Based on current reduction targets, the world's largest companies are on track to reach the scientifically-recommended level of greenhouse gas cuts by 2089 – 39 years too late to avoid dangerous climate change, reveals a research report – The Carbon Chasm – released August 24 by the Carbon Disclosure Project (CDP).
It shows that the Global 100 firms (92 of which participated in the study) are currently on track for an annual reduction of just 1.9% per annum which is below the 3.9% needed in order to cut emissions in developed economies by 80% in 2050. According to the Intergovernmental Panel for Climate Change (IPCC), developed economies must reduce greenhouse gas emissions by 80-95% by 2050 in order to avoid dangerous climate change.
The research report – The Carbon Chasm – was conducted by the Carbon Disclosure Project, based on data reported to CDP in 2008*, and supported by BT, to analyse how the world's largest 100 companies currently set greenhouse gas emissions reduction targets and whether they are sufficient to combat long term climate change.
Of those emissions reduction targets with a deadline, a majority (84%) are set up to and including 2012, which correlates with the final year of the Kyoto Protocol and suggests that businesses may be waiting to hear outcomes of the UN Conference of the Parties meeting in Copenhagen this December (COP-15) before they set longer term reduction goals.
BT's Chief Sustainability Officer Chris Tuppen commented: "Most large companies now measure their carbon footprint and many have set carbon reduction targets. But how many of those targets are actually in line with the required reductions to prevent dangerous climate change? The research highlights a significant gap between what is needed from the corporate sector and what's currently promised. We in the business world need to find a way of closing this carbon chasm."
Paul Dickinson, CEO of the Carbon Disclosure Project, an independent not-for-profit organisation that holds the largest database of primary corporate climate change information in the world, said: "While 73% of Global 100 companies have set some form of reduction target, the majority need to be far more aggressive if they are to achieve the long-term reductions required. This is a time of huge opportunity for businesses to gain competitive advantage by reducing their own impact on the climate and benefit from associated cost savings, as well as sparking major innovation around the production of new, lower carbon products and services."
Businesses cite various motivations for setting emissions reductions targets including identifying inefficiencies in corporate operations to achieve cost savings and stimulate innovation; minimising GHG associated risks whilst preparing for potential future regulation; and achieving competitive advantage. However, as motivations are largely driven by market forces rather than scientific recommendations, Global 100 targets often fail to deliver the required cuts.
The report highlights some recommendations to close the current carbon chasm:
- Every company should set a CO2-e reduction target.
- Targets must have clear baseline and target years.
- Governments need to agree clear medium and long-term reduction goals in Copenhagen to provide a framework for business to set required targets.
- Company targets should reflect the IPCC scientific recommendations and whilst absolute targets are preferred for clarity, aggressive intensity targets can also deliver.
The research also revealed a vast array of targets which presents challenges in assessing one against another. Greater harmonisation in setting targets in line with the science is required and this consistency will assist in revealing the leaders and the laggards in emissions reductions and ensure that major cuts are pursued in the short, medium and long term in order to permanently close the carbon chasm.
Key Findings in Report
We are facing a Carbon Chasm – To cut emissions in developed economies by the required 80% by 2050, we need to see a minimum annual global reduction rate of 3.9% per annum. However, analysis of reduction targets from the Global 100 companies shows they are currently on track for an annual reduction of just 1.9% per annum. If we were all to continue on that trajectory we will not achieve the required reductions until 2089, 39 years too late. The consequences for the climate could be dramatic.
73% of Global 100 companies report some form of reduction target, while a significant minority (27%) do not. There is an urgent requirement for all companies to establish and achieve required targets.
Company target setting is motivated by market forces, not scientific requirements - reduction targets are used to identify inefficiencies in corporate operations, to achieve cost savings, stimulate innovation, to minimise climate change risks, to benchmark against competitors and satisfy stakeholder demands. Some also cite a positive impact on the environment and staff motivation and recruitment as a factor too.
CO2-equivalent targets dominate and are more popular than energy efficiency or energy consumption targets. 62% (84) of the targets are CO2-e related, compared to 15% (21) based on energy consumption and 9% (13) based on energy efficiency.
Absolute targets outstrip intensity in popularity, with almost twice as many absolute (86) targets compared to intensity (45). Companies favouring absolute targets say they are more transparent and deliver absolute reductions, while those preferring intensity targets say they benefit from more flexibility, especially in terms of business growth.
84% (103) of target deadlines are set to 2012 or before which suggests that businesses are waiting to hear outcomes of the UN Conference of the Parties meeting in Copenhagen this December (COP-15), before setting longer term reduction goals. Just 16% (19) of those with a target year, are set beyond 2012 suggesting government leadership is required to stimulate longer term target setting.
The wide range of targets is not directly comparable and it is difficult to judge the impact. The absence of a standard framework for setting emissions reduction targets has led to a patchwork of company specific targets, which have developed from individual company priorities and market forces.
One Size fits all won't work – Although there was recognition that harmonisation of targets has advantages, there was broad consensus among interviewees that a 'one-size-fits-all', cross-industry approach, is not a favoured option within a voluntary process. It was argued that sector and company differences could result in skewed data or incentives and reduce transparency if one target methodology was applied across the board.
* Companies report climate change data to CDP annually. This research report is based on the most recent data provided by 92 of the world's 100 largest publicly quoted companies in 2008. CDP also conducted in-depth interviews with executives at 12 of the Global 100 companies on target setting.
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