EcoAct report shows FTSE progress against climate goals has stalled since COP26

Source: press release, 24 October 2022

illustration: EcoAct
illustration: EcoAct

EcoAct, an Atos company, has released its 12th Annual Corporate Climate Reporting Performance Report. Despite rapid progress in 2021 during the lead up to COP26, the 2022 report, which assesses how international businesses across the FTSE, DOW, DAX, CAC, FTSE MIB and IBEX are tackling climate-related sustainability challenges, found that less than half (48%) of FTSE 100 businesses achieved Scope 1 & 2 emissions reductions in line with 1.5° C, in comparison to 72% in 2021.

According to the Intergovernmental Panel on Climate Change (IPCC), emissions must peak within just 3 years and be cut by 43% by 2030. However, EcoAct’s research found that 52% of FTSE 100 businesses have not reduced emissions aligned to a 1.5° C trajectory, and some actually increased emissions.

Similarly, it appears that FTSE 100 commitments to net zero have slowed, and many businesses lack long-term emissions reduction targets. Whereas last year 66% of businesses committed to net zero compared to 45% in 2020, that percentage only rose to 75% this year.

According to the Science Based Targets initiative (SBTi) Corporate Net-Zero Standard, the world’s first framework for corporate net-zero science-based target setting, most companies are required to have long-term targets with emissions reductions of at least 90-95% by 2050. However, almost all (97%) FTSE 100 businesses do not have long-term emissions reduction targets for Scopes 1 and 2 emissions, and in the same vein, 96% lack a long-term reduction plan for Scope 3. All this demonstrates a fundamental lack of understanding of what it takes to deliver net zero in practice.

The largest 20 FTSE businesses perform in line with other indices on near-term targets, with two in five (40%) setting 1.5° C-aligned, validated emissions reduction targets for Scope 1 and 2, compared to 50% for the DOW, and 40% for DAX and CAC. More positively, they significantly outperform their peers when it comes to validated targets for Scope 3 emissions with one in four (25%) businesses with a science-based target (SBT) aligned to 1.5° C, in comparison to only one in ten (10%) for DAX and DOW, and only one in twenty (5%) for IBEX.

Commenting on the findings, Stuart Lemmon, CEO of EcoAct, and Managing Director of the Net Zero Transformation practice at Atos says, “It’s positive that three in four businesses intend to reach net-zero, and the FTSE 100’s leadership on Scope 3 emissions is notable. However, the climate reality of today means that this positive intent does not go nearly far enough, deep emissions cuts are needed across all businesses in all industries. Many businesses have become well-versed in the requirements of climate disclosures but ultimately, the majority are still failing to act across Scopes 1, 2 and 3 in a way that will limit the temperature rise to 1.5° C.”

“Last year COP26 built phenomenal momentum, however, it appears that this progress has stalled. Far fewer businesses achieved emissions reductions this year, after we saw significant reductions as a result of COVID-19. Businesses have now a fresh set of economic and geopolitical challenges to contend with. These can however be a further stimulus for action. Accelerating decarbonisation across all sectors must become an imperative for businesses, not only to limit climate catastrophe but to mitigate widespread economic losses,” Lemmon continues.

Across the indices, there was a noticeable drop in scores this year, as businesses fail to keep pace with the rising bar for climate best practice and to deliver emissions reductions in line with Paris Agreement goals. Just over a third (35%) of the international businesses reviewed have a validated (SBT) for Scope 1 and 2 emissions and just 8% have one for Scope 3 supply chain emissions.

In the UK, GSK secured the number one spot in this year’s FTSE 100 leaderboard, having risen rapidly through the ranks over the last 2 years. It was closely followed by Burberry Group, Landsec and AstraZeneca. Together this sees the biopharmaceuticals, personal care and cleaning products and information, technology and telecommunications (IT&T) industries topping the leaderboard this year.

As international climate leader, Maya Ormazabal Herrero, Environment and Human Rights Director, Telefónica S.A. says, “At Telefónica, we have been integrating climate change in our business strategy for 20 years. We count on short, near- and long-term emissions reduction targets across our broader value chain. Our targets are also aligned with what climate science now demands from companies to act on climate change and limit global warming to 1.5° C.”

“Leading EcoAct´s 2022 Corporate Climate Reporting Performance Report confirms the need to develop long-term climate action strategies that align business growth with decarbonisation. Ahead of COP27, the urgency to reduce our emissions is undeniable. The telecommunications sector has become an essential ally in the transformation of other industries, demonstrating that the benefits of connectivity and digitalisation are key in the net-zero transition,” Herrero adds.

At the international level, some sectors, such as the IT&T sector, despite accelerated growth during the pandemic, achieved higher emissions reductions across their activities compared to other sectors, such as biopharmaceutical, financial, retail, and real estate. Notably, Cisco, whose climate strategy focuses on waste reduction and supplier engagement, and Microsoft, which uses 100% renewable energy to mitigate Scope 2 emissions, show that climate best practice can go hand-in-hand with business growth.