Global decarbonization gaining momentum?
Published
August 2024
- Average emission intensity for reporting companies declining globally, for Scope 1, 2 and 3
- Reporting North American companies starting to close emissions gap
- Average global Implied Temperature Rise (ITR) for reporting companies falling
Globally, the numbers of companies publishing temperature targets and making emission reduction plans, such as Net Zero 2050 commitments, has continued to increase. But is there any evidence to suggest these commitments are having an impact on global corporate emissions?
Our analysis using the ICE Global Emissions and Targets Database to track global corporate emissions suggests there are positive signs. We found improvement in both the quality of data being reported and the trend in global emission intensities, and absolute emissions globally. Overall, evidence points to the trend of global corporate decarbonization gaining momentum in the last reporting year.
To carry out a detailed analysis and to examine progress on a like-for-like basis we created a global diversified portfolio of companies reporting complete Scope 1 and 2 emissions and at least one category of Scope 3 emissions for at least the past two years (sample of 2,005 companies).
Figure 1: Carbon intensity by revenue
Source: ICE. Notes: Average emissions intensities (tCO2e/$m Revenue), Scope 1,2 and 3, for our global portfolio of companies reporting complete Scope 1 and 2 emissions and at least one category of Scope 3 emissions for at least the past two years (sample 2005 companies), and the portfolio filtered for companies with verified SBTi temperature targets (sample 668 companies).
Declining intensities across Scope 1, 2 & 3
The global average emission intensity (tCO2e/$m revenue) reduction for this sample portfolio is an impressive 30% year-on-year for Scope 1 and 2 and 24% year-on-year for Scope 3 for the last reporting year. Screening the portfolio for companies that also publish a verified SBTi temperature target (sample 668 companies) produces further interesting results. While the rate of emission intensity reduction is not quite as steep for Scope 1 and 2 in the latest reporting year at 26% year-on-year, the Scope 3 intensity decline is 31% year-on-year. Overall average intensity levels for companies with SBTi targets continue to be significantly below the average of the broader sample portfolio, particularly for Scope 1 and 2 emissions.
These results are consistent with previous ICE research which found companies with temperature targets tend to report lower intensities and overall faster decarbonization rates than their peers without targets1.
Absolute emissions: a more complicated picture
In terms of absolute emissions (by EVIC), the declining trend is also evident for Scope 1 and 2 emissions, for both the overall portfolio and the SBTi screen portfolio.
Figure 2: Declining trend: Scope 1 & 2 absolute emissions (by EVIC)
Source: ICE. Notes: Average absolute emissions by EVIC (tCO2e), Scope 1 and 2, for our global portfolio of companies reporting complete Scope 1 and 2 emissions and at least one category of Scope 3 emissions for at least the past two years (sample 2005 companies), and the portfolio filtered for companies with verified SBTi temperature targets (sample 668 companies).
For Scope 3 absolute emissions the picture is more complex. While there is no clear trend observed for overall Scope 3 emissions in recent years, we note divergent trends between the upstream (declining) and downstream (rising) Scope 3 emissions for our sample portfolio, a dynamic we will explore further in following articles.
Figure 3: A more complex picture: Scope 3 absolute emissions (by EVIC)
Source: ICE. Notes: Average absolute emissions by EVIC (tCO2e), Scope 3, for our global portfolio of companies reporting complete Scope 1 and 2 emissions and at least one category of Scope 3 emissions for at least the past two years (sample 2005 companies), and the portfolio filtered for companies with verified SBTi temperature targets (sample 668 companies).
Regional variations are also interesting. European companies on average report the lowest emission intensity for both Scope 1 and 2, and Scope 3 emissions, with continued strong decarbonization trends evident in the latest data. At the other end of the scale, North American companies have traditionally reported higher emission intensities, but here we are finding encouraging trends emerging.
North America: closing the Scope 3 gap?
In recent years, average Scope 1 and 2 emission intensities reported by North American companies have fallen significantly. Average emission intensities reported by North American companies are now aligned with the global average. However, it is Scope 3 emission intensities where the most significant change appears to be taking place. While average Scope 3 emission intensities reported by North American companies remain the highest globally, these have fallen dramatically and are now closing the gap with the rest of the world.
Figure 4: Regional intensity (tCO2e/$m revenue) reduction last reporting year
Source: ICE. Notes: Average regional emissions intensities (tCO2e/$m Revenue) reduction, Scope 1,2 and 3, for our global portfolio of companies reporting complete Scope 1 and 2 emissions and at least one category of Scope 3 emissions for at least the past two years (sample 2005 companies).
Net zero aligned…
An assessment of the portfolio (before applying the SBTi filter) using ICE’s Net Zero Analysis tools, show 90% of companies in the portfolio have published temperature targets (both verified and unverified by SBTi). Our analysis finds the portfolio is aligned to the NGFS Phase IV Net Zero 2050 scenario until 2026, when some divergence starts to take place, giving an Implied Temperature Rise (ITR) of 2.18 degrees C. Applying the SBTi filter improves the performance further, taking the ITR down to 1.94 degrees C. This is an improvement from 2.44 degrees C and 2.29 degrees C, respectively in the previous reporting year and is consistent with the percentage reduction in the divergence of the portfolio cumulative emissions from their Net Zero pathway.
Figure 5: Percentage divergence of cumulative emissions from net zero pathway
Source: ICE. Notes: Comparing the latest and previous year’s percentage divergence of emissions (tCO2e), Scope 1,2 and 3, from the NGFS Phase IV Net Zero 2050 scenario (EVIC) for our global portfolio of companies reporting complete Scope 1 and 2 emissions and at least one category of Scope 3 emissions for at least the past two years (sample 2005 companies), and the portfolio filtered for companies with verified SBTi temperature targets (sample 668 companies).
…But more work to be done
Overall, the analysis of our sample portfolio of globally diverse companies which consistently report high quality emissions data, shows some positive trends, including continued decarbonization, as evidenced by declining emissions intensities.
However, it must be noted that the ICE On-Track with Targets Indicators shows (figure 5 above) that on average the companies within our portfolio are currently not quite on track with their published targets, suggesting there remains room for further improvement in the coming years.
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