Headline-making pledges and “empty slogans” about emissions reductions are coming under fire at the United Nations Climate Change Conference – or COP26 – in Glasgow, Scotland. During an early event at the two-week-long, world leader-drawing conference, United Nations Secretary-General António Guterres called attention to the state of “net-zero” pledges and corresponding targets – which have proven popular among both governmental and non-governmental actors, including consumer brands, with the latter often using heavily-publicized pledges as way to market to increasingly climate concerned consumers – telling conference attendees on Monday that “there is a deficit of credibility and a surplus of confusion over emissions reductions and net-zero targets, with different meanings and different metrics.”
With such confusion and a lack of universally-adopted standards in mind, Secretary-General Guterres announced that he will establish “a group of experts to propose clear standards that go beyond the mechanisms already established in the Paris Agreement to measure and analyze net-zero commitments from non-state actors.” The message from Guterres comes as companies continue to “self-define net-zero targets without credible and independent assessment of their ambition and integrity,” according to Alberto Carrillo Pineda, co-founder and managing director of Science Based Targets, an initiative that has established what it calls “the world’s first corporate net-zero standard.”
Mr. Guterres has not been the only one to touch on the topic in connection with COP26 meetings thus far. Zhang Jun, who is China’s Permanent Representative to the United Nations, stated on Twitter on Wednesday that addressing climate change calls for “firm commitment and continued actions,” and not “empty slogans, ever-changing policies, [and] luxury motorcades and entourages.” While Chinese President Xi Jinping is not present at the COP26 in Glasgow, he released a written statement about China’s efforts on the climate front, and Mr. Zhang confirmed that he – and a Chinese delegation – is in attendance, and that China has announced its “carbon peak and neutrality targets, and released [its] action plan and policies.”
THE BROAD VIEW: The calls for uniform emissions standards coincide with companies readily setting out ambitious carbon reduction targets and “net-zero” pledges. Amazon, for example, announced recently that more than 200 companies – including retailers like ASOS, Holt Renfrew, and Selfridges, and consumer goods giants like Proctor & Gamble – have joined its Climate Pledge, committing to reach net-zero emissions by 2040. They also come as regulatory agencies continue to grapple with how to handle climate-specific disclosures and other related risk factor reporting by publicly-traded companies. As CNBC reported this summer, Securities and Exchange Commission (“SEC”) Chair Gary Gensler is “moving the market regulator closer to requiring carbon disclosures from companies as investor concerns about the material impact of climate change on financial performance continue to escalate,” and as variations among the disclosures by different companies make it difficult for investors to track and compare such information.
Still yet, in lieu of a mandatory and standardized framework, “not all issuers will disclose [climate change risks], and disclosure will continue to vary greatly by issuer, making it difficult – if not impossible – for investors to compare companies,” SEC Commissioner Allison Herren Lee stated this summer, noting that “the proliferation of voluntary standards and principles” only serves to exacerbate this issue. Given the role that climate-related information is playing in investors’ decision-making processes, Lee revealed that “investors are overwhelmingly telling us, through comment letters and petitions for rulemaking, that they need consistent, reliable, and comparable disclosures of the risks and opportunities related to sustainability measures, particularly climate risk.”
All the while, increasing investor focus and reliance on climate, as well as other Environmental, Social, and Corporate Governance-related disclosures, and demand from consumers that brands simultaneously boost their sustainability credentials and the transparency around their operations has brought with it a stunning rise in greenwashing, or efforts by brands to mislead consumers about the green credentials of a product or service or the environmental performance of the company as a whole, including by overstating (or failing to appropriately contextualize) the impact of sustainability-focused endeavors.
There is a direct line between uniform disclosures and the current lack thereof, and greenwashing, according to Aoife Brophy Haney, a lecturer at Oxford’s Smith School of Enterprise and the Environment, as “historically, big business has been able to get away with greenwashing thanks, in part, to a limited” – and largely legally undefined – “understanding of what ‘green’ actually means, and due to a plethora of different definitions and certifications with little standardization.”