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The ESG Review: Corporate net zero targets face greater scrutiny

Pressure is rising on the corporate action being taken to reduce emissions and large companies being true to their pledges on major change commitments.

The past week has seen a couple of new reports from groups that track progress towards goals, and the technical accuracy of statements about products and services.

Are such groups activists in the conventional sense, or more independent watchdogs? The reality is that it doesn’t matter that much, because they play a role in helping to hold large companies to account in the public eye, and with COP28 on the near horizons were always going to try to crank up the volume.

The story that grabbed most headlines was the move by several groups to support legal action against drinks manufacturers over claims about plastic bottles being made from 100% recycled materials.

The action centres on the groups maintaining that the claims can be vague, factually incorrect, or not substantiated, and that companies may “suggest that bottles can be recycled in an infinite circular loop”. Reading the news reports about the announcement, the bone of contention in the case to be made to the European Commission seems to be that elements of the bottled products, specifically caps and labels, may not be made from recycled plastics.

Expect to see more headlines zoning in on how products are marketed, and how environmental commitments are being pursued, in the coming few weeks.

The bigger story of the week, arguably, was one that saw less media attention but made profound points.

A study by the independent data consortium Net Zet Tracker concluded that just 4% of more than 1,000 of the world’s largest companies that have set a net zero target have done so in a way that meets tough United Nations guidelines for what constitutes a quality pledge.

“The report suggests there is an overreliance on low-quality carbon offset credits rather than emissions reductions”, said EuroNews.

Those companies assessed would likely point to the legitimacy of the targets they have set themselves given the frameworks - UN or other - that they align to.

But the report claimed that just 37% of companies that had set targets had covered their Scope 3 emissions within them, and so covered the firm’s entire value chain. This may seem like a technicality, but as targets and timelines come under greater scrutiny the true depth of those commitments is always going to be called into question, particularly where the UN, even though with just one of its many climate initiatives, is the yardstick.

Shots across the bow in the run-up to COP were inevitable. But the dissection of what’s really behind net zero targets is also likely to become a longer-term ploy given the initial major deadline of 2030 that many companies have set for making demonstrable, sustained progress in reducing emissions.

The ESG News Review is written by Steve Earl, a Partner at PR agency BOLDT.

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