- The number of companies that committed to or set a science-based decarbonisation target rose from 2,134 in 2021 to 3,784 by the end of September 2022
- Despite this ambition, a third (33%) of companies who disclose on greenhouse gas (GHG) emissions through CDP and had operational decarbonisation commitments due in 2021 did not meet these, according to the latest CDP disclosures. 1
- Ahead of COP27, Bain & Company highlights five actions businesses can take to turn their pledges into action
London—November 3, 2022—As the world convenes for the latest United Nations Climate Change Conference, COP27, in Egypt this month, a new analysis by Bain & Company of reports from companies worldwide offers an insightful picture of the business community’s response to global warming and progress towards meeting carbon reduction and net zero goals.
In 2018, only 144 companies had committed to or set a science-based decarbonisation target to address their GHG footprint. This doubled to 358 in 2019 and again to 764 in 2020, before rocketing by 179% to no fewer than 2,134 companies in 2021 ahead of the COP26 conference in Glasgow. And with Q4 yet to play out, there has already been a further 77% increase in the number of companies having committed to or set a science-based target, taking the total to 3,784 in the lead up to COP27.
Yet despite the surging number of commitments to these science-based targets by businesses, a third (33%) of the companies that report GHG emissions through CDP 2 and had an absolute scope 1 & 2 target expiring in 2021 failed to meet it , Bain’s report, COP27: It Will Take Visionary Pragmatism to Accelerate Decarbonization in the Downturn reveals.
Torsten Lichtenau, Senior Partner and global lead of Bain & Company’s Carbon Transition Practice comments on the context behind the figures and how companies can adopt more successful approach to sustainability.
“Setting ambitions is the easy part, but meeting those goals has proven difficult, with 33% of companies missing the absolute scope 1 & 2 targets that expired in 2021 according to the latest CDP disclosures,” he said. “There is a very steep rise in the numbers of businesses committing to or setting decarbonisation goals. This is very positive for the planet. But while ambition is an important – and a vital first step for businesses to take – true differentiation will come from ambition matched with the commitment and determination to deliver the targets in a consistent as well as a cost-effective way. At the same time, companies will need to be able to commercialize and make fully viable their low carbon offering to their customers. This is the essential next step in this journey that most companies are beginning to embark upon.”
As world leaders gather at COP27, Bain & Company’s analysis highlights five areas which encapsulate its advocated approach of “visionary pragmatism” to accelerate decarbonisation efforts – even during the present deteriorating economic environment. Bain’s findings highlight how leading companies can turn the energy and carbon transition into competitive advantage.
The five areas that Bain’s report identifies as enabling companies to succeed against their green ambitions are:
- Strategic adaptation: Companies do not need ever more climate scenarios but, rather, clarity on the relevant ones. Most important, they need to identify the signposts that will indicate what’s coming next.
- Investor and lender resonance: Shareholders are sharpening their expectations about decarbonization, and at the same time, they are often unwilling to compromise on near-term returns. It will be critical for companies to double down on proof points to clearly demonstrate for capital markets the progress made to date on decarbonisation and explain the flexible pathways available to a more sustainable business in the medium-to-long term.
- Customer-back decarbonization: Companies that are most successful in their climate transitions start decarbonization with the customer in mind and work backward across offerings, operations, and the supply chain. More than ever, it will be critical to clearly understand the sustainability priorities of customers who are navigating an economic downturn and are therefore very focused on costs.
- Partnerships for results: Carbon transition is a problem too big to be solved by any one organization on their own and companies need to engage the wider ecosystem of customers, suppliers, and peers up and down the value chain.
- Creating an empowered ‘green organization’ from top to bottom: Top management and new recruits may be convinced of the need for aggressive decarbonization. Yet the task of delivering this has solidly moved into middle management. Leading companies are empowering middle management to get the job done. It’s critical to integrate decarbonization delivery into a company performance management, by aligning KPIs and incentives, putting a price on carbon (internal carbon pricing) in decisions – and providing clarity to middle management on resolving trade-offs.
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Notes to Editors
- Company achievement rate based on achieved emissions over targeted emissions in 2021, for absolute scope 1 & 2 targets expiring in 2021.
- CDP – the CDP, or Carbon Disclosure Project, is an international non-profit organisation that helps companies and cities disclose their environmental impact.