How companies drive climate action already

Chart of the week

Company commitments to cut greenhouse gases have begun to spread in high-emitting sectors. Chances are we could see a further acceleration over the coming months.

With Texas gripped by power outages, much attention remains focused on government plans to cut greenhouse-gas emissions.[1] Meanwhile, though, plenty of companies continue to quietly adjust their practices in line with the Paris climate agreement under the Science-Based Targets initiative (SBTi). Launched in 2015, the SBTi ultimately commits corporate signatories to track and disclose progress on greenhouse-gas-emissions reductions.

By now, roughly 1,200 companies have joined the SBTi across 60 countries and covering 50 sectors as our Chart of the Week shows. Of those who have pledged their commitment to the SBTi, about half of the companies have set their approved science-based targets. Encouragingly, the Covid-19 pandemic has not deterred company enrolment. Companies have been joining the SBTi at a monthly clip of 31 new entrants since the end of 2019, more than double the rate of new signatories over the 2015 to 2019 period. Importantly, many signatories are targeting emission cuts not just in their own operations, but, along their supply chains too (also known as scope-three targets). In its latest progress report, the SBTi network finds that 94% of companies now have such scope-three targets.[2] Studies show that emissions in a company's supply chain are on average 5.5 times higher than its operational emissions.[3]

Within their own operations, SBTi companies have on average reduced emissions by 6.4% per annum since setting their target. That is well above the 4.2% annual reduction needed to stick within the Paris guidelines to limit global warming by 1.5ᵒC. Increasingly, SBTi membership has also been spreading in high-emitting and hard-to-abate sectors such as cement and concrete. The hope is that when some companies lead the way, others are more likely to follow. For example, progress in the high-emitting cement and concrete sector might catalyze commitments in other high-emitting sectors, such as steel, maritime transportation and metals and mining, where progress remains depressingly slow.

One open question is just how much participation will be necessary to trigger a domino effect. According to the SBTi, 20% may be a critical hurdle rate. And, intriguingly, in 16 OECD countries more than 20% of high-impact companies, as measured by emissions and market capitalization, have already adopted SBTi targets. From a sector perspective, commitments have hit a critical mass across 14 sectors including consumer durables, hospitality, apparel and food and beverages. 2021 could be the year when we see a further acceleration.

20210226_Cotw_Science-Based Target initiative_CHART_EN_72DPI.png

* cumulative
Sources: Science Based Targets and DWS Investment UK Ltd as of February 2021

1. DWS (January 29, 2021) Moving the net-zero needle

2. Science Based Targets (January 2021). From ambition to impact: How companies are reducing emissions at scale with science-based targets

3. CDP (September 2019). Global Supply Chain Report 2019


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