Fortune 500 companies are responsible for nearly a third of all greenhouse gas emissions—and many of them would like you to think they’re doing their best to shrink that. Since Amazon launched its Climate Pledge in 2019 to reach net-zero carbon within 20 years, 436 other companies in 38 countries have joined it, with thousands more signing up to other voluntary carbon reduction schemes.
But even just a few years on, accusations of obfuscation, double-dealing and greenwashing are calling into question many firms’ commitment to real climate action. The New Climate Institute crunched the numbers and came to a depressing conclusion. Of two dozen major global firms that had signed up to the UN-sponsored Race to Zero campaign, almost all their climate strategies couldn’t be taken at face value, and at worst were misleading.
Despite falling short of their vision, at least these companies are trying. Many of their rivals are silently conducting business as usual. Here we explore two routes forward: doubling down on accountability, or turning around now.
• • •
Tattered But Fixable
1. Hitting greenwashers where it hurts. Legal researchers in Israel and the US have come up with a creative idea to punish greenwashing companies who don’t follow through on their climate promises. They suggest that when issuing a climate pledge, a company would have to enter into a firm commitment to purchase as many carbon credits as the difference between its target and what it has achieved. So if it fails to decarbonize properly, it would have to stump up for a forest of carbon credits. The professors envisage the commitment being handled by banks, in the same way that letters of credit or bonds are issued today.
2. Science-based targets work. The 2,250 companies that are part of the Science Based Targets Initiative (SBTi) are cutting direct emissions faster than their peers, claims the partnership between businesses, the UN, the WWF and the World Resources Institute. The reductions total tens of millions of tons of carbon every year. A recent analysis of these efforts by researchers at Delft University of Technology in the Netherlands suggests they could even be enough to keep global warming within 2°C. And the number of companies signing up is accelerating, with more having carbon targets validated by SBTi last year than in the previous seven years combined.
3. Don’t let perfect be the enemy of good. Around the world, only a third of publicly listed companies have a target of net zero emissions, according to this handy Net Zero Tracker from MSCI, a financial analysis provider. And just 18% have announced pledges aligning with the Paris Agreement’s target of limiting warming to 1.5°C. Focusing criticism on companies that are trying to do the right thing ignores the iceberg of firms that don’t seem to care at all.
• • •
Shattered Beyond Repair
1. Corporations are not built for climate action. One problem is that most big companies simply weren’t designed to decarbonize, according to this insightful article in Harvard Business Review by consultant John Goddard. He notes that just 3% of businesses have a full set of indicators for their environmental, social and governance (ESG) goals. “The more that leaders try to operationalize sustainability, the more they find their organizations are ill equipped for the task—out of alignment and lacking essential skills and metrics,” he writes. “The sustainability distress call is coming from inside the house.”
2. Too hot, too late. Earlier this year, the New Climate Institute and Carbon Market Watch dove deep into 24 companies that are promising to hit the 1.5°C target—and the results weren’t pretty. They rated the climate strategies of 15 of the 24 companies to be “wholly insufficient” to meet their decarbonization trajectories, and many also lacked transparency. MSCI’s independent analysis agrees. It found that publicly listed companies will exceed their carbon budget for 1.5°C of warming as soon as late 2026, and are on a path to heat the world by as much as 2.5°C this century.
3. Climate action shouldn’t be voluntary. “Regulation will absolutely be required to transform entire sectors,” said Jamie Beck Alexander of climate solutions non-profit Project Drawdown, in a good overview of corporate pledges in The Guardian. And there’s no doubt that it can work – Sweden has the highest carbon tax in the world, and has grown its GDP by over 50% since 1995, while cutting emissions. We don’t ask companies nicely to not sell weapons to Russia or use child labor – we punish them if they do it.
• • •
What To Keep An Eye On
1. Pro-legislation businesses. Some companies are actually pushing for climate regulation rather than against it. When Britain’s ruling Conservative Party proposed delaying a 2030 ban on petrol vehicles recently, Ford Motors wrote: “Our business needs three things from the UK government: ambition, commitment and consistency. A relaxation of 2030 would undermine all three. We need the policy focus trained on bolstering the EV market in the short term and supporting consumers while headwinds are strong.”
2. Greenhushing. About a quarter of 1,200 large private companies with climate targets do not plan to publicize them, according to a report released last year by South Pole, a climate consultancy. The process, called “greenhushing,” apparently protects companies like Anheuser-Busch and BlackRock from pushback from climate deniers, says a report in The Washington Post.
3. The offset market. SBTi’s standard requires most companies to reduce emissions by 90%, with only the final 10% of carbon being able to be stored or offset. Other schemes are more forgiving—and that comes with risks if their offsets are found to be as worthless as some research suggests.