Road to Zero Emissions

This report assesses the progress of 55 of the largest U.S. corporations in reducing greenhouse gas (GHG) emissions in line with the Paris Agreement’s objective of limiting global average temperature rise to 1.5 degrees Celsius above pre-industrial levels, which requires achieving “net zero” emissions by 2050. The primary finding from our analysis is that the overwhelming majority of companies assessed have neither established comprehensive, 1.5 degree-aligned GHG reduction goals nor demonstrated progress in reducing their emissions in alignment with net zero goals.

The social, environmental, and economic impacts associated with climate change are escalating year on year. To mitigate the most catastrophic impacts of climate change, the COP26 Glasgow Climate Pact, signed by almost 200 countries in the fall of 2021, reiterated the importance of setting and achieving emissions reduction targets that hold global warming below 1.5 degrees C. Investors have been a significant force in driving companies toward Paris-aligned climate action. A majority of companies now measure and report some range of their Scopes 1, 2, and 3 GHG emissions and set some level of GHG reduction targets. Many have set net zero ambitions. The vast majority of company climate actions and GHG reductions, however, are not yet aligned with global climate goals.

This report scores companies on their actions across three pillars for an Overall Net Zero grade: (1) climate related disclosures, (2) GHG reduction targets, and (3) GHG reductions. Given the importance of reducing GHG emissions, the Overall Net Zero grade is weighted most heavily to achievements in year on year, 1.5 degree-aligned GHG reductions.

A summary of the Net Zero scorecard results is set forth below. Appendix A provides the full list of grades by pillar. Appendix B provides the list of indicators met or not met, and Appendix C provides the complete scoring methodology.

KEY FINDINGS

Only Three Companies Received an Overall “A” Grade: Figure 2 below shows that, of the 55 companies assessed, two companies, Microsoft and PepsiCo were awarded an “A” grade for overall performance. Ecolab earned an “A-”. Alphabet achieved an overall grade of “B”, Apple achieved a “B-”, Prologis and Abbott Laboratories received “C+” grades, and Southern Company and Air Products & Chemicals received “C-” grades. The rest of the companies assessed received “D” or “F” grades.

Six Companies Received an “A” Grade for Emissions Reductions: The vast majority of companies are not adequately reducing the full range of their Scope 1, 2, and 3 GHG emissions. Only six companies, Microsoft, PepsiCo, Ecolab, Alphabet, Prologis, and Abbott Laboratories, received “A” grades for reducing their Scopes 1, 2, and 3 GHG emissions and GHG emissions intensity at a rate consistent with 1.5 degrees. A contributing factor to the low scores is that, while many companies are reducing their operational and energy emissions, the vast majority are not addressing their full range of Scope 1, 2, and 3 emissions; Scope 3 emissions, which often are made up of supply chain and product emissions, are particularly lacking. Where emissions disclosures are incomplete, companies received a zero score in Pillar 3 GHG reductions, reflecting this non-disclosure and an inability to score emissions reductions.

Lagging Reduction Grades Reflect a Failure to Account for and Reduce the Majority of Company-Related Emissions: While many companies are demonstrating reductions in Scope 1 (operational) and Scope 2 (purchase power) emissions, these emissions often represent just a fraction of total emissions, leading to low performing grades. For example, while Chevron has focused on reducing Scope 1 and 2 emissions in alignment with 1.5 degrees over the past three years, such reductions represent only about nine percent of the company’s total emissions when Scope 3 product emissions are included. The company therefore earns an “F” grade in reduction performance. Twenty-one assessed companies have reduced Scopes 1 and 2 emissions in alignment with 1.5 degrees, but Scope 1 and 2 emissions represent 50 percent or more of total emissions for only two of these companies, Freeport-McMoRan and Air Products and Chemicals, demonstrating that most companies are not taking action to reduce their most material emissions.

Zero Companies Received an “A” Grade for GHG Target Setting: While seven companies received “B” grades in the GHG reduction target setting category, no company received an “A” grade, which requires a net zero by 2050 goal applicable to all emissions Scopes with limited use of offsets. Both the CA100+ Net Zero Benchmark and the Science-Based Targets Initiative (SBTi) have underscored the importance of companies achieving comprehensive, company-related GHG reductions, rather than using carbon offsets. To achieve global 1.5 degree goals, offsets should be used only for residual emissions where reductions are not feasible due to technology limitations (which generally should represent 10 percent or less of total reductions). None of the 55 assessed companies has made a clear commitment to follow these guidelines. While 12 companies have committed to achieve net zero emissions or carbon neutrality by 2050 or sooner across all relevant scopes, none specifically states an intent to accomplish this with limited offsets.

Nearly 2/3 of Companies Fail to Align Any GHG Reduction Goal with 1.5 Degrees: Aligning GHG reduction goals with 1.5 degrees, which requires 4.2 percent or more absolute emissions reduction per year in the near term, is critical to reducing the worst impacts of climate change. Thirty-five of the 55 assessed companies have some type of GHG reduction goal. Only 16 companies have both Scope 1 and 2 goals aligned with 1.5 degrees; 39 of the companies fail to align any Scope of emissions with climate science.

Only Two Companies Have Scope 3 Targets Aligned with 1.5 Degrees: Just two companies (Apple, and Microsoft) have a goal to reduce their Scope 3 emissions in line with 1.5 degrees. Some companies have established less ambitious Scope 3 reduction goals, such as well below 2 degrees, which is notable progress, but insufficient to reduce the worst impact of climate change.

Companies Are Performing Better on Disclosures but Are Still Missing Key Elements of Disclosure: Demonstrating forward momentum, a majority of companies assessed received “C” grades or better for their GHG disclosures. Too many companies, however, still miss the mark on disclosing critical metrics, such as full value chain emissions (Scope 3) or clear disclosure on use of carbon offsets.

Most Companies Report Full Scope 1 and 2 Emissions; Most Fail to Disclose Scope 3 Emissions: While 90 percent of the assessed companies report Scope 1 and 2 operational emissions, few disclose Scope 3 emissions, which include indirect supply chain and products-related emissions. Out of the 55 assessed companies, only 20 companies reported all relevant Scope 3 emissions (as identified by the GHG Protocol). Many companies report on Scope 3 emissions but fail to include their primary sources of emissions. This type of reporting can confuse investors.

Carbon Offsets Disclosures Lack Clarity: Companies are failing to disclose necessary information about how carbon offsets are used in GHG disclosures, targets, and achieving emissions reductions goals. Only 11 companies disclosed the number of carbon offsets purchased, a description of the types of carbon offsets projects, and the verification status of these offsets.

Company Scores: A summary of the Overall Net Zero grades is set forth in Figure 2 below. Grades are based on the combined points earned in each pillar, with the Greenhouse Gas Reduction pillar being weighted most heavily. The maximum number of points available is 18, with four points available for GHG disclosures, six points for GHG reduction targets, and eight points associated with GHG reductions. A full list of company grades by each pillar is provided in Appendix A.

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