For the past two weeks, much of the sustainability world has been participating, or keeping an eye on, what’s happening in Sharm-El-Sheikh, Egypt during COP27. The annual United Nations Climate Change conference is where world leaders and their teams negotiate targets and solutions for stabilizing the climate. It attracts over 40,000 participants from activists to delegates to corporate leaders. It’s not without controversy or frustration. Swedish activist Greta Thunberg skipped this year, calling it a forum for greenwashing. But it is where the latest, usually depressing, science is shared. It’s where pacts and policies are negotiated. What happens at COP, or not, does make a difference.
Which is why a report from the United Nations’ High Level Expert Group on the Net Zero Emissions Commitments of Non-State Entities attracted my attention. Non-state entities include businesses, financial institutions, and local governments. The introductory letter from the chair was titled, “It’s time to put a red line around greenwashing”. The tone was sharp. “Non-state actors—industry, financial institutions, cities and regions —play a critical role in getting the world to net zero no later than 2050. They will either help scale the ambition and action we need to ensure a sustainable planet or else they strongly increase the likelihood of failure. The planet cannot afford delays, excuses, or more greenwashing.”
The report laid out ten recommendations that tackle pervasive problems surrounding corporate Net Zero Commitments, ranging from dishonest accounting to other behavior that circumvents deep climate action. The implications of some of their recommendations would be profound if adopted, most notably:
- Non-state actors cannot claim to be net zero while continuing to build or invest in new fossil fuel supply.
- Non-state actors cannot focus on reducing the intensity of their emissions rather than their absolute emissions or tackling only a part of their emissions rather than their full value chain (scopes 1, 2 and 3).
- Non-state actors cannot lobby to undermine ambitious government climate policies either directly or through trade associations or other bodies. Instead they must align their advocacy, as well as their governance and business strategies with their climate commitments.
- To effectively tackle greenwashing and ensure a level playing field, non-state actors need to move from voluntary initiatives to regulated requirements for net zero
Most sustainability professionals would welcome more order in the chaotic world of net zero accounting. Regulations would provide much needed consistency. While scope 3 emissions are challenging to measure, there is general agreement that it has to be included.
But if you are a financial institution or anyone in the fossil fuel industry, the first bullet is the big one. If you build or finance a new fossil fuel supply, you can not claim to be Net Zero. The world's top banks provided $742 billion dollars to the fossil fuel industry last year. Most leading banks, including JP Morgan Chase and Goldman Sachs, have net zero commitments.
The other big one that leaders need to pay attention to is lobbying, especially through industry associations. The Influence Map identifies the most influential companies lobbying against climate action. 80% of the top 25 companies have net zero commitments. It also identifies the most “destructive” industry associations. The US Chamber of Commerce is number 3. If these recommendations have any influence, it would ratchet up the pressure from members for the chamber to reverse course on climate.
While it remains to be seen whether policy emerges, these recommendations are a shot across the bow at corporations and the banking sector to walk the talk for Net Zero. It will be fascinating to see where we go from here.