5 years after the Paris Agreement, where are we on corporate climate ambition & impact?
As we are celebrating the 5th anniversary of the Paris Agreement, let’s reflect on the ambitions, action and impact over the past years. The Paris Agreement is a legally binding international treaty on climate change, adopted by 196 Parties at COP 21 in Paris, on 12 December 2015. It sets out a global framework to avoid dangerous climate change by limiting global warming to well below 2°C and pursuing efforts to limit it to 1.5°C above pre-industrial levels.
The Belgian Alliance for Climate Action is based on the Science Based Targets Initiative (SBTi) to promote ambitious climate action by making member organisations commit to develop science-based targets. SBTs show companies how much and how quickly they need to reduce their greenhouse gas (GHG) emissions, grounded in climate science, to prevent the worst effects of climate change. Let’s compare the SBTi situation today with five years ago, when it was founded:
By the end of 2015, only 7 companies in the world had set SBTs: General Mills Inc., Thalys, Dell Technologies, BillerudKorsnäs, NRG Energy Inc, Pfizer Inc. & Kellogg Company. Today, a total of 526 companies have set science-based climate targets that formalize their ambitions to develop their business sustainably and in line with the Paris Agreement. Another 567 companies have formally committed to the SBTi and are in the process of developing their SBTs. Their joint market value in the global economy totals over 15 trillion USD, spans 60 countries and 50 sectors. (Source)
Of course, setting targets is one thing, outlining the strategy and implementing concrete mitigation measures to realize those objectives is something else. Yet every strategic plan needs ambitious, measurable and time-bound targets – so does tackling the climate crisis. Science-based targets are a great way to specify your climate ambitions, indicating on organizational level what’s required to reach GHG emission reductions in line with the Paris Agreement.
Setting ambitious targets is the first step to stop the climate from changing: it gives guidance on the optimal direction and intensity of climate action. Without specific climate targets, the pathways to climate neutrality at entity- or society-level would be undecided, making it impossible to monitoring progress and measure impact on the end goal. Climate targets concretize required steps and help define strategies to reach climate neutrality, but we also need climate action, the implementation of that strategy, to live up to our climate ambitions. Implementation is key, but knowing where to go is crucial.
Next to climate targets, carbon disclosure is another good indicator of the level of ambition, transparency, and relevance of the climate topic in the corporate world. We’ve therefore benchmarked the number of reports and top scores of the Carbon Disclosure Project (CDP) - a global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts.
In 2015, 5532 companies (market cap of US$35,7 trillion) disclosed on climate change to CDP, the world’s largest database of corporate environmental information. 114 companies made the A list, recognizing companies that are leading in their actions to reduce emissions and mitigate climate change. CDP scoring drives corporate transparency and helps to guide, incentivize and assess environmental action.
Five years ago, 822 investor signatories with US$95 trillion in assets used CDP’s data to understand how companies are confronting sustainability challenges. Insights lead to action, guiding investments decisions to manage climate change related risks and to profit from companies that future-proof themselves in a low carbon economy (source). The fact that these data are being reported, empowers financial institutions to incorporate climate performance indicators in their decision process.
Today, already 9526 companies worth over 50% of global market capitalization, disclose data through CDP on climate change. The number of corporate disclosures is up over 70% since 2015 when the Paris Agreement was signed. 270 companies have made the climate change A List, which is 137% more than in 2015. The rise in corporate disclosures is a response to requests for information from investors with US$106 trillion in assets, and over 150 major purchasing organizations with over $4 trillion in buying power (source).
We can conclude the climate crisis is more than ever on the agenda of organisations of all types and sizes, globally and in Belgium. Both climate ambitions and reporting standards have seen a spectacular uptake, yet it’s important to mention that nor disclosing emissions, nor setting targets directly correspond to climate action. While we are excited to see what the Decade of Action will bring between today and 2030, we also need a continuous focus on real impact and change.
Today, in the light of the first anniversary of the EU Green Deal, European policymakers agreed a new target: to reduce net* emissions by at least 55% by 2030, compared to 1990 levels. We are happy the EU recognizes that its previous climate ambition for 2030 (to reduce emissions with 40% compared to 1990) would not suffice in terms of intensity to tackle climate change. While we are pleased with these increased ambitions, we also want to note that the scientific community points us to even bolder targets and increased efforts to reach the Paris Agreement’s goal: to limit global warming to 1.5°C, we would need to lower emissions with 65% by 2030.
We are therefore extremely proud of our BACA members, and all other organisations committed to SBTi, that are setting more ambitious, science-based climate objectives in the Road to Zero by 2050.
*Net emissions means that the part of greenhouse gasses taken up by natural systems (‘carbon sinks’ such as soils, oceans, plants…) also count as active carbon reduction – however this does not correspond to concrete mitigation measures of private and public organisations.