The decarbonisation industry has gone through a profound transition in a short period of time. What used to be a PR exercise just a few years ago, enforcing real climate action is now gaining prominence, driven by new standards demanded by regulators, customers and investors.

As the climate awareness of stakeholders has grown, there has been a wave of articles criticising companies for greenwashing their sustainability messaging or questioning the quality of carbon credits. Indeed, anybody can set a net zero target and announce it publicly. The question is, how do these targets help achieve the real goals that our planet needs to limit global warming to 1.5°C by 2100 compared with pre-industrial levels?

The Science Based Targets initiative 
In July, the Science Based Targets initiative (SBTi) announced a major shift towards a new minimum ambition for businesses around the world. The change requires a rapid acceleration in short-term (by 2030) corporate emissions reductions, from 2.5%/y under the ‘well below 2°C’ scenario, to 4.5%/y.

SBTi holds great influence over the global emissions and environment standards as it partners with organisations such as the CDP, UN Global Compact, World Resources Institute and World Wildlife Organization. The initiative reflects an embodiment of a collective expectation of some of the world’s most influential actors. While the 1.5°C standard is not a legal requirement, its authority and influence may prompt stakeholders to require corporations to align with ‘1.5°C’, in effect making it a compulsory requirement.

This may be easy to achieve for companies with operations in developed economies whose majority of emissions are electricity-derived (Scope 2), as oftentimes all they have to do is pick up the phone to their current utility supplier and ask to switch to a renewable tariff. However, imposing the short-term 4.5%/y standard in hard-to-abate sectors (such as shipping, logistics or any other heavy industry) may reverse corporate progress. In the face of unrealistic demands, hard-to-abate sectors will be left to either make unachievable promises for temporary theoretical compliance, or not make any commitments at all.

Unattainable commitments
Promises built on fundamentally impossible demands will inevitably fail. Unattainable commitments will only foster a fake sense of security and delay actual progress during the intermittent period before its eventual non-performance. Furthermore, failure after failure of corporate pledges will undermine the legitimacy of commitments as a powerful tool for alliance and cooperation in combating climate change.

For many companies in hard-to-abate sectors where decarbonisation solutions will not exist at scale in the short-term, meeting current science-based targets would have to mean divestiture. The Environmental Defense Fund published research of 3,000 oil and gas merger and acquisition (M&A) deals between 2017 and 2021, which show that the emission commitments disappear as soon as large oil and gas companies sell off their assets to local private companies which, unlike large companies, have no sustainability reporting requirements to their shareholders.

The same can be said about any other industry – for example, if a large shipping company removes a specific route does it mean that this route will remain unused? Most likely, it will be taken over by another player who may not have as rigorous sustainability goals as a global corporation. None of that helps us progress towards the common global climate goals.

Achieving decarbonisation goals
Therefore, in order to enforce real climate action, we believe it is crucial to strike the right balance between:

• Target-setting methodologies – these should focus on ambitious but realistic objectives. There are certainly sectors that could get to 100% decarbonisation by 2030, but there will be others (eg shipping or trucking) where the technology will not be there yet and even 25% may be ambitious.
• Real decarbonisation actions of companies – it should not be acceptable for companies to have a publicly announced target, but only plant a few trees and buy a couple of credits, or have a target that is impossible to achieve in the first place due to the nature of the industry they operate in.

Targets that live up to these standards can only be achieved through collaboration between organisations which administer targets and the companies setting them, so that those that impose targets do so in a realistic manner, and those that set them fully understand what these targets mean.

We also shouldn’t undervalue the importance of ensuring R&D into low carbon technologies and their enablers being included in climate targets. R&D is an activity that doesn’t have an immediate impact on corporate carbon reduction targets. However, it will eventually enable rapid decarbonisation, for instance at the next end of life equipment replacement, which may happen in a decade or two.

There is a risk that companies will allocate their finite resources towards quick wins for annual reductions such as small-scale solar installations or LED retrofits. Instead, we need them to also focus on R&D for long-term, big-ticket items.

We are excited for 2030, which will be the first ever ‘checkpoint’ of corporate commitments. Will the companies that have achieved their targets gain a competitive advantage over the ones that didn’t commit or missed their targets? What will be the key drivers of their success, and will others be able to replicate them into the 2030s and beyond? Only time will tell.

*Piotr Konopka is also Senior Manager of Energy and Decarbonisation Programmes at a global shipping and logistics company. Hanhee (Aliana) Yoon is an undergraduate researcher at the Massachusetts Institute of Technology (MIT) and a full-time undergraduate at Wellesley College in Massachusetts, US, majoring in Political Science and minoring in Computer Science.

The views and opinions expressed in this article are strictly those of the authors only and are not necessarily given or endorsed by or on behalf of the Energy Institute.