On Friday 22 April, it was Earth Day. This year’s theme was Invest in Our Planet. The Earth Day Network called on everyone, including government, citizens and companies, to contribute to tackling climate change.
“Unless businesses act now, climate change will ever more deeply damage economies, increase scarcity, drain profits and job prospects, and impact us all,” wrote Earth Day Network on their website.
Most companies have some form of climate strategy in place. However, without clear guidelines and accountability, there is a risk of unclear targets, empty promises and greenwashing.
When investigating the climate strategies of 25 major global companies, the non-profit NewClimate Institute found that pledges made in these public strategies are often ambiguous and emission reduction commitments are limited.
“All of the 25 companies assessed in this report pledge some form of zero-emission, net-zero or carbon-neutral target,” the researcher wrote. “But just three of the 25 companies (…) clearly commit to deep decarbonisation of over 90% of their full value chain emissions by their respective net-zero and zero-emission target years.”
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With the lack of regulation, there is a growing need for companies to set clear and credible targets. This is where independent certification schemes such as the Science Based Targets initiative (SBTi) come in.
The SBTi is a collaboration between CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature. Over 1,300 companies have joined with science-based targets that are in line with the Paris Agreement goals and approved by the SBTi.
Verdict analysed the emissions reduction targets of the companies in the database of the SBTi. Because it can be difficult to compare targets between different companies and sectors, the analysis only includes the companies with absolute targets. Absolute targets are only relative to a baseline, while intensity targets – the ones that were excluded – are relative to a unit or economic output, for example, a reduction of emissions per million dollars of profit.
The data shows that fewer companies are committed to Scope 3 than to Scope 1 and 2, as well as the targets set for Scope 3 are less ambitious.
Scopes are categories of emissions set by the Greenhouse Gas (GHG) Protocol, a framework for reporting greenhouse gas emissions from the private and public sectors. Scope 1 covers direct emissions from owned or controlled sources, Scope 2 covers indirect emissions – for instance from the generation of electricity – and Scope 3 covers all other direct emissions from the value chain.
Setting Scope 3 targets as a company is just as important, if not even more, as setting targets for Scope 1 and 2, explains SBTi: “For the majority of sectors, the largest sources of a company’s emissions lie upstream and/or downstream of their core operation”.
Taking the average of reported targets of the companies in each sector indicates how ambitious each sector is compared to others. Calculating the average target by sector was done by averaging the percentage of the reduction target and averaging the timeframe between the base year and the target year.
Based on an average of 10 companies, the semiconductors and semiconductors equipment sector commits to reducing 36.6% of emissions in 10 years. That is less ambitious than the average of all companies. For comparison, the total companies commit on average to a reduction of 44.58% in a timeframe of 12 years.
Among companies in the semiconductors and semiconductors equipment industry, ROHM Co., Ltd. has the highest commitment, with a reduction of emissions of 50.5% by 2030. The runner-up was STMicroelectronics NV with a pledge to reduce 50% of emissions by 2025.
It should be noted that the semiconductor companies ranked in the data have all at least signed up voluntarily to the emissions scheme. They are being transparent about how close they are to achieving the goals. It could very well be that other companies who haven't volunteered their goals perform better than the companies listed. Just as likely, there are companies that could be performing worse.
To avoid the most significant consequences of climate change, the rise in global temperature needs to stay below 1.5°C above pre-industrial levels by 2050. However, the latest report from the Intergovernmental Panel on Climate Change (IPCC) shows that the current trajectory will result in global warming of between 2.2 and 3.5°C. In response to the urgent need to reduce emissions further, the SBTi will “only accept target submissions of scope 1 and 2 targets that are in line with a 1.5°C trajectory” as of July 15, 2022.
With a total of six companies, most companies with absolute and intensity targets in the semiconductors and semiconductors equipment sector are in line with a trajectory towards 1.5°C above pre-industrial levels by 2050, while four companies wouldn’t be able to submit their targets under future SBTi norms.