Counting carbon: why emissions targets must be based on science

Every company that aspires to be responsible sets targets for reducing its greenhouse gas emissions. General Motors says its manufacturing plants will reduce their carbon intensity by 20%. Wells Fargo says it will achieve a 35% reduction in greenhouse gas emissions from its buildings. UPS aims to reduce airline emissions by 20%.

These global corporations recognize the reality of climate change and they are striving to become more efficient. While governments, including the US and China, the world's two leading emitters, can't agree on binding climate targets, it would seem as if some companies are doing their part.

Unhappily, most are not.

The trouble is, corporate climate targets are almost never based on climate science. They are not designed to do the what needs to be done – bringing global carbon emissions down to levels that will avert dangerous climate change. Instead, the corporate targets appear to be driven by internal considerations – what companies can achieve and afford, what their peers are doing, even what round numbers will fit into a headline or press release. No one promises to cut emissions by 23% by 2021.

As it turns out, some big companies are doing their part to curb climate change. An analysis of 100 global companies by two nonprofit groups, Climate Counts and the Center for Sustainable Organizations, found that 49 are on track to reduce carbon emissions "in line with scientific targets to avert dangerous climate change". That may not sound bad – those 49 companies are emitting what the study describes as "sustainable" levels of carbon.

But the 100 companies chosen for the study were selected because they have been tracking their emissions since 2005. In other words, they are leaders when it comes to transparency for climate change. A broader universe of companies would, it's safe to assume, underperform this group. What's more, just as the vast majority of the world's big countries will need to co-operate to avert a climate crisis, so will the vast majority of the world's big companies. Forty-nine out of 100 won't get the job done.

The importance of context

More important than the specific findings, though, is the underlying message of the study: that the time has come for companies to set emissions targets and assess their performance through the lens of climate science. This study, as well as others, demonstrates that it's possible to assign a company its "fair share" of global emissions, based on its economic contributions to society, and then to track whether it is doing its part to cut back.

Bill Baue and Mark McElroy of the Center for Sustainable Organizations call this approach context-based sustainability, which they define as "measuring, managing and reporting the sustainability performance of organizations that takes contextually relevant social, economic and environmental limits and demands explicitly into account".

It sounds geeky, and it is unavoidably complicated, so Mike Bellamente, the executive director of Climate Counts, offers this analogy:

"Assessing sustainability performance without context provides a limited view of reality. It's as if I were to tell my wife, 'Hey, I've reduced my cheeseburger intake by 20% from last year' without telling her that my doctor advised me to abstain from cheeseburgers altogether if I'm to avoid having a massive coronary by the time I'm 40."

"We have to get companies to set science-based targets and get away from these arbitrary targets," Bellamente told the Guardian.

To see how companies set their emissions targets, I asked a half dozen companies that ranked near the bottom of the Climate Counts analysis how they did so. The responses were revealing.

Companies that are ordinarily eager to talk about their sustainability efforts offered regrets. A spokeswoman for Dow Chemical said that "as Dow is fully engaged with the Olympics at this point, unfortunately the company will not be able to participate in this opportunity." A P&G spokeswoman emailed: "Unfortunately, P&G is not available for this interview." Said UPS: "Unfortunately, we're going to have to pass on this particular story."

Others sent explanations that raised as many questions as they answered.

Neil Tonge, global director EHS and sustainability at Molson Coors, said by email:

"Our targets are set with a determination to push the organization to maximize its potential using good business practices and current technologies, but also to 'think bigger' in adopting new technologies. Molson Coors has set targets in the areas it thinks are most relevant to its stakeholders and the business as a whole."

Dave Tulauskas, General Motors' director of sustainability, said:

"The targets are set based on a couple things. First, we look at the aggressive reduction activities we achieved between 2000 and 2010. Energy intensity reduction was 49.4% during that time. Carbon emissions intensity reduction over the same time period was 45%.

Then we see what can still be accomplished by looking at upcoming planned projects, as well as potential new opportunities that are built into our 10 year business plan … Our targets will require us to stretch our capabilities and innovate."

Mary Wenzel, who heads environmental affairs at Wells Fargo, said:
 

"The target was developed by modeling what was relevant and possible in our current business; conversations with multiple internal and external groups, including Wells Fargo business leaders and team members, NGOs, and customers; an understanding of the scientific consensus of required GHG reductions; and our desire to demonstrate leadership in managing our own environmental footprint."

In fairness, it should be noted here that these companies' sustainability programs go well beyond greenhouse gas reductions. Wells Fargo has promised to provide $30bn of financing by 2020 to businesses and projects that benefit the environment, while GM has put enormous marketing resources behind the electric Volt. These efforts are arguably more meaningful than their climate targets.

Yet the fact is that these companies and others are emitting unsustainable levels of carbon pollutants, at least according to the Climate Counts-Center for Sustainable Organizations analysis.

Of the 100 global companies ranked in the study, P&G was ranked number 90, followed by GM (92), Wells Fargo (93) Dow Chemical (95), UPS (98) and Molson Coors (99). Rounding out the bottom 10 were Cisco, Citigroup, Conagra, Royal Bank Scotland and Weyerhauser.

The Top 10 were Autodesk, Unilever, Eli Lilly, Canon, Loreal, GE, Reckett Benckiser, Abbott Labs, Hyundai and State Street.

A lack of robust metrics

Behind the rankings is a complex set of calculations and assumptions. The carbon reduction metric, which was developed by the Center for Sustainable Organizations with help from the Tellus Institute, is based upon a pathway of declining emissions that would stabilize CO2 concentrations in the atmosphere at 350ppm by 2100.

The model then allocates the burden of mitigating emissions in what is called a "justice-based or equity sensitive way", assigning a higher share of reductions to emitters in the developed world and a lower share to emitters in poor countries. The target for each company is based on its gross margins, which are a proxy for its contribution to society.

When companies grow, their fair share grows, too, and when they decline, they should emit less. Everyone involved agrees that the metrics can be improved; for now, they don't include supply chains, where the bulk of some companies' emissions are generated.

Others have come up with their own science-based methods for setting corporate climate targets. BT, the British telecom company, developed a methodology for target setting, which was followed by work at Autodesk, the software firm, which released a free, publicly-available program called C-FACT (for Corporate Finance Approach to Climate-Stabilizing Targets) in 2009.

Emma Stewart, Autodesk's head of sustainability solutions, told me that the company came up with the program after she informally surveyed tech companies and their climate goals.

"I looked out at what was considered best practice at the time, and I was underwhelmed at how targets were set," she said. "None of it was grounded anywhere in science."

Five years later, little progress has been made – and remember, these companies are among those recognized as sustainability leaders.

As Mark McElroy puts it: "Most of what passes for best practice in sustainability measurement and reporting today falls short of the mark, precisely because it fails to take real social and environmental thresholds into account."