Less than half of ASX200 have net zero commitments

Less than half of the ASX200 companies have net zero commitments, according to a report from the Climateworks Centre.

The report recognised "momentum" occurring but said more effort needs to be scaled up to limit global warming to 1.5C. 

Tom Wainwright, system lead - sustainable corporates at Climateworks Centre told Digital Nation Australia that organisations need to align their net zero and emissions reduction commitments with the 1.5C company-specific decarbonisation trajectory and covering all emissions scopes.

These comments come off the back of the release of the 1.5°C climate goal: How does the ASX200 stack up in 2022 report which assesses the publicly available climate commitments of Australia’s largest companies by market capitalisation, and measures these commitments against a decarbonisation pathway compatible with limiting global warming to 1.5C.

Wainwright said, “Setting interim emissions reduction targets supporting long-term net zero goals is also imperative. ASX200 corporates’ efforts in the short- and medium-term fall short of what’s required for the 1.5C transition. Under current commitments, the ASX200 is on track to overspend its carbon budget by 36 percent.

“It was also interesting to see some of the highest emitting and harder-to-abate sectors performing better in terms of net zero scope 1 and 2 commitments than those operating in lower-emitting sectors (i.e. retail).”

The report noted that only 23 of Australia’s largest companies have their emissions under long-term net zero targets which are aligned with the 1.5C goal of the Paris Agreement/

Wainwright said there is an increasing corporate ambition around climate change.

“It is possible for companies to meet such targets if a comprehensive plan is set in line with a 1.5C future and best practice principles. Ambitious short and medium-term emissions reduction goals and comprehensive transition plans detailing corporate decarbonisation actions are key,” Wainwright said.

“As others have found, current confidence around meeting those targets within companies is not as high as it should be, which shows the importance of backing up targets with effective plans and taking the right actions now, particularly in terms of investment in technology and capacity building.”

Wainwright said this confidence will grow as the market shifts next year to encourage more transparent disclosures, to provide more guidance around the pathways required for each sector, and demand for green finance will increase.

The ASX200 companies need to include decarbonisation efforts in the short and medium term to their agenda, Wainwright said.

“Short and medium-term emissions reductions are key to achieving net zero emissions in line with a 1.5C trajectory and staying within the required carbon budget. However, current commitments miss the pace of decarbonisation required before 2035 leading to an overspend of the ASX200 carbon budget as mentioned before,” Wainwright said.

Wainwright said there also needs to be an alignment with a 1.5C pathway.

“Some corporate net zero and emissions reduction targets still fall short of what is required to limit global warming to 1.5C. Ambition needs to be scaled up recognising that the decarbonisation pace varies across sectors,” he explained.

The report also highlighted that 81 ASX200 still do not have net zero targets, Wainwright said there are a number of factors that can coax them to lock in their targets.

“Customer sentiment, investor pressure and support, policy and regulation, and corporate leaders setting an example for their peers and engaging with actors across their supply chain. Net zero frameworks and sectoral guidance can also help companies identify appropriate emissions targets and establish an effective transition plan,” he said.

“As we found this year through supporting the Climate Leaders Coalition, leading organisations are increasingly understanding that decarbonisation offers a competitive advantage and that they need to support their customers and suppliers to work towards this common goal,” he ended.