Publicly traded companies have been slow to adopt net-zero emissions goals, but corporate peer pressure combined with regulatory changes is beginning to turn the tide.
Only 37% of about 5,300 companies reviewed in the 2021 S&P Global Corporate Sustainability Assessment had announced plans to reduce Scope 1 or Scope 2 emissions. However, some of the largest companies in high-emitting sectors around the world are among those already disclosing emissions and setting net-zero targets. For example, an S&P Global Commodity Insights review found that 21 of the top 30 mining and metal companies by market capitalization have set a net-zero goal. In the less emissions-intensive banking sector, only about half of the 30 largest companies reported setting an emissions target.
But more businesses appear ready to shrink their carbon footprints.
Pressure from investors, regulators and other stakeholders to carefully document and disclose emissions up and down the supply chain is drawing more companies into the broader discussion about greenhouse gas emissions. With U.S., European and other regulators around the world backing the investment community’s push toward a more granular disclosure of corporate ambition and progress on climate issues, more companies will soon need to reduce their emissions.
“If you have a client base that is setting net-zero commitments, I think that’s a really strong impetus for some of these smaller companies to start addressing the net-zero objective as well,” said Jennifer Grzech, responsible investing director at global investment manager Nuveen.
Pressure moving down the supply chain
Companies in some of the heaviest-emitting sectors are also among the earliest adopters of greenhouse gas emissions disclosure practices. By 2020, 70% of utilities and 56% of oil and gas companies in the U.S. already publicly disclosed Scope 1 and/or Scope 2 emissions, according to S&P Global Sustainable1 data. In the same year, only 5% of banks and 11% of healthcare businesses disclosed greenhouse gas emissions.
As investors increasingly focus on environmental, social and governance issues, more companies have begun thinking about Scope 3 emissions targets, a broadly defined set of emissions that encompasses companies’ entire supply chains. When larger companies such as Shell PLC or BP PLC start to set Scope 3 targets, they spread some of the pressure for more transparency around emissions and climate risk to the smaller companies that contract with them.
“[Companies are] finally under the realization that this is real and it’s not going away,” said Keith Fortson, global head of ESG at risk management provider Riskonnect.
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