The Bank of England Governor suggested businesses should set science-based targets, but is he being realistic?
The Bank of England Governor on Friday created headlines late last week when he called for businesses to plan for zero net emissions, arguing corporates should be transparent about their contribution to climate change and how they are tackling it.
Mark Carney, who is also chairman of the global Financial Stability Board (FSB), said investors are entitled to expect businesses to have a strategy for long term decarbonisation, alongside shorter term targets that reflect governmental climate policies in the countries in which they operate.
He argued businesses in Europe should be seeking to reduce their emissions by around 1.6 per cent per year, he said, in line with the bloc's 2030 Climate and Energy Framework. But he added that they should also set out long term emissions plans in line with the Intergovernmental Panel on Climate Change (IPPC) advice to aim for net zero emissions.
"What's your strategy for net zero?" he asked "Ultimately, whatever degrees centigrade the climate settles at, you have to get to two degrees."
A growing number of companies are already setting basic carbon reduction and renewable energy goals, so is there really a need to go one step further and commit to zero net emissions?
Apparently so, if you ask many of the world's biggest corporates, such as L'Oreal, Mars, Enel, Ford and H&M. They are part of a small group of blue chips that have all set "science-based" targets for greenhouse gas emissions.
This means rather than setting the bar low with a goal that can be met relatively easily, a company calculates its contribution to global emissions, based on factors such as its productivity and carbon intensity, and then sets a goal accordingly that will help deliver 2C.
So whereas a conventional target may cover the next five to 10 years and fall short of the reductions needed to avoid exceeding 2C, a science-based target will often set a 2050 goal and is designed to ensures the company is taking full responsibility for its climate change impact.
Kevin Rabinovitch, global sustainability director of Mars, believes all businesses should be looking at science-based targets.
The confectionary and pet food company has set goals based on the IPCC's recommendation of an 80 per cent drop in emissions by 2050, as well as shorter term targets. Rabinovitch says Mars is on track to reach its target to reduce emissions by 25 per cent by the end of this year, compared to 2007 levels, and is then working to eliminate these emissions by 2040. The company is also working on addressing supply chain emissions, which account for 86 per cent of its footprint.
"If we had just set our targets based on what's feasible, we'd have mapped out an energy efficiency roadmap and then we probably would have said minus 20 per cent or 30 per cent, but because we started with the science, we knew that the right answer was much further than that," he explained to BusinessGreen. "I think the tension that is created by having that long term target - even before you commit to it - [...] can actually drive new strategies, new ideas and innovation, that then make what seemed unachievable possible."
Setting science-based targets is still relatively new. However, a new guidance report by WSP and Parsons Brinkerhoff last week argued the approach is only set to gain prominence in future, with the leading green companies blazing the way.
As well as boosting innovation, science-based targets can also increase profitability by slashing energy bills, the report argued. In addition, it can also improve a company's reputation and help avoid future carbon taxes.
Yesterday in Paris, Jochen Zeitz, the former chief executive of Puma and founder with Richard Branson of the B Team, reportedly said the business case for net zero in 2050 was "irrefutable".
"We believe that net zero by 2050 would at least get us to 2 degrees, leaving the door open for further reduction to 1.5, which should be something we should be looking at in the future," the Guardian reported him as saying.
But not all companies see it that way. BUSINESSEUROPE, Europe's biggest industry group, raised doubts over Carney's call for all companies to set a target for net zero emissions, suggesting some sectors should be excluded from ambitious efforts to tackle climate change.
Alexandre Affre, BUSINESSEUROPE director for industrial affairs, said the governor's call was "seducing", but not necessarily feasible.
The European Union has set a long term goal to slash greenhouse gas emissions by 80 per cent by 2050, compared to 1990 levels. Member states have also agreed to an interim 40 per cent reduction goal by 2030.
But Affre said BUSINESSEUROPE was currently focused on the medium term goal, and not yet considering the longer term targets.
"Although the idea [of net zero emissions] is seducing, it cannot be implemented overnight and raise the question whether applicable to all sectors," he said in an emailed statement. "Our priority as EU industry is to continue on the efforts already engaged (-24 per cent emissions reduction since 1990) and to deliver on the ambitious -43 per cent by 2030."
He added that BUSINESSEUROPE's priority was also for other major economies to scale up their emission reduction efforts "given that comparable global actions is the only way forward".
Significantly, Mark Carney did not say businesses should be forced to set a net zero goal. But he argued that in doing so, and talking about it, investors had a better idea of the level of climate risk that company is facing. Then they can choose whether that company is a good bet for delivering attractive returns in the long term.