A new study by CO2 AI and Boston Consulting Group (BCG) has found that despite responsibility to mitigate the crisis with emissions reductions in their operations and supply chains, companies have not made much progress in comprehensively measuring and reducing their emissions over the past year.
The study, ‘Why Some Companies Are Ahead in the Race to Net Zero,’ builds on CO2 AI and BCG’s 2021 and 2022 investigations into the progress that businesses have made on emissions measurement and reduction worldwide and surveyed 1,850 executives responsible for emissions measurement, reporting, and reduction in their organizations across 18 major industries and 23 countries.
Each organisation surveyed had at least 1,000 employees and annual revenues ranging from $100 million to over $10 billion.
“Reflecting the UAE’s leadership in climate action, the nation has launched the UAE Net Zero by 2050 strategic initiative, being among the first in the Middle East and North Africa to target net-zero emissions by 2050. This ambitious drive underscores the region’s commitment to comprehensive emissions measurement and reduction, aligning with global sustainability goals,“ said Shelly Trench, Managing Director and Partner at BCG.
According to the survey, just 10 per cent of companies now report comprehensively measuring all their emissions – no improvement relative to the 2022 survey.
Further, only 14% of companies report reducing emissions in line with their ambitions over the past five years, down 3 pp from 2022, citing difficult economic conditions and capital constraints as challenges to their reduction efforts.
However, the report, in line with other recent studies, found that companies that have made decarbonisation progress are seeing both financial and non-financial benefits to their business, citing reputational value, lower operating costs, and regulatory compliance among the top benefits.
When asked to quantify, 40 per cent of respondents estimate an annual financial benefit of at least $100 million from meeting emissions reduction targets, a 3 pp increase compared with last year’s survey.
The number of respondents indicating partial measurement and reporting of Scope 3 emissions has increased by 19 pp since 2021, from 34% to 53%.
More respondents also said they had set Scope 3 reduction targets up 12 pp since 2021, from 23% to 35%, with the most common areas of focus being waste management and purchased goods and services.
Some regions have demonstrated clear improvement in comprehensive measurement of emissions in the past two years.
Asia Pacific respondents improved comprehensive reporting of Scope 1 (direct emissions from company-owned and controlled resources), 2 (indirect emissions from the generation of purchased energy that an organization consumes), and 3 (indirect emissions that occur in the value chain of a company, including both upstream and downstream emissions) emissions by 7 pp since 2021.
The number of South American and North American respondents improved comprehensively, reporting their internal emissions, Scopes 1 and 2, by 9 pp and 5 pp, respectively.
Companies that report reducing their emissions in line with their ambitions were found to display four notable traits more strongly:
● Collaborating with suppliers and customers on emissions measurement and reduction: 75 per cent of companies that reduced emissions in line with their ambition have joint reduction initiatives with most of their suppliers, and 54 per cent have similar initiatives with most of their customers.
● Calculating emissions at the product level: The survey found that 75 per centof companies attempt to calculate emissions for at least some of their products “from cradle to gate,” that is, from raw materials to distribution.
● Harnessing the power of digital technology in the emissions-management process: Companies with automated digital solutions for measurement are 2.5 times more likely to measure their emissions comprehensively. In addition, 30 per cent of companies plan to expand the deployment of AI-powered tools within the next three years to improve accuracy, efficiency, and decision-making in emissions management.
● Viewing Regulations Positively: They are 2.0 times more likely to view emissions-reporting regulations as a key reduction enabler.
Download the full report here.