind on rolling out climate-related disclosure requirements. There are more than 175 policies worldwide focused on reporting and disclosures, and hundreds more on other aspects of green finance, per Green Finance Platform. 

For example, the U.K. in October announced that large domestic companies would have to comply with disclosures as recommended by the Task Force on Climate-related Financial Disclosures whose members hail from G20 nations. That mandate, which takes effect April 6, will apply to more than 1,300 of the biggest U.K.-registered companies and financial institutions. 

The European Union last spring adopted a package of new rules that will go in effect in 2023 and increase the number of Europe-based companies that have to comply to 49,000.   

Between the lines: While the SEC is reportedly expected to require disclosures of Scope 1 and Scope 2 emissions, the Scope 3 category remains the wildcard. 

Scope 1 emissions are generated from a company’s operations, while Scope 2 emissions relate to its energy consumption. 

Scope 3 emissions — those from a business’s supply chain, and whose methodologies for measuring have room for improvement — may end up only being required for certain companies for which they make up the bulk. 

As each country or region adopts its own approach, divergent disclosure requirements, standards, and scopes could create more reporting loopholes and opportunities for continued “greenwashing” from companies. 

What’s next: If a majority of the SEC commissioners vote to move the proposal forward, the agency will then open it to public comment. The final rules could be ready as early as October. 

5. Companies face a new world of climate disclosure

New rules are being put in place around the world.

Illustrated collage of measurement lines and a hand holding a list with abstract circles.

New climate disclosure regimes are being put in place around the world, setting expectations for how companies will do business as climate change threatens everyone and everything on the planet.Why it matters: A company&#x27;s role in spewing more greenhouse gas emissions and its exposures to climate risks are becoming key metrics in the evaluations conducted by investors, customers, and the public.

Pressure on big companies to disclose and slash carbon pollution is spawning a hot growth industry: sophisticated emissions accounting services.

Why it matters: Precisely tallying greenhouse gas output — and crafting strategies for reducing it — requires complex data gathering and analytics that many companies aren't equipped to do in-house.

That's especially true as companies look not only at their own emissions, but also emissions from other companies in their supply chains and from the use of their products.

Driving the news: Tech startups in the "carbon accounting" space have emerged in recent years, attracting significant venture funding and big customers. 

Last year saw $356 million in new VC funding across 24 deals worldwide, up from $63 million and 12 deals in 2020, according to PitchBook data.

A number of startups pair carbon accounting software platforms with services to help companies cut emissions, such as finding renewables investments, cleaner supply chains or offsets.

But precise tracking of this space is hard, given the number of companies with overlapping but not identical missions. 

Watershed, which helps companies calculate and cut emissions, raised $70 million in Series B funding in February. Customers include Twitter, Airbnb and DoorDash.

Persefoni, a carbon accounting platform, raised $101 million in Series B money last fall.

SupplyShift, which helps give companies a detailed window into their supply chain emissions and performance, raised $10 million in December.

Sweep, another company that helps clients measure, track and reduce emissions, announced a $22 million Series A round in December.

State of play: "The theoretical total addressable market is huge," said sustainable finance expert Daniel Firger, managing director at Great Circle Capital Advisors.

"There's a real pain point for many, many companies across many industries, financial or non-financial, to grapple with this new and complex data landscape," he said.

Here's why companies are seeking out emissions accounting and help with finding effective carbon-cutting methods:

There's growing investor and activist pressure to improve climate performance and show that they're making good on emissions-cutting promises.

There's also growing participation in voluntary bodies like the Task Force on Climate-Related Financial Disclosures, CDP (formerly the Carbon Disclosure Project), and the Science Based Targets initiative.

European disclosure regulations, as well as the coming Securities and Exchange Commission climate disclosure rule, are slated to be major drivers of accounting needs.

What we're watching: How the market shakes out. Startups are emerging and growing at a time when incumbent accounting giants are branching out into more climate-related offerings. For instance, EY this year announced its new EY Carbon division.

What they're saying: "Basically every dollar businesses spend is now going to be filtered through this lens of carbon impact," Watershed co-founder Taylor Francis said in an interview.

"That's because of investor demand. It's because of regulatory expectation. It's because of expectations from customers and employees," he said. "It's trillions and trillions of dollars per year that's going to change direction based on climate as a lens."

Francis said clients are using Watershed to figure out steps like redesigning supply chains, choosing new vendors, and changing materials and ingredients in products.

The bottom line: He said the key motivation is not just accounting, but working with companies to act on it.

"I would be really disappointed if we built a huge carbon accounting business and no one was actually taking action to bend their carbon graphs," Francis said.

Editor's note: This story has been corrected to note that Persefoni raised $101 million in Series B money, not $101, and to delete an incorrect statement that the company has a heavy focus on banks and financial institutions.

6. One hot industry: Corporate climate shepherds

Many companies need help tallying up their greenhouse gas output.

Pressure on big companies to disclose and slash carbon pollution is spawning a hot growth industry: sophisticated emissions accounting services.Why it matters: Precisely tallying greenhouse gas output — and crafting strategies for reducing it — requires complex data gathering and analytics that many companies aren&#x27;t equipped to do in-house.

Closer

Axios Closer

Jobs and working conditions around the world are being altered by the effects of climate change and efforts to limit global warming. 

The big picture: Companies and countries are expected to create millions of new jobs over the next few decades as they take steps to reduce carbon emissions.

Yes, but: Even under best-case scenarios, climate change will continue to take a toll on productivity and laborers, especially among the most economically vulnerable.

State of play: Extreme weather has already been hurting farmers and their output, cutting into lumber production, and eroding coastal tourism.  

These conditions — heat waves, droughts, wildfires, flooding — are expected to continue even after countries reduce emissions.  

By the numbers: The equivalent of 80 million full-time jobs throughout the world could be lost in 2030, due to working hours lost to high temperatures, according to a 2019 report from the U.N. International Labour Organization (ILO).

And that's based on two huge assumptions: that the world limits warming to 1.5°C above preindustrial levels — a goal not yet within reach — and that agricultural and construction workers will be able to work in the shade. Take away either of those, and the losses get even worse.

Threat level: Agriculture and construction jobs and workers are expected to be the most impacted by heat stress, per the ILO report.

Around the world, countries will experience the impacts disproportionately, according to a recent McKinsey report — with Bangladesh and Pakistan being hit especially hard. 

In the U.S., Black and Hispanic workers are likely to be hit by bigger productivity losses due to extreme heat than white workers, an August 2021 report by the Atlantic Council found.

The other side: The Bureau of Labor Statistics projects that jobs for environmental scientists and specialists will increase by about 8% by 2030.

That's faster than the national average, but far faster growth will come from some jobs more closely tied to limiting the effects of climate change.

Jobs involving the servicing of wind turbines and installation of solar roofs are projected to see the fastest growth of all jobs, with about 68% and 52% growth respectively over the next decade, according to the Department of Labor.

And some experts insist that a successful transition to a low-carbon economy would create more jobs and economic value than would be lost.

For example, an October 2020 report by the International Organisation of Employers estimated that 18 million jobs could be created worldwide — largely in construction and renewable energy — if countries took serious climate measures, including reducing greenhouse gas emissions by 41%.

But 6 million jobs would be lost through that kind of transition, largely in the fossil fuels industry, the report stated.

It's hard to project exactly how many and when and exactly why job growth happens, because there are a lot of factors like new technologies getting cheaper that impact how jobs change, Michael Wolf, an economist at the Bureau of Labor Statistics, told Axios.

What they’re saying: Manufacturing and construction could see some of the biggest expansions in jobs, but in general, the kinds of jobs that will be created will be disproportionately high-skilled and high-wage jobs, Stuart Mackintosh, executive director of the think tank Group of Thirty, told Axios.

Another benefit, according to Mackintosh, is that regions that historically have had few well-paid jobs will see a lot of opportunity. 

For example, the top two renewable energy producing states are Texas (for solar and wind) and Kansas (for wind), according to Mackintosh.

“Farmers that build these wind farms on their land will get a consistent stream of income. This is not a one off thing … and so the [job estimates] we’re coming up with at the moment are probably too low.” 

What to watch: Whether there will be enough workers, and how much government intervention there will be.

Companies are trying to cut their emissions whether government incentives or mandates exist or not. But what those incentives and rules look like will ultimately dictate the pace and scale of change.

There's also already a gap between the demand for “green talent” — people who can help employers carry out environmentally friendly policies and achieve their climate goals— and the supply of workers with those skills.

7. How jobs will change with a warming world

Climate change will affect jobs and the way people work in nearly every part of the economy.

Illustrated collage of two businessmen walking in different directions, surrounded by shapes and grids

Jobs and working conditions around the world are being altered by the effects of climate change and efforts to limit global warming. The big picture: Companies and countries are expected to create millions of new jobs over the next few decades as they take steps to reduce carbon emissions.