Corporate emissions reduction targets across G7 countries are only ambitious enough to align with limiting global average temperature increase to 2.7°C above pre-industrial levels, falling well short of the Paris Agreement’s 1.5°C ambition needed to avoid the most significant effects of global warming, according to a new study released today by climate research provider and environmental disclosure platform CDP, and management consulting firm Oliver Wyman.
The analysis for the report as conducted using CDP’s temperature ratings, calculated by comparing the expected rate of change of company emissions based on publicly disclosed targets with science-based global warming pathways.
CDP is one of the founding organizations behind the Science Based Targets initiative (SBTi), one of the key organizations focused on aligning corporate environmental sustainability action with the global goals of limiting climate change, which assists companies in setting science-based emissions reduction targets, and assesses the alignment of the targets with global climate goals. SBTi recently tightened its criteria for approved climate targets to only accept targets aligned with its 1.5°C warming ambition, and also launched a Net Zero Standard to assess and certify company’s commitments to achieve net zero emissions.
According to the report, while a growing number of companies around the world are setting science-based climate targets, bringing down the implied temperature increase from corporate emissions, “not enough companies have embraced target setting and those that have are not nearly ambitious enough in their plans to reduce emissions.” Additionally, of those that have set targets, many only cover Scope 1 and 2 emissions, and fail to encompass value chain ‘Scope 3’ emissions, which often account for the most significant portion of company emissions footprints.
The report found that the temperature increase for every G7 country’s corporate emissions ambitions is above the 1.5°C threshold. Germany and Italy have the lowest implied increases, at 2.2°C each, while the U.S., Japan and Canada rank worst, with implied increases of 2.8°C, 2.8°C and 3.0°C, respectively.
According to the study, 76% of Germany’s corporate emissions are covered by science-based targets, compared to 24% in the U.S., and only 4% in Canada.
By region, Europe is the closest to aligning with the Paris Agreement goals, with European companies overall aligned with a 2.4°C decarbonization pathway. Europe saw an 85% increase in the number of companies with science-based targets last year, leading to its aggregate corporate temperature rating declining by 0.3°C since 2021.
North American companies are on track for a 2.5°C, while Asian companies are on a 3°C path.
The report also highlighted the sectoral effects driving the differences in implied temperature tracks across regions. One of the sharpest differences occurred in the power generation sector, which is on a 1.9°C pathway in Europe, compared to 2.1°C in North America and 3.0°C in Asia. Similarly, the infrastructure sector in Europe is on track for 2.2°C, compared to 2.3°C in North America and 3.0°C in Asia.
Click here to access the CDP & Oliver Wyman report.