Raging wildfires, heat waves, droughts, hurricanes, snowstorms, calving glaciers, and melting sea ice ...it’s been a tough year.
Extreme weather events around the globe are raising our awareness of the anticipated ongoing effects of climate change. Climate change is projected have significant impacts on economies, the stability of global financial markets, and the companies that operate within them. No matter the industry or geography, no business will be immune. To address this crisis, companies are recognising they must set strong corporate climate goals.
As a global public benefit research project that helps companies embed sustainability across their operations and decision making, we realised that companies wanted to see examples of good sustainability goal setting. To help, we maintain a free public database of leading sustainability goals. Every year, we review tens of thousands of them. Encouragingly, this past year, we have seen significant developments around climate goal setting.
The climate crisis
Rising temperatures are causing catastrophic climate impacts worldwide. Climate-related social crises are on the rise and the health of the ecosystems on which all species depend is deteriorating rapidly. Globally, we are now on a path to increasing climate impacts that will continue to intensify for the foreseeable future.
According to the Intergovernmental Panel on Climate Change (IPCC), to avoid the worst climate impacts, we need to limit global average temperature increases to a 1.5 degree trajectory. We can only do that if global greenhouse gas emissions drop by half by 2030 and get down to net-zero before 2050. Yet despite pledges from countries and companies to reduce carbon emissions, temperatures continue to rise.
And the climate risks for businesses and society will continue to worsen unless we transition rapidly to a low-carbon economy.
Climate risk for business
So what does this mean for companies? Climate change is a complex challenge with significant business risks that exceed typical strategic planning cycles. For companies, climate change comes with both physical risks from extreme weather events that can cause business disruption and transition risks from the need to fundamentally transition our energy and transportation systems. Recommendations by the G20 Financial Stability Board’s Task Force on Climate-related Financial Disclosures (the TCFD) help businesses identify, understand, monitor, and oversee the changes necessary to mitigate these climate risks and realise the opportunities associated with a just climate transition.
The evolving landscape of climate risks and societal expectations has significant implications for future business success. And the question company leaders and directors must ask themselves is: are we doing our part as a business, both in terms of our own operations and by working with our value chain to ensure that we are on track to prevent catastrophic outcomes? Have we set appropriate climate goals?
Credible corporate climate goals
Setting credible goals is about moving away from what your company could do, to what your company must do in order to do its part. When it comes to setting climate goals, the focus has been on setting science-based targets. That means that companies need to be setting their goals in alignment with climate science, which tells us we need to collectively limit global average temperature increases to 1.5 degrees …and that means reaching net-zero emissions well before 2050. Articulating a clear emissions reduction pathway that aligns with climate science is a key component of credible corporate climate strategies.
Emerging trends in climate goal setting
We’ve seen glimmers of hope. This past year, companies from a broad range of industries have been committing to do their part to address the climate crisis and have set corporate climate goals.
In early 2020, Microsoft announced a commitment to capturing carbon equivalent to what it calculates is all of the carbon it has emitted since it was founded in 1975. Now we are seeing other companies also make historical emissions pledges.
Another key trend has been coordinated action as an industry or as a group of companies. In the financial sector, we have seen the launch of the UN Principles for Responsible Banking. Several banks have also announced a Collective Commitment to Climate Action that focuses on aligning their portfolios with financing the transition to a low-carbon, climate-resilient economy. In September 2020, Morgan Stanley, a company that historically has provided considerable capital to the fossil fuel industry, became the first major bank to promise to reach net-zero financed emissions by 2050. We also saw the 13 airlines in the oneworld alliance unite behind a common target to achieve net zero carbon emissions by 2050, becoming the first global airline alliance to do so.
And lastly, we see that the timeframe on climate commitments has also been accelerated, reflecting the urgency of taking action. Amazon, in partnership with others, launched the corporate climate pledge where signatory companies agree to aim for net zero by 2040, 10 years ahead of the Paris Agreement target. Those companies signing on have said that they will do this through business change and innovations, including efficiency improvements, renewable energy, materials reductions, and other carbon emission elimination strategies. Walmart has even pledged to hit zero emissions from its global operations by 2040 without using carbon offsets.
Setting your own climate goals
It is encouraging to see a growing number of companies are adjusting their strategies to ensure they operate within social, environmental, and economic system limits. We know we urgently need to transform our global economies to bring emissions down.
If you are ready to set your own corporate climate goals or sustainability goals related to other key issues, we can help. Be sure to check out our public Credible Goals Database where we’ve curated leading examples of goals for inspiration. We are clear about what we are looking for and the information we use to assess goals. You can also read more about how to set credible sustainability goals that help support the resilience of the social and environmental systems your company depends on.