Closing the Ambition-Action Gap: Solutions for Private-Sector Climate Leadership
RMI and the World Economic Forum release a white paper offering guidance for corporate players to meet emissions targets
Relying on current policies alone, the world is on course for 2.7°C of global warming. At that level of warming, rising seas will force over 300 million people to move to higher ground. A number of corporations have set robust and science-aligned greenhouse gas (GHG) reduction targets that would likely keep warming to 2.1°C: these targets need to be met. That’s why we recently collaborated with our partners at the World Economic Forum (WEF) to publish a white paper, From Aspiration to Action, explaining how to close the gap between ambition and action for private-sector climate leadership.
At the end of 2021, the Science -Based Targets initiative (SBTi) had over 2,250 members, each committing to set science-based targets over the next 5–10 years. Many even committed to net-zero by 2050. Collectively, these members represent $38 trillion of market capitalization, or one-third of the global market capitalization. While these metrics signal a move in the right direction, as of June 2022 only 1,482 of the SBTi signatories have set actual emissions reduction targets, rather than just committing to set them. A yawning gap remains between corporate climate commitments and climate action.
Understanding the challenge correctly will lead industry to know where to invest. Supply chain emissions are a collective problem, and transparency of these emissions across supply chains will be key to knowing where one gets the best returns in terms of climate alignment. For this reason, RMI works independently and with private-sector partners to create market-ready tools that raise the bar on corporate climate accountability.
We recently launched Horizon Zero, a project focused on promoting the transparency of supply chain emissions. Increased transparency accelerates the decarbonization of supply chains by making it possible to understand the GHG emissions impact of what companies are purchasing and selling. Through Horizon Zero, we are catalyzing the decarbonization of specific sectors, beginning with crypto, steel, aluminum, aviation fuel, natural gas, and petrochemicals. We’re proud to already be influencing markets through our leadership of the Crypto Climate Accord, methane-focused MiQ standard, Sustainable Aviation Fuel Certificate (SAFc) Framework, and the design of a first-of-its-kind Renewable Energy Emissions Score approach to decarbonize electricity-intensive industries.
Whatever the depth and breadth of our own portfolio of projects, our work only succeeds when it gains traction from corporate leadership. To avoid the worst consequences of climate change, corporations will need to collectively commit to GHG reductions and then figure out ways to make good on those commitments. There are many ways for corporations to meet their emissions targets, such as by implementing new technologies in their production processes, purchasing greener goods upstream in the supply chain, or sourcing low-carbon energy. But none of these options alone can address the entirety of the problem. Figuring out a comprehensive strategy toward climate-aligning (and future-proofing) a company’s activities can sound daunting at first glance.
From Aspiration to Action can help corporations make sense of it all. It focuses on three challenges and their solutions. These are the high hurdles that all responsible businesses must clear to advance their climate goals:
- Account for Scope 3 emissions. Scope 3 emissions are sometimes referred to as indirect emissions because they fall outside a company’s direct emissions or purchases of fuel and electricity. For instance, the emissions produced by the fuel consumed by cars are Scope 3 emissions from the perspective of an automaker. But indirect does not mean “beyond control.” The climate crisis requires that firms take responsibility for these emissions — by procuring low-carbon materials, designing more energy-efficient products, and making responsible decisions about major sources of Scope 3 emissions, such as corporate travel.
- Invest in carbon-intensive processes and industries. The emerging landscape of climate-conscious investing is paradoxical. Responsible capital is being pushed away from the places where it is needed most. For instance, the global steel industry — accountable for 7%– percent% f global GHG emissions — will require nearly $300 billion of new investment to decarbonize by mid-century. Climate-conscious investors must behave like firefighters — running toward the flames in order to tame them.
- Act boldly amid uncertainty. There is a second paradox of climate inaction: although business success is often built upon bold leadership, corporate emissions reductions are plagued by risk-aversion and stalling. When it comes to climate, the private sector occasionally resembles the middle pack of a running race. To meet climate goals, businesses must do what they do best: break from the pack, innovate, take risks, diversify, and lead. The current “race to the middle” is wholly insufficient to prevent a climate disaster.
Climate-conscious investors must behave like firefighters — running toward the flames in order to tame them.Tweet
As we head further into this decisive decade, tools and technologies for decarbonization continue to improve, but bold climate leadership remains the exception rather than the rule. The private sector — more than governments or individuals — is best equipped to meet the challenge of this planetary emergency. Making emissions visible, transforming carbon accounting, and adopting transparent reporting protocols are critical catalysts for driving change.
Read the full paper, From Aspiration to Action: Credible Corporate Climate Leadership and the Net-Zero Imperative, to learn more about corporate climate solutions and how RMI and partners are laying the framework for bold private-sector action.