invert logo

More Companies are Reporting Scope 3, but U.S. is Still far Behind.

Read more in the April 19 edition of Invert Insights.

Share

The latest release of the Net-Zero Tracker has been issued and in it, MSCI (formerly Trove Research) has highlighted some interesting trends in the collective progress of publicly listed companies.

Their research found that of the public companies that currently report their emissions data, 60% are reporting on Scope 1 and 2 emissions as of January 31, 2024, representing a 16% increase over the past 2 years. In comparison, 42% have reported at least some Scope 3 or value chain emissions over the same reporting period.

In addition, the report found that more companies are setting emissions reduction targets, and while the pace for commitments has slowed, the quality is increasing, with a sharp rise in science-backed decarbonization targets. In this group, the number of companies setting climate targets for the current year and beyond, and those who have set net-zero targets, has remained consistent, while the percentage of companies setting science-based targets grew 8%.

Chart showing share of listed companies with climate targets by type.

MSCI also flagged that U.S. companies are falling far behind their global counterparts on climate reporting with 73% of reporting companies outside the U.S. reporting on Scope 1 and 2 emissions and 54% reporting on Scope 3. 

Chart showing emissions disclosure gap between US & non US companies.

The most concerning metric is that the decarbonization trajectories of the world’s listed companies place them on a path to warm the planet by 3°C (5.4°F) above pre-industrial levels in this century, roughly double the goal of limiting global warming to 1.5°C. In fact, these companies are on track to burn through their share of the global carbon budget for limiting average temperature increases to 1.5°C by July 2026. 

MSCI estimates that these companies will produce 11.8 billion tonnes of Scope 1 GHG emissions just this year, roughly the same amount they produced in 2023 and representing nearly one-fifth of global GHG emissions. At the current rate, they estimate that global GHG emissions would need to peak by 2025 and fall 43% by 2030 to avert the worst impacts of global warming.

Participation in the voluntary carbon market continues to grow as an option for companies looking to offset hard to abate emissions. The number of carbon credits retired during the first quarter totaled 54.2 Mt of CO2e, up 10% from the same quarter a year earlier. The increase from a year ago largely reflected demand for nature-based projects (REDD+ and Nature Restoration) credit retirements, which rose 27% and 103%, respectively.

Chart showing quarterly retirements of voluntary carbon credits by project type (MtCO2e)

Global energy and petrochemical company Shell remained the top disclosed retiree this past quarter and Italian multinational energy company ENI S.P.A. rose from 11th in 2023 to 2nd place. 

Chart showing top 10 disclosed retirees, first quarter 2024

Other key highlights from the report:

  • Nearly 38% of listed companies have set decarbonization targets that aim to reach net-zero, a one percentage point increase over the same period. 
  • Just over half (52%) of listed companies have disclosed an emissions reduction commitment.
  • 20% of companies have science-based climate targets.
  • Only ≤1.5% align with the goal of holding the rise in average global temperatures to 1.5°C above pre-industrial levels.
  • Reducing emissions often requires companies to undertake upfront investments and MSCI estimates the cost of abating residual emissions can be as high as $500/tCO2e in some industries.

Invert Insights.

💡 With reporting companies on the path to warm the earth by double the 1.5°C global goal threshold there is an urgent need to do more in the short term and for those non-participating companies to begin to make meaningful commitments. 

💡 The current pace of targets is slowing but the quality of commitments increasing signals that more care and attention is being taken by companies to set realistic and well thought out targets.

💡 The report is released at a pivotal time when many groups are working in tandem to develop standardization across the voluntary carbon market. With companies facing costs as high as $500/tCO2e to abate residual emissions, creating a reputable and transparent market will go a long way in making the sustainability business case for the use of carbon credits to offset emissions that companies are currently not able to abate. 

Want to keep reading? Check out the latest Invert Insights.