Getting corporate sustainability standards right
WWF has been supporting revisions to the Greenhouse Gas Protocol, the Science Based Targets initiative and ISO’s new partnership with GHGP and net-zero standard to ensure they are fit for purpose going forward. We have three simple goals: (1) ensure GHGP and SBTi remain a gold standard for corporate climate accounting and goal setting, (2) unlock the trillions of investment needed to decarbonize corporate footprints at the pace required to keep a safe climate future in view, and (3) simplify and harmonize processes as much as possible.
Getting these accounting and leadership standards right would:
- ensure a high bar for corporate climate action
- allow companies to report progress in multiple and complimentary ways
- simplify and harmonize standards wherever possible
- incentivize action across company value chains, a critical feature of systems where everyone shares responsibility for cutting emissions
- allow the use of market instruments/EACs to help companies dramatically scale investments
- recognize and encourage company action even when a company struggles to meet a goal — whether it is a scope 3 goal that relies on indirect influence rather than direct control, or a scope 1 goal in sectors and industrial processes without widely available substitutes
Those who work with companies around these issues know that scope 3 is one of the most important levers for driving action in value chains and one of the biggest challenges for companies. With the world economy not decarbonizing as fast as it needs to, companies are increasingly running into a stark reality: scope 3 goals will be difficult to meet. There’s no doubt that some companies will face shortfalls in their progress as company ambition meets the reality of the global economy and other headwinds.
For my non-profit colleagues, investors, and other corporate stakeholders, the question we need to tackle is: what will we do and say when companies announce that they will fall short of their ambition? The question companies will face is whether they will stay the course or retreat from their sustainability targets if they prove difficult to meet. And standard setters like GHGP/SBTi and ISO must ask themselves whether they will adopt standards that acknowledge these challenges while creating incentives for companies to keep going.
With the world economy not decarbonizing as fast as it needs to, companies are increasingly running into a stark reality: scope 3 goals will be difficult to meet.
McDonald’s, one of WWF’s corporate partners, recently gave a window into a company trying to answer these questions. The company reported that while it expects to exceed its operational (scope 1) and energy (scope 2) goals and has made some progress on its scope 3 value chain goal, it does not expect to reach its 2030 scope 3 goal on the original timeline. They explained that they alone can’t control their value chain emissions, but nevertheless plan to retain their existing long term net-zero SBTi target, prioritize work that helps “protect long-term supply, helps keep food affordable, and helps our System be more resilient,” and invest at least $1 billion over the next decade in supply chain resilience and mitigation, with a strong focus on regenerative agriculture and farm-level interventions.
This is a reasonable, transparent approach that can set an example for other companies to follow. Companies facing similar challenges should be up front about the challenges they are facing while recommitting to their sustainability goals and getting right back to the business of investing and taking actions to build a business that meets customers’ needs, reduces emissions, and is resilient to the impacts of a changing climate.
When faced with a scope 3 challenge, McDonald’s answered the tough question — they plan to maintain their long-term goal, improve energy efficiency, invest in renewable energy, and increase the resiliency of their supply chain.
Although the question for GHGP and SBTi remains unanswered, there are hopeful signs that both are moving in the right direction. As these standards evolve, it will be critical for them to recognize market mechanisms and the inherent challenges of scope 3 accounting and reporting. SBTi’s newly released strategy is an encouraging signal. It suggests the organization will recognize a broader range of company investments in their value chains, encourage best efforts, incentivize transparency about progress and challenges, and support companies in getting back on the horse if they fall short.
Stay tuned.