Are companies taking climate change seriously? A new tool helps you figure it out
We see a flood of corporate climate change plans and commitments, but are companies go far enough, or is it just a mirage of corporate responsibility? Right now it is impossible to tell, but a new framework, which evaluates climate change plans with just five multiple-choice questions, is here to help.
Almost every day now we have an announcement of a company presenting a new climate change plan and/or commitments. This is supposed to be good news, right? After all, it shows that companies pay attention and respond to the climate crisis. At the same time, we need to remember the context: We are at a point where climate change is getting worse, even with the short-term impacts of Covid-19. This means that just taking action is not enough anymore. What we need from companies is an adequate response that meets the gravity of the climate crisis.
So, are the new climate plans companies release up to the challenge? Do they provide an adequate response to the climate crisis?
The short answer is: It is very difficult to know. These climate change plans and commitments usually provide information in a manner that makes it difficult to understand if they go far enough. First, companies tend to (over)use jargon and terminology (“Firm commits to achieve operational carbon neutrality starting in 2020”) that could be very confusing, and second, it is not clear what constitutes a “good enough plan” to address the climate crisis. As a result, it is not too surprising that the lack of clear language and a comparable format together with vague benchmarks make corporate climate change plans the modern version of the Tower of Babel. Unfortunately, journalists and websites covering these plans do not help most of the time to clearly contextualize them, leaving the readers confused and having a hard time separating signal from noise.
If it feels like deja vu that’s because it is. Two years ago I wrote here about the lengthy sustainability reports, which I suggested represent “(almost) everything that is wrong with sustainability-as-usual — these long and complex reports celebrate all sorts of progress, without giving the reader any clear indication if the progress described in the report is good enough”. Back then I offered a new sustainability dashboard to overcome some of the shortcomings in sustainability reporting. Today, I would like to offer a new framework/tool that could help provide further clarity on corporate climate change plans.
Before I present this framework I want to emphasize the importance of clarity — sustainability-as-usual, which describes the current state of business, in which most companies seemingly care about sustainability but in a very limited and ineffective way, thrives in an environment of vagueness. In such an environment, there is no clear context of what companies need to do, no way to compare companies to one another, and it is thus impossible to hold companies accountable. Companies, for the most part, have no problem with it because it allows them to: a) move forward at a pace they feel comfortable with, not the one actually needed, and b) be perceived as responsible companies that address the climate crisis, no matter how adequate their response is.
Just like with the sustainability dashboard I’m taking a design approach to this challenge, starting with the user of the new framework. I was looking to ensure that you don’t need to be a subject matter expert to use it and that it won’t take more than 10 minutes to give a grade to a company on its climate plan. In addition, I wanted to make sure the framework is grounded in a clear, science-based context, i.e. what we need to do to fight climate change based on what science tells us, not just what we feel like doing, which is not very helpful. Next, I was looking to create a framework providing results that are comparable and are easy to understand. Finally, as this effort is part of my Sandbox Zero project, I wanted it to reflect the principles of sandbox zero — first and foremost, urgency and the need to create solutions that are both practical and radical.
To summarize, this was my design brief: Create an evaluation framework that is: 1) user-friendly (anyone can complete it in 10 minutes); 2) context-based; 3) produces comparable and easy-to-understand results; 4) promotes the value of transparency and accountability; and 5) represents the principles of Sandbox Zero.
The result is a report card that is based on 5 questions — each question is covering a different aspect of climate plans with five possible answers. To complete the card you need to answer the questions and a grade between A and F is generated automatically based on the replies. The results for each question as well as the final grade allow you to compare the climate plans of different companies, even across industries just like report cards of students from different schools.
The framework I created reflects a balanced approach to fighting climate change. On the one hand, it creates a high bar that goes beyond scopes 1–3, demanding companies to address their impacts on climate policies and politics (q. 4) and their approach to just transition (q. 5). On the other hand, this framework does not directly address the issue of carbon offsets (only indirectly via science-based targets that is the focus of q.1), which gives companies more flexibility in their actions. Another example is the use of the latest guidance provided by the IPCC (Intergovernmental Panel on Climate Change) — while some may suggest it is not going far enough, the IPCC reflects the global scientific consensus on climate change and therefore I believe we need to strengthen this consensus, not undermine it.
The report card was tested on 7 companies that published new climate plans or commitments in the last couple of months (Walmart, Primark, JPMorgan, Gillette, Estee Lauder, Accenture, and Nespresso). The results (here are links to the calculations and the report cards), are not great, to say the least — the highest grade was B- (Accenture) and three companies (out of 7!) received the grade F (Gilette, JPMorgan, and Primark). These grades show the necessity of comparable, context-based, and meaningful measurements that could provide us an accurate picture of where companies stand on climate change. Below you can see examples of some of the abovementioned report cards.
So how does the climate change report card work?
Using the card is pretty straightforward and includes the following steps:
1) You read an update on a company’s new climate plan and/or commitments (either the company’s announcement or an article about it).
2) If you haven’t read yet the guidelines below please do it. If you did, move to step #3.
3) Open this excel sheet.
4) Review the five questions on the sheet and select the most appropriate answer to each question. Basically, you need to add “x” (on column D) next to the answer you find most appropriate.
5) The points for each question are calculated automatically based on your answer (the first reply equals 4 points, the second 3 points, and so on), and when you are done with the five questions you will have the total number of points for the assessment calculated for you on a 0–100 scale (you can find it on cell D39).
6) The total number of points will be automatically translated into a grade on an A-F scale (look for it on cell D40), which is similar to the one that is used in colleges:
7) Feel free to create a report card (you can use this format). Check how we did it for 7 companies at the end of the article. If you’d like to, you can then send us your report card. We plan to have a repository of report cards on the Sandbox Zero website.
The Why, What, and How of the Climate Change Report Card
This part provides a detailed explanation of each question in the report card — for each one of the five questions, you will find here the “why” (the logic behind having this question as part of the report card), “what” (what is the information that you need to find out to answer the question), and “how” (how do you find the requested information). As you will see, the report makes use of existing guidelines and tools in acknowledgment of the many other efforts trying to provide structure and context to corporate climate change activities.
Q.1 Does the company have a science-based target?
Why: Science-based targets (SBTs) are “aligned with reduction pathways for limiting global temperature rise to 1.5°C or well-below 2°C compared to pre-industrial temperatures” and therefore provide an essential context to any corporate plan to reduce greenhouse gas (GHG) emissions. Administered by the Science-Based Targets Initiative (SBTi), SBT gives a company’s climate plan credibility that is somewhat similar to the one of an audited financial statement, i.e. there is a process in place ensuring that no matter what story the company tells you, it is aligned with clear guidelines and thus is more trustworthy. Only in this case, it’s not the Generally Accepted Accounting Principles (GAAP), but SBTi’s context-based, rigorous protocols.
While SBTi-backed SBTs are far from being perfect (for example, companies can choose to align themselves with either a well-below 2°C or with 1.5°C decarbonization targets rather than just the latter), alignment with SBT is still a strong signal indicating that the company you’re looking at its climate plan is probably taking the issue of climate change more seriously.
What: You need to check if the company has a science-based target and if so, the type (1.5C or well-below 2C ambition) and status of the SBT (committed to a target or target set).
- Type — as mentioned above, SBTi offers companies two pathways:
- Alignment with a 1.5C decarbonization target
- Alignment with a well-below 2C (Wb2C) target
Based on the 2018 IPCC report, we know that we need to limit global warming to no more than 1.5C as “warming of 1.5°C or higher increases the risk associated with long-lasting or irreversible changes, such as the loss of some ecosystems”. Therefore, a SBT aligned with a 1.5C target is better than SBT aligned with a well-below 2C target and receives more points in the report card’s evaluation.
Note: Until October 2019 SBTi allowed for targets consistent with limiting warming to 2C. This option will be considered in the same category as its successor — the well-below 2C.
- Status — companies that commit to a science-based target with SBTi have up to two years then to have their commitments approved by the SBTi. Therefore, if you look at SBTi’s website you can see that a company’s status is either “committed” or “target set”. Not surprisingly, the value of a SBT that has been approved (status = target set) is greater than one that has not yet been approved (status = committed).
Finally, some companies may commit to a 1.5C target but will do so without working with the SBTi to verify it. While such commitments may represent a well-intentioned effort, it is not clear how trustworthy these commitments are without a third-party reviewing and validating the company’s plan, which is why it receives no points, similarly to not having a science-based target at all. The idea is simple: A climate plan is no different than a financial report — in both cases we need a third-party to review it and approve that it actually makes sense based on accepted guidelines.
How: Look for relevant information on the company’s announcement. Just to be on the safe side, go to SBTi’s website, where you can use the ‘search’ function on this page to determine if a company has committed to or set a science-based target and if it’s aligned with maximum warming of 1.5C or well-below 2C (or 2C in the case of an old commitment). If your search doesn’t bring up the company’s name it means that it does not work with the SBTi.
Q.2 Scope 1&2 emissions: Does the company commit to halving its emissions by 2030 and achieving net-zero emissions by 2050?
Why: SBTs are necessary but not sufficient as a context for any corporate climate change effort, as currently they do not require emissions reduction by about 50% by 2030 and achieving net-zero emissions by 2050, which the 2018 IPCC report defines as necessary milestones to limit global warming to no more than 1.5C. Therefore, this question and the following one will cover these milestones’, addressing scopes 1&2 in this question and scope 3 in the next one.
We use here the guidance of the 1.5C Business Playbook, which was developed by the exponential roadmap initiative “for companies and organisations of all sizes that want to align with the 1.5°C and net-zero ambition”. The playbook suggests that the first step for companies is to focus on reducing their GHG emissions, i.e. scope 1 (“from in-house sources such as furnaces, vehicles or leakage from refrigerants”) and scope 2 (“from purchased electricity, cooling, heating, and steam״) emissions.
We separate scopes 1&2 from scope 3 emissions (the latter covering emissions in the value chain from sources the company does not own or control, e.g. raw materials purchased or customer use) not only due to the guidance of the playbook, but also to ensure an accurate representation of companies’ efforts, as some may work on scope 1&2, but not on scope 3.
What: You need to check if the company has any commitment whatsoever to halving its scope 1&2 emissions by 2030 and achieving net-zero emissions by 2050. Please note: 1) we refer to the suggested timeline as a minimum requirement — 2030 and 2050 should be considered as the floor, not the ceiling. 2) we prioritize short-term over long-term goals. The reason is very simple — we need action now, not in 10 years, and procrastination on climate action should be discouraged. This is why a 2030 goal has a greater value than a 2050 goal.
How: Look for relevant information about scopes 1&2 on the company’s announcement. In many cases, companies are very specific about the categories (i.e. scopes) of emissions they will be working to reduce. If it’s not clear from the announcement just go for the final option (“sorry, I can’t tell from the announcement which one it is”). Remember: The goal is to encourage companies to be very clear about what they are doing — there is no accountability without transparency and there is no transparency without clarity!
Q.3 Scope 3 emissions: Does the company commit to halving its emissions by 2030 and achieving net-zero emissions by 2050?
Why: Following the rationale explained in the previous question this question focuses on scope 3 emissions. These are GHG emissions created in the company’s value chain (including both upstream and downstream emissions). As the 1.5C Business Playbook, which asks companies to halve scope 3 emissions by 2030 and achieve a net-zero target by 2050, notes scope 3 emissions “normally represent the largest share of a company’s total footprint and must therefore be addressed”. In other words: Scope 3 emissions are very important.
What: You need to check if the company has any commitment to halving its scope 3 emissions by 2030 and achieving a net-zero target by 2050. The same comments that were made in Q.2 about the timeline as the floor, not the ceiling, and the prioritization of short-term over long-term goals are also applicable to this question.
How: Look for relevant information about scope 3 emissions reduction on the company’s announcement. In many cases, companies will provide clear information about it, but if it’s not clear from the announcement please select the final option (“sorry, I can’t tell from the announcement which one it is”).
Q.4 Doing less harm and/or more good?
Why: Covering targets for scopes 1–3 and adoption of a science-based target are critical components of an effective corporate climate strategy, but they are still not enough to ignite the type of transformational change we need to fight climate change. To win this fight companies must first seek to eliminate the negative impacts they have on climate politics and policies. Second, companies need to exercise their capacity, as pillar no. 4 of the 1.5 Business Playbook (“Influence climate action in society”) suggests to “use their power to and wider sphere of influence to support and accelerate climate action in line with the 1.5°C ambition”.
It may be worth explaining why we shouldn’t expect companies to just reduce emissions and adopt a science-based target. First, it’s about the nature of the climate crisis and the type of change needed to address it effectively. As Bill McKibben explains: “If we don’t act quickly, and on a global scale, then the problem will literally become insoluble.” To act quickly and at the needed scale we need companies to use all the power they have, not just some of it, and that includes their ability to influence different stakeholders they engage with. It goes both ways — building on Kurt Lewin’s approach to change and his force field analysis, companies will need to help strengthen the forces supporting change and weaken the forces opposing it. The work on the latter could be even more important than on the former — removing obstacles is critical to making any change happen.
What: You should check what the company is doing about obstacles and drivers shaping the type of change we need to see to win climate change quickly and at scale. Here are some examples that can give you a better idea of what to look for:
Do less harm (weaken obstacles that help block changes) — these ideas are based mainly on my suggested scope zero framework and the various resources it uses:
- Stop giving money directly or indirectly to politicians or lobbyists whose policy positions are at odds with science-based climate policies (Defined by Veena Ramani of Ceres as policies that align efforts “with the latest climate science to limit global average temperature increase to 1.5° C above pre-industrial levels, with immediate and rapid emissions reductions in every sector of the economy, halving emissions by 2030 and achieving “net-zero” emissions in the U.S. and other industrialized nations by 2050 at the latest”).
- Leave any trade association that does not support science-based climate policies, such as the US Chamber of Commerce.
Do more good (strengthen drivers of transformational change) — these ideas are based on pillar 4 of the 1.5 business playbook (you can find more examples on p.22 of the playbook):
- Advocate for regulatory bodies and policymakers to promote industry-wide action that is aligned with 1.5C ambition
- Join and contribute to business/trade organizations that are committed to a 1.5C ambition
- Initiate or help develop sectoral industry roadmaps, strategies, and actions required to achieve 1.5C goals in the short- and the long-term.
- Create new sustainability solutions for employees, customers, business partners, and communities that are aligned with 1.5C ambition (see Intuit’s example).
Note: I would include in “doing more good” initiatives that may not be directly related to a specific stakeholder, such as reusing/recycling 100% of Accenture’s e-waste by 2025 to ensure that companies’ efforts are credited in a fair and accurate way.
How: Look for any examples you can find on the company’s announcement of doing less harm/more good. Consider the examples suggested here, but look in general for any indication of an action the company is taking that is aligned with less harm/more good as defined above. If it’s not clear from the announcement please select the final option (“sorry, I can’t tell from the announcement which one it is”).
Q.5 Committing to a just transition
Why: Just transition should become a crucial element in any corporate climate change plan as we cannot separate the environmental aspects of climate change from its social aspects. The authors of the report “Just Transition Concepts and Relevance for Climate Action” explain this idea: “In recent years, there has been a growing focus on “just transitions” to help achieve the economic and social changes necessary for sustainable development while protecting workers and communities and ensuring a more socially-equitable distribution of benefits and risks”. The Climate Justice Alliance adds: “If the process of transition is not just, the outcome will never be.”
Every climate change plan and guidance, from the Paris Agreement to the IPCC report on 1.5C states the importance of just transition as part of the solution. Nevertheless, this part is usually missing from corporate climate change plans, which tend to focus more on the environmental part of the transition to a low-carbon economy. The goal of this question is to make sure ‘just transition’ is part of the conversation and that companies understand that they are expected to address the social impacts of climate change, not just their carbon footprint.
What: In this question, we offer to consider three levels of potential support in just transition:
1) Supporting or advocating for local and/or national policies that support just transition — this is the strongest level as it is aiming at a policy-based intervention that is considered to be a very effective way to implement just transition solutions at scale. Examples could include “locally and nationally… policies that support just transition, particularly for vulnerable workers and communities, and drive job creation, decent work, development and poverty eradication”. I would also love to see companies showing support and advocating for policies that are based on the Green New Deal, but this is just one of many options to choose from.
2) A clear commitment to a just transition for stakeholders both inside and outside the organization. First, the emphasis here is on the word “clear” — whatever the company plans to do, it should be clear and actionable, in contrast for example to the vague language of the Business Roundtable’s statement on the purpose of a corporation. Second, the commitment itself is aimed both at stakeholders inside and outside the company that are more vulnerable to changes. The former include employees (considering how the interests of employees could be aligned with decarbonization strategies/practices, making sure that employees play a role in the decision-making processes regarding these changes, etc.), while the latter includes suppliers and communities. Examples can be taken from the various ways in which (some) companies supported their stakeholders during the Covid-19 pandemic.
3) The third level includes a clear commitment to a just transition either inside or outside the organization, not both.
How: Look for any mention or indication you can find in the company’s announcement of just transition initiatives. If you find any, consider if they fit the categories detailed above in the “what” section of this question. If it’s not clear from the announcement then select the final option (“sorry, I can’t tell from the announcement which one it is”).
Last but not least, I consider the climate change plan report card presented here as a prototype or version 1.0 and expect it will evolve and be improved over time based on feedback received from users, as well as changes in the environment in which companies operate. I invite you to ‘play’ with this tool, test it, explore its different features, and of course, provide feedback on your experience with it (feel free to leave a comment or send me an email).
Raz Godelnik is an Assistant Professor of Strategic Design and Management at Parsons School of Design — The New School in New York. He is currently working on a new book: “Rethinking Corporate Sustainability in the Era of Climate Crisis — A Strategic Design Approach”, which will be published by Palgrave Macmillan in 2021. Feel free to connect on Twitter and LinkedIn.