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Sustainability Research, Sustainable Investment Profiles

The Corporate Path to Net Zero

Last year, at the United Nations Climate Change Conference (COP26) in Glasgow, countries representing 90% of the world’s GDP committed to net-zero carbon emissions by 2050. This target is seen as critical to keeping warming as close to 1.5 C as possible, a level above which climate change is expected to become even more unpredictably destructive.

Around the time of the conference, corporate net-zero commitments also began to proliferate: the Net Zero Tracker reports that 38% of the world’s largest 2,000 companies by revenue now have net-zero targets, up from 20% a little over year ago, according to Forbes. This increase in commitments unquestionably represents progress. But quantity does not imply quality, and a report put out in February by the NewClimate Institute and Carbon Market Watch—and another in June from the Net Zero Tracker itself—both highlighted critical issues that plague many of the new targets. From shortcomings in emissions accounting, to a dearth of intermediate target-setting, to an over-reliance on carbon offsets, many companies have clearly taken shortcuts to making promises that won’t come due for decades.

To be fair, outside mechanisms to help companies set and validate legitimate net-zero targets have only recently come online. The gold standard for net-zero targets, the Net-Zero Standard from the Science Based Targets initiative (SBTi), was released just under a year ago (in October 2021). Rather than wait through a lengthy approval process, many companies understandably chose to signal their ambition sooner, in a show of support for the COP26 goals. Since that time, however, just 24 companies have established SBTi-approved net-zero goals for 2040 or earlier, with an additional 40 companies validating net-zero targets out to 2050. While early, these numbers remain a far cry from the 700+ companies that the Net Zero Tracker is tabulating.

One company making a commitment before it had every detail in place was Renishaw, a UK-based manufacturer of precision measurement and healthcare technology. Established in 1973, Renishaw has 5,000 employees worldwide, of which approximately half are in the UK. One of these employees is Ben Goodare, the company’s Head of Sustainability, who was hired nine years ago as its Corporate Social Responsibility Manager. Among Goodare’s accomplishments at Renishaw has been a carbon management system that began by gathering data from 139 properties. With this data in place for establishing emissions baselines, Renishaw then implemented efficiency initiatives and renewable energy purchasing that allowed it to reduce its carbon footprint 39% between 2017 and 2021.

That initial success presumably gave Goodare, and Renishaw, the confidence to declare a 2050 net-zero commitment in November 2021. One feature of Renishaw’s target that immediately distinguished it from some of the others—alongside the company’s recent track record in decreasing emissions—was its up-front commitment that the target would be SBTi-validated. And just over six months later, Renishaw followed up with more detail: a 2028 commitment to net zero for scope one and two greenhouse gas emissions (those generated directly by the company along with its own power and heating needs), alongside a March 2023 commitment to fully measure scope three emissions (those generated by suppliers and customers in conjunction with Renishaw’s products). With scope three emissions quantified, the company also said it would set a “more ambitious” net-zero target for all emissions. Two weeks later, Renishaw announced the creation of a dedicated sustainability team, reporting to Goodare and responsible for making sure the company met its net-zero target by 2050 or earlier.

Given the clear and concrete steps Renishaw has already taken, along with those it has set itself, it would be hard to fault the company for setting its target first, and then promptly following up with the steps to get there. Thus far, those steps have been a model of the net-zero target-setting best practices recommended by WRI. And while the lack of any baseline data for the company’s scope 3 emissions is a handicap, its willingness to hire a team dedicated to the net-zero goal demonstrates a realistic understanding of the challenge at hand, and the significant work that will be required to follow through.

Renishaw demonstrates a similar coupling of transparency and realism in other environmental, social and governance areas of its business as well: the company did not meet its 2021 landfill waste targets, but expects to be back on track following the lifting of pandemic restrictions; it reports significant gender pay gaps, which it admits will take time to address given the entrenchment of highly experienced male leadership at the company (and in the U.K.’s STEM industries more generally); and the gender balance on Renishaw’s board includes 33% women, up from 20% just a few years ago but still limited in part due to the continuing presence of the company’s founders on the board.

In the global pursuit of net zero, transparency and realism will be desperately needed from the corporate world. For now, we must push for more of the same from the hundreds of other companies who have made their promises, without yet charting the path to meet them.