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14 March 2022

Number of European companies with science-based climate targets rises 85%

If Europe’s most carbon-intensive companies caught up with the best climate performers, corporate emissions in Europe – roughly equal to the annual emissions of the UK and Ireland – could be cut in half, finds a new report by CDP and Oliver Wyman.

By Energy Monitor Staff

The number of European companies with approved science-based climate targets grew 85% last year, to now cover businesses responsible for a third of reported emissions, according to a new report by CDP, the non-profit that runs the global environmental disclosure system, and global management consultancy Oliver Wyman.  

The report – using data from more than 1,220 European companies disclosing their impacts on climate change, forests and water security through CDP’s disclosure system in 2021 – found that while European companies are driving global progress on science-based targets, they are often failing to act on their wider environmental impacts. Now For Nature: The Decade of Delivery also states that if Europe’s most carbon-intensive companies caught up with the best climate performers, corporate emissions in Europe – roughly equal to the annual emissions of the UK and Ireland – could be cut in half.

One of Drax’s UK power plants has greenhouses that grow vegetables with the excess heat the station produces. (Photo by Clare Louise Jackson via Shutterstock)

However, still only 16% of companies have targets aligned with the Paris Agreement’s 1.5°C goal. Covid-19 brought a 13% drop in reported corporate emissions; but after adjusting for Covid-19, cuts are in the range of the pre-pandemic trend of 1.5% per year – far short of the 4.2% required for companies to align with the Paris Agreement’s 1.5°C pathway. 

The analysis found companies’ indirect (scope 3) emissions represent 86% of their total emissions – or six times those they produce directly. However, only 53% of companies disclose data on their most important sources of these indirect emissions – their supply chains and use of their products.  

Furthermore, only 5% of companies have a combination of a science-based emissions target, a target for reducing water withdrawals, and a best-practice forests commitment that includes zero-deforestation – pointing to a trend of companies under-appreciating their wider environmental impacts on nature and biodiversity. The average risk related to climate change was estimated at €355m, ten times larger than the average impact of water risks, and five times larger than deforestation-linked risks, such as incoming EU regulation banning deforestation-linked imports.   

The report also gives reason for optimism, however, with 450 million tonnes of CO2 estimated to be ‘locked in’; deriving from companies with targets set through the Science-Based Targets initiative

There is also evidence of accelerated progress in finance. In a 50% annual improvement, 44% of European financial institutions now report ‘financed emissions’ – those linked to investment, loans and insurance activities – although only 27% include at least half of their portfolio. Meanwhile, 32% of disclosing financial institutions report specifically encouraging companies in their portfolios to set emissions targets in line with 1.5°C.  

Globally, just 13 out of 25 net-zero pledges made by the world’s largest companies set out explicit emission-reduction commitments, and those 13 companies only commit to reducing emissions by 40% from 2019, on average, not 100% as suggested by their “net-zero” and “carbon-neutral” statements.

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