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Closing the Net-Zero Credibility Gap Amid Climate Change

Updated: Nov 26, 2023

Ahead of COP28, a credibility gap persists around corporate net-zero pledges amid climate change

60% of companies are off-track

As countries face devastating climate impacts from floods to droughts, the world keeps breaking heat records. Ahead of COP28, a credibility gap persists around corporate net-zero pledges.

New analysis reveals just how severe this credibility gap has become. PortageBay actively tracks over 1500 science-based climate targets from corporations worldwide. Of these, a staggering 59% are not on track to meet their pledged carbon reductions.

Combined, the off-track companies emitted 8.6 billion tonnes of CO2 above their stated targets. This volume exceeds the total annual carbon output of the United Kingdom and Italy combined. Or envision over 11,000 coal-fired power plants running non-stop for an entire year.

Surprisingly, the data showed that, while big oil contributed to this year's climate back-tracking, it was traditional companies that are most off-track. (email us if you’d like to see the full list). These alarming data points underscore how the flurry of net-zero commitments have yet to catalyze real-world progress and emission cuts.

Issues underlying the credibility gap

Looking closer, PortageBay's research team identified common issues underlying the lack of progress against targets:

  • Most critically, ambitions appear disconnected from core financial and strategic planning, rendering them marginalized within the business.

  • Over-reliance on carbon offsets, particularly forest protection. Consider that BP has allocated $100 billion for offsets for ongoing emissions, rather than cutting their own emissions directly.

  • Ambiguous language like “net-zero by 2050 at the latest” provides excuses to delay action.

  • Reporting quality varies greatly and there’s limited detail on scope 3 reductions. For most companies, scope 3 emissions from supply chains make up over 70% of total emissions.

The DNA for Net-Zero During Climate Change

With such a yawning gap between pledges and progress, how is it possible to evaluate whether companies have the capacity to credibly deliver on net-zero aims? Corporations frequently say that employees are their greatest asset. In the case of net-zero implementation, this is absolutely true.

PortageBay researchers analyzed the 41% of firms actually on track, mining for insights on transition success factors in the time of climate change. Applying machine learning to this outperforming cohort revealed persistent transition characteristics - not written plans or leadership but the underlying people, culture and policies to implement disruptive change. It’s in the "transition DNA" of the company.

Employees must believe in the mission and have conviction it can be achieved. Human capital policies must foster an adaptive culture open to deep operational shifts. This analysis found "transition DNA" manifests differently across industries and regions based on starting points. Cultivating such capacity appears essential to closing the credibility gap in responding to climate change.

does a company have the DNA for net-zero during climate change?

Beyond targets and timeline, people determine progress

Transition DNA cannot be fabricated overnight. Net-zero pledges without a solid foundation in human capital, corporate culture, and supporting policies merely engender skepticism. But understanding these human dynamics and best practices is vital to evaluating corporate net-zero implementation amidst climate change.

How do employees view the net-zero commitment? Are they empowered or inhibited to rethink processes? How resilient is the business model to innovation? Does the C-suite encourage creative risks and rapid learning? All these can be measured with models, such as PortageBay’s.

Because beyond targets and timelines, people determine progress.

human element ,the “transition DNA” ,offers a critical perspective that could be the key to unlocking better net-zero progress amid climate change

In conclusion, research suggests that the human element - the “transition DNA” - offers a critical perspective that could be the key to unlocking better net-zero progress. If you're keen on enhancing your net-zero performance, or making more informed sustainable investment decisions, we encourage you to reach out to us at PortageBay.

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