More companies than ever before are releasing sustainability and climate plans.
This also means that more stakeholders are reviewing and assessing corporate sustainability and climate plans than ever before.
There are five principal tensions that corporate sustainability teams should be aware of in communicating their plans to prevent any unwarranted criticisms from derailing their efforts.
The New Climate Institute, in collaboration with Carbon Market Watch, released the Corporate Climate Responsibility Monitor 2022 the week of February 7th. The report “assesses the climate strategies of 25 major global companies [and] critically analyzes the extent to which they demonstrate corporate climate leadership”. There are new Net-Zero reports and Op-eds coming out daily, and most are simply recycling shallow and tired analyses, but this report is substantial and is deserving of the attention it is already starting to garner.
Just as important as its contents, the report also serves as an excellent flagship drawing attention to broader tensions, opportunities, and lessons in corporate sustainability plans and communications.
But first, an overview…
The report is framed in the context of: The world is increasingly alert to a climate emergency → Leadership is required from all stakeholders → Public companies can play a large role in this and many have pledged to do so → Yet a lack of regulatory oversight and fractured disclosure frameworks make identifying and promoting true climate leadership quite challenging.
In this context, the report sets about assessing the climate action of 25 of the world’s largest companies--based on publicly available information, and much of it disclosed by companies themselves. These companies have positioned themselves as taking action on climate change and have been praised for their leadership…oh, and they represent 5% of global annual GHG emissions.
The findings are clear: if these are the best corporate climate plans we have then it is time to sell any beachfront property you may own before you lose it to unabated sea-level rise.
All 25 companies have Net-Zero plans which would suggest that the aggregated emissions should fall by 100% over the respective timelines, yet the report suggests that these will only fall by 40% at most given current plan structures. Only 3 of the 25 companies have plans including any significant decarbonization with all others relying on ambiguous commitments, offset strategies, and future technologies. More immediately, all targets for 2030 are nowhere near what is required to meet the Paris Agreement-aligned goals to keep warming to under 1.5C to avoid the worst consequences of climate change, with average reductions of full value chain emissions from 2019 to 2030 at only 23%.
The report does an excellent job in suggesting an optimal trajectory to achieve a stated objective and then assesses each company’s actions and plans relative to these. Any company in the process of formulating, or revising, their climate plans could find it helpful to read this report.
The report is well researched…but largely mis-directed.
Unfortunately, the report is being presented and commented upon as having ‘unveiled the shocking cases of greenwashing by the world’s largest companies’. This framing is unnecessary and simply fuels acrimonious stakeholder relations. The Business & Society relationship does not need any more acrimony.
Yet such occurrences of great research being pushed and re-circulated into a narrative of ‘gotcha’ investigative reporting is increasingly common. And so, this most recent report serves as a great case to highlight some of the tensions corporate sustainability teams should keep in mind when preparing communications.
The New Climate Institute report is a great example of how corporate sustainability plans are engaged by a broader community of stakeholders. The subject, the approach, the dissemination, and the response to this report highlight five principal tensions all corporate sustainability teams should be aware of. These tensions are not unique to this report, but rather the report serves as a timely flagship example of these tensions.
When you design a sustainability plan you do so within, and for, a specific internal and external context. It is critical to remember that your context is not universal. Your plans will almost always be reviewed by entities operating from a different context.
All of the corporate climate plans reviewed in the New Climate Institute report were largely prepared, it would seem, within the context of crafting the best plan that fits the organizational interests and contributes in a non-negligeable manner to broader sustainability interests and community.
But this is not the context within which the plans are being reviewed externally. As explained in the report, the plans were being reviewed in light of science-informed best-practices toward limiting warming to the Paris Agreement-aligned objective of 1.5C.
These two contexts are similar, but not identical. Whereas companies are issuing plans as being part of the solution, reviewers are analyzing plans as being the solution. Whereas companies are issuing plans for sustainability as part of business development, reviewers are analyzing plans as sustainability above all else. Whereas companies are issuing plans as relative best efforts toward improvements over past performance, reviewers are analyzing plans against external and absolute objectives. In this setting, no plan can ever be enough.
The plan and the assessment of the plan exist in different contexts.
The contexts by which your plans are reviewed will never be the same as the ones by which they are developed and intended, but corporate sustainability teams shouldn’t just accept this situation as a necessary tension. You do have a few cards to play to help bridge this gap.
Narrative matters. Be clear in the context and purpose of your plans. If you want to be part of the solution then be sure to make this clear. If instead you want to be recognized as the foremost climate leader, then be sure to make this clear. The more clarity you can bring to your objectives, ambitions, challenges, and anticipations, the more you prevent a mis-representation of your plans. External reviewers may still fault you for not being a leader as measured by their own contexts, but with the transparency in your plan, it is easier to frame the ensuing discussion. When context is not clear, the void is always filled by the expectations of the audience.
Companies will always be accused of greenwashing. We have come so far in popular sustainability that the use of the word greenwashing now exceeds the occurrences of greenwashing. There are plenty of cases of actual greenwashing to be critical of…but even if you are not one of these cases, you will still likely be accused of greenwashing.
Greenwashing is when companies benefit from the illusion of change while actively not engaging in change. Yet the term has been bandied about on social media so much that it is now often being used to refer to any company that does not meet the expectations of the speaker.
You commit to Net-Zero by 2050 but I want full decarbonization by 2030--Greenwashing! You are actively implementing DEI policies but I want quotas--Greenwashing! Your view of sustainability is heavy on the social but mine is heavy on the environment--Greenwashing!
I am among the first to scorn actual greenwashing, but I am also among the first to admit that claims of greenwashing have become hyperbolic. The 25 companies reviewed in the New Climate Institute report all had meaningful and authentic climate plans, just not plans that met the expectations of the framework established by those individuals conducting the review. And so what has the social media response been following this report: “Greenwashing!”
Criticisms of greenwashing can largely go ignored--but only once you evaluate for yourself if your plans could reasonably be construed as greenwashing or not. As the issuer, the onus is on you to 1) not greenwash, and 2) ensure your communications could not reasonably be misinterpreted as greenwashing.
Just as in the above point, transparency and narrative are key. Remember that greenwashing is BENEFITTING from INTENTIONAL DECEIT, and so can be properly identified. Just ask yourself:
Are our sustainability plans integrated with our business activities?
Do our sustainability plans commit to actual and meaningful change?
Is this change equal to or greater than the illusion of change conveyed by the plans?
Are the anticipated benefits of the sustainability plans likely to accrue due to the implementation of the plans rather than simply the communication of the plans?
If you answer ‘Yes’ to these questions, then you can disregard claims of greenwashing--your plans are authentic.
To generalize (and I try to avoid generalizing, but sometimes it fits), popular sustainability has largely grown frustrated waiting for political leadership and this has increased the pressure and expectations on companies. Increasingly, individuals feel they have more direct leverage in relation to companies than they do to political leadership, and this is particularly so in relation to companies that benefit from popular recognition and appeal.
If you want to review the integrity and applicability of corporate Net-Zero plans, you could choose a randomized yet statistically representative sample from a subpopulation of companies with Net-Zero plans and proceed accordingly. But I have yet to read any popular reports that follow this methodology.
Typically, reports will identify a group of either very large companies or very recognizable companies (or both) to assess. The idea is that the findings will be of greater interest to a larger audience than if a more ‘scientific’ sample-selection methodology were employed. And of course this works. The media is more likely to circulate news of a report investigating the climate plans of Apple or Amazon than they are one covering Zebex Industries or Zimmer Biomet…or one covering 25 of the largest and most recognizable companies responsible for 5% of GHG emissions than one covering 25 random yet statistically-representative companies also covering 5% of GHG.
If you are a large company, your sustainability plans will receive more scrutiny. If you are a publicly-recognized company, your sustainability plans will receive more scrutiny. If you are a large and publicly-recognized company, your sustainability plans will receive a lot of scrutiny…and skepticism.
In a setting which prioritizes free-market individualism, we can’t really be all too surprised when greater expectations are placed on the perceived ‘leaders’ of the markets. It is better to develop and communicate your sustainability plans accordingly than it is to cry foul. It may not be fair, but that’s life.
So many terms in sustainability are ambiguous. Scope 3, Impact, Net-Zero, Stakeholders, Leadership, and even Sustainability itself, are just quick examples. Reading sustainability plans, we all generally understand what is being discussed, but we don’t all understand it in the same detail. I may think these particular emissions are part of your Scope 3, but you may not. I may take a broad view of ‘stakeholders’ while you take a narrow view. I may think of Net-Zero as a process while you think of it as a destination. Nothing inherent to these terms could suggest which one of us is correct.
Ambiguity was a benefit in the 1990s era of sustainability--anything could be everything to everybody. It was all about bringing people into the tent. But that era is long gone. Sustainability is no longer a tent on the fringe, it is the main act.
Leaving terms undefined within your sustainability plans leaves the door open to skepticism, misinterpretation, and confrontation. If you are reporting on Scope 3 emissions then fully define what is, and what is not, included in your Scope 3. If you are engaging stakeholders, then identify who it is that you consider stakeholders, and why.
Much of the discrepancies and perceived shortcomings identified in the New Climate Institute report can be traced back to ambiguity. The 25 climate plans in question all discuss Scope 3 emissions and various timelines, but not in any great detail or clarity. In turn, the New Climate Institute report takes advantage of this to provide a strong definition of what should be included in Scope 3 and how intermediate milestones should be achieved within the broader timeframes, and then assesses against this definition. Had the 25 original corporate climate plans provided details and definitions to the terms they used, this assessment would not have been reasonable.
Clarity, transparency, and accountability help establish shared understandings and expectations of your plans, and these in turn establish the frameworks for how your plans can reasonably be assessed. Ambiguity is easy, but it does not help.
Very few corporate sustainability plans exist on their own. Almost all present campaigns, strategies, and initiatives which align with broader stakeholder frameworks. Plans are quick to highlight how they follow GRI reporting, are part of 1% For the Planet, disclose to the CDP, are Rainforest Alliance certified, or so on. The general idea is that by aligning with broader frameworks, plans and their proponents gain greater recognition and social legitimacy.
In theory this is true, but in reality it doesn’t typically pan out. The challenge is that most stakeholder frameworks are not as powerful or as important as most proponents believe.
Consider that all the companies assessed in the New Climate Institute report prepared their Net-Zero plans as active participants (or signatories) to the Race to Zero campaign by the United Nations Framework Convention on Climate Change (or the UNFCCC Race to Zero). Just to recall, the UNFCCC is the inter-governmental body responsible for global climate negotiations, including the Paris Agreement to which these companies’ Net-Zero plans are being assessed.
Should the fact that these 25 plans were accepted as part of the UNFCCC Race to Zero not mean that they are inherently aligned with the Paris Agreement objectives? Can plans aligned with one the most important global conventions operationalizing sustainability be considered greenwashing?
The mandate of the UNFCCC Race to Zero is “ [...] to build momentum around the shift to a decarbonized economy ahead of COP26, where governments must strengthen their contributions to the Paris Agreement. This will send governments a resounding signal that business, cities, regions and investors are united in meeting the Paris goals and creating a more inclusive and resilient economy.”
Success! These 25 company plans aligned with the UNFCCC Race to Zero and delivered the momentum so clearly sought. But then why did the New Climate Initiative report find them so wanting?
If the plans are considered insufficient, should the criticism not be levied at the governing framework for which the plans were developed? Why is the New Climate Initiative report focused on these 25 companies instead of being focused on the UNFCCC Race to Zero?
Because of Tension #3 above.
It’s all about recognition and expectations…and the recognition and expectations of these 25 global companies varies greatly from the recognition and expectations of the UNFCCC Race to Zero, or even of the UNFCCC itself. Authors of assessment reports themselves want to be recognized, they want their work to be carried across media outlets and channels, and to do that they must address subjects which themselves are recognized. Most people recognize Amazon and Toyota, few people can tell you what the UNFCCC acronym stands for.
The reality is that stakeholder frameworks don’t mean much to people beyond these frameworks. They don’t offer protection from skepticism or criticism. They may serve as a quick virtue signal to the generally disengaged, but is it the generally disengaged that company plans are designed for?
Corporate sustainability plans should align with the frameworks it makes sense to align with, whether they are consumer-, investor-, or community stakeholder-oriented; or global, regional, or industry-sector in scope; or general or specialized in theme. Frameworks can serve a purpose, but don’t expect them to provide cover from skepticism.
You will always be held to higher standards than are the frameworks you align to. So ask yourself which frameworks really make strategic sense to align with.
The New Climate Institute report is one of the best Net-Zero assessments I have read lately, both for what it shares and for how it serves as an excellent case study in the tensions in communicating sustainability plans.
These five tensions will never truly be resolved, but neither must they always remain acutely present. Keeping these front-of-mind can help corporate sustainability teams craft and communicate plans with only a minimal chance of being reasonably mis-interpreted.