The latest insights from the We Mean Business coalition

We can’t afford to let perfection be the enemy of companies taking climate action

A shorter version of this article originally appeared on Reuters Sustainable Business.

There will be plenty of business leaders reflecting on the start of 2023, who’d agree with Kermit the Frog: “It’s not easy being green.” Recent weeks have seen a series of reports taking aim at companies. Researchers have raised concerns about investments in offsets, the credibility of projects funded through carbon markets and the pace of emissions cuts across the value chains of major companies.

Speaking at COP27 in Egypt last year, UN Secretary General António Guterres was clear: “the criteria and benchmarks for… net zero commitments have varying levels of rigor, and loopholes wide enough to drive a diesel truck through. We must have zero tolerance for net zero greenwashing.”

Accountability is key – for governments, cities, researchers and, of course, business. We must all deliver against the commitments we have made. Yet the implication that all corporate climate action is tantamount to greenwashing is simply wrong. Many companies are making incredible progress and charting the course for others to follow.

Highly respected institutions such as the International Energy Association (IEA) and the Energy Transitions Commission (ETC) remain upbeat that the shift to a net zero global economy is possible and well underway. In this context, companies can and should be on track to cut emissions in half by 2030 and reach net zero by 2050. 

The reality is far more complex. I regularly hear from CEOs, CSOs and other corporate leaders just how challenging it is to develop a credible decarbonization strategy and plan. Companies are, voluntarily, engaging with the Science Based Targets initiative (SBTi), and pouring incredible amounts of time and resource into their sustainability efforts. 

If this is the experience of companies considered veterans of the climate action conversation, it shouldn’t be surprising if those new to the space are wary. It takes a confident leader to step into the crossfire of shifting market conditions, inconsistent government policies, different legislation across borders, activist investors, consumer scepticism around marketing claims and greenwashing attacks.  

How can any business make sense of all this? 

We simply don’t have time to debate who is right or wrong. We have less than seven years until 2030 when we must halve emissions to have any chance to keep 1.5°C within reach. I would rather see a million companies worldwide rolling up their sleeves and getting on with delivery of imperfect climate plans today, rather than lose another decade arguing with the few thousand companies already underway to get their plans to be faultless. 

To reach such scale will ultimately need governments to introduce regulation that compels companies to act. However, those companies pioneering emissions reductions today are paving the way for others to follow. The structures and initiatives that We Mean Business Coalition have helped to build, including SBTi, the SME Climate Hub and others, may not be perfect, but they get better every day and are driving progress.

Recent research (scientific-peer-reviewed, unlike many of those recent reports attacking corporate climate action) by the University of Münster definitively established the positive link between corporate carbon emissions performance and corporate financial performance. Business leaders now have the scientific evidence that taking climate action will boost their corporate success. Without the voluntary leadership of a handful of companies, that argument could not have been proven and would remain fiercely contested.

What do we know works?  

The experience of thousands of companies, big and small, over many years demonstrates what every company needs: Ambition – measuring emissions and set science-based targets; Action – creating and delivering on a climate transition action plan; Advocacy – calling for policies and regulation that will help accelerate action; and Accountability – reporting publicly on progress.

While we know the journey each company must go on, there is still much to do to make it easier for business to play its full part in halving emissions by 2030. Here are just a few priority interventions to address the most serious obstacles to even more effective corporate climate progress.

Upgrade the global rules on measuring emissions.

To cut emissions at the speed and scale necessary we first need to understand where emissions are coming from. Companies are getting much better at understanding their own (Scope 1 and 2) emissions, but it remains difficult to measure, understand and therefore act to cut emissions within their value chains (Scope 3). Thanks to the phenomenal work of CDP, more than 20,000 companies are already reporting their emissions on a voluntary basis.

The International Sustainability Standards Board has established credible emissions disclosure standards, which would be comparable across different jurisdictions. Local legislators must now get on and make reporting to these standards mandatory. Yet to truly deliver net zero across whole industries and economies, every company must be reporting accurate emissions data. For many big companies, as much as 90% of emissions are generated in their value chain. These Scope 3 emissions can only be properly understood and ultimately cut if every business, including all those that make up the value chains of other companies, are consistently and accurately measuring and reporting.   

Use voluntary carbon markets responsibly.

Whatever their historic flaws, there is no credible route to halving global emissions and halting biodiversity loss this decade, without well-functioning voluntary carbon markets. For many companies, the solutions simply do not exist to allow them to cut their emissions to zero, so carbon markets offer a means to make progress while the necessary technology matures.

High-integrity carbon credits enable business to go further and faster – but only when used in addition to cutting emissions across a company’s value chain. This point is critical and remains an area of confusion. Companies cannot ‘count’ any investments in nature-based solutions outside of their value chains towards science-based emissions reduction targets. Yet it would be a huge lost opportunity to ignore the potential of carbon markets to help companies go further right now.

A We Mean Business Coalition study showed that if the world’s 1,700 biggest emitters compensated each year for just 10% of the emissions they have not yet cut, through investments in nature, it would mitigate nearly 30 gigatons of emissions and mobilize up to $1 trillion in climate finance by 2030. The quality and integrity of the projects being funded through voluntary carbon markets is key. Companies seeking out the highest quality projects must be prepared to pay a higher price. 

While voluntary carbon markets have previously been a lawless space, the rules are now becoming much clearer. Initiatives such as the Voluntary Carbon Markets Initiative (VCMI) and the Integrity Council for the Voluntary Carbon Market (ICVCM) are creating the rules that will help distinguish the good from the bad. This will make it easier to spot those companies that are using carbon markets for greenwashing, and filtering out low quality carbon credits that have damaged the voluntary carbon market’s reputation. More importantly it will give a framework for the many companies that want to invest in nature and don’t know how to make it in a credible way.

Transparency and honesty will be key.

Companies at the vanguard of corporate climate action have stood up and shown leadership by making commitments and starting to act. It is right that they should face scrutiny and indeed it is welcome where it helps their teams to refine and improve climate action efforts. Companies must always make sure their marketing and communications efforts are honest and aligned with the complex reality of cutting emissions. However, greater transparency in emissions data from all companies will reveal those that are avoiding scrutiny and shirking their responsibilities. Once those business leaders feel the consumer and regulatory pressure to begin their climate journey, I’m sure they will be grateful for the trailblazing efforts of those companies already underway. 

It may not be easy being green, but as national and international regulation increasingly comes into force, there will ultimately be no alternative. In the meantime, those companies that recognise the scientific necessity and incredible business opportunity of climate action are charting a course. We know what needs to be done. The UN High Level Expert Group on Net Zero Pledges summarised it well: “non-state actors [including companies] require not only long-term pledges but also short-term science-based targets, as well as detailed transition plans showing immediate emissions reductions and capital expenditures aligned with these targets and their net zero pathway.”

Yet businesses are delivering these complex and challenging decarbonization efforts while the rules of the game – across emissions accounting, voluntary carbon markets and reporting – are still being developed. Those willing to voluntarily act in a responsible way in such uncertain conditions are true leaders.

I know that business leaders in the companies we work with welcome scrutiny and consider accountability amongst their highest priority. Ultimately, for the hundreds of millions of people, communities and species currently vulnerable to the escalating impacts of climate change, their success could not be more important.