The World Benchmarking Alliance (WBA) applauds the UN High-Level Expert Group (HLEG) on the Net-Zero Emissions Commitments of Non-State Entities for the release of its report at COP27 that provides clear recommendations to ensure the integrity of net-zero commitments. As an international non-profit organisation that assesses how the world’s 2,000 most influential companies are progressing to help achieve the Sustainable Development Goals, WBA advocates for corporate accountability, and the need to align company performance with limiting global warming under +1.5°C by the end of the century. WBA’s benchmarks demonstrate that, more often than not, assessed companies and financial institutions are not living up to their net-zero commitments in their transition plans and actions, creating a high risk of greenwashing, increasing mistrust from their stakeholders, and most importantly, not decarbonizing the real economy at the right speed. WBA supports the objective of the HLEG recommendations to bring integrity, transparency, and accountability to net-zero.
The HLEG report gives a strong signal to the international and business community that net-zero commitments need to be accompanied by meaningful action and sets out clear recommendations on what this looks like, halting ambiguity and greenwashing. As recognised in the report, we cannot delay immediate climate action, also by companies and financial institutions, and there is no time for vague commitments and actions that are incompatible with a 1.5C aligned world. We also highly welcome the support of the United Nations Secretary General (UNSG) in this regard, driving the corporate accountability agenda in the multilateral landscape.
As demonstrated below, WBA’s Benchmarks echo the five principles of the HLEG to guide the setting and attaining of net zero targets. These principles illustrate the importance to close the gaps between the rhetoric of companies and the actual actions needed to reach 1.5C. The five principles of the HLEG are already incorporated in WBA’s methodologies, resulting in assessments that are in line with the HLEG vision. Through its benchmarks, WBA provides meaningful insights into where companies stand in their decarbonization and just transition to net zero and can as such provide a feedback loop to demonstrate progress and leadership, while holding laggards to account.
WBA benchmark findings in support of the HLEG five principles
1. Ambition which delivers significant short – and medium – term emissions reductions on a path to global net-zero by 2050
WBA’s Climate and Energy and Financial System Benchmarks expose how too many net-zero targets are being set without intermediary (near and medium-term) targets. WBA’s Transport Benchmark for example, which assesses 90 transport companies across different industries (rail, aviation, shipping, road, and multi-modal) shows that while 51% of companies do have long-term net-zero targets, only 17% have more than one intermediate target and only ten companies have set such targets without the use of offsets. Similarly, WBA’s Financial System Benchmark reveals that while 37% of financial institutions set net-zero targets, only 2% set interim absolute emission targets. In order to work towards a net-zero world by 2050, companies and financial institutions need to step up the quality of their transition plans, accompanied with robust interim targets.
2. Demonstrated integrity by aligning commitments with actions and investments
Across its Climate and Energy Benchmarks, WBA’s data reveals that the majority of assessed companies do not have robust low-carbon transition plans, do not invest sufficiently in low-carbon technologies and do not realign their business models with low carbon activities. In oil and gas, shipping, and aviation, companies even actively lobby against more stringent climate policies. For transport, this represents almost half of the companies assessed. Such actions are incompatible with net-zero. It is therefore essential for companies to demonstrate integrity by matching their commitments with concrete actions and investments on the ground.
3. Radical transparency in sharing relevant, non-competitive, comparable data on plans and progress
There is still a lack of transparency from companies in disclosing climate data. As part of its oil and gas benchmark for example, WBA shows that only 30% of the companies disclose low carbon capex and the average spending is more than ten times lower than what is needed to align with a 1.5C path. By ensuring all our methodologies and benchmarks are free and publicly available, WBA provides a public good to help hold the world’s most influential companies accountable and empower different stakeholders with the transparent and evidence-based insights they need to do so. By building on what is there, including existing initiatives, the best available science and international agreements, WBA aims to provide a coherent roadmap on what is expected of companies in their contributions to sustainability topics. WBA is eager to collaborate with the HLEG to share insights from its benchmarks, analysing the similarities and divergences in net-zero reporting, and where data is insufficiently available. In doing so, we can better monitor and evaluate progress made by companies and financial institutions over time.
4. Established credibility through plans based in science and third-party accountability
Setting a net-zero target should not be a box-ticking exercise. It should be based on robust methodologies, that are designed through a consultative process and that align with the best available climate science. WBA’s climate and energy benchmark methodologies are peer-reviewed by multiple stakeholders and experts in the field and align with a 1.5C trajectory. While using a 1.5C pathway affects the performance of companies, WBA views this as necessary to ensure the credibility of its climate and energy benchmarks. Credibility also means companies should not be assessed based on a single or small subset of indicators. As part of its Assessing low Carbon Transition initiative(ACT Initiative1), core social and just transition methodologies, WBA evaluates not just the emission reduction targets companies set but a host of other aspects as well, including how climate and social challenges are embedded within the governance structure of the company, how the company’s past, present and future climate performance is aligned with its carbon budget and how it engages with suppliers, trade associations and public authorities on these issues.
5. Demonstrable commitment to both equity and justice in all actions
There can be no effective transition if it is not just and does not actively involve workers and communities impacted by the climate crisis. WBA’s core social and just transition indicators can provide the accountability mechanism needed to determine the equity and justice components of net-zero targets and highlight the areas where companies need to improve. WBA’s 2021 just transition assessment for example showed that only 6% of the companies assessed disclosed how the low carbon transition will impact the social protection of their workforce. Similarly, companies underperform in terms of their just transition planning, with only 1% of companies meeting the four elements of just transition planning which include: social dialogue and targets to mitigate the social impacts of the low-carbon transition for workers, affected people, and business relationships. In contrast, there are areas where companies perform better. Over half of the companies assessed as part of the just transition assessment did indicate some of the measures they were taking to enable the creation of green jobs.
The HLEG report’s principles and recommendations provide a powerful guidance to improve accountability for non-state commitments on net-zero and come at a pivotal moment to course-correct the world’s progress towards achieving the Paris Agreement and 1.5C future. Now is the time to integrate these recommendations into existing processes and initiatives to ensure they become aligned with the world’s climate ambitions. As WBA continues to update its existing benchmarks and develop new ones, such as for the construction sector in 2023 and heavy industry, it actively seeks to collaborate and present its work to the HLEG members, the UNSG Climate Action team and other organisations and expert groups to put the HLEG report recommendations into practice.
WBA stands ready to support the calls to action for regulators, initiatives and standard setters and will continue to steer non-state actors to deliver with rigour, transparency and fairness on their net zero pledges. Specifically, WBA aims to support through its benchmarks, existing initiatives and coalitions to assess company commitments and actions, allowing for transparent tracking of progress and for dialogue on where and why progress is lagging behind. WBA welcomes the call to convene a Task Force on net zero Regulation, with standard setters and regulators. A coherent regulatory framework that facilitates consistent and comparable sustainability reporting globally will better equip stakeholders, including policymakers, investors and civil society, to transparently assess where companies stand and where further action is needed.
In addition, the Global Stocktake of the Paris Agreement provides a key moment to review the performance of non-state actors and in turn ensure they are held accountable for their actions, including through regulations and revised NDCs. We call on Parties and all stakeholders involved in the Global Stocktake to follow the recommendations of the HLEG report to ensure that it results in a complete and constructive assessment of progress by non-state actors in achieving the long-term goals of the Paris Agreement.