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Governments should ‘stop dithering’ and better regulate corporate green claims

Published: 24 March 2023

We need to strengthen regulations and sharpen reporting around misleading climate-related communications, according to Lindsay Otis Nilles of Carbon Market Watch.

Lindsay Otis Nilles, Carbon Market Watch: “We’re at a critical point in the climate crisis and corporations are under increasing societal pressure to take climate action.” Petmal on iStock

Carbon Market Watch, the Brussels-based think tank, released its 2023 CCRM report under the challenging title ‘Net zero or not zero? Combating corporate greenwashing’, to shed light on the true extent of the problem.

“Humanity is on thin ice and that ice is melting fast,” noted the UN’s Secretary General Antonio Guterres in response to this week’s Intergovernmental Panel on Climate Change report issuing a “final warning” on the climate crisis.

Carbon Market Watch calls for governments to “stop dithering” and better regulate the green claims companies make. According to the CCRM report, corporations have set ambitious “net-zero” targets, yet their actual climate plans only cut 36% off combined emissions, instead of the 90-95% realistically needed.

Humanity’s total carbon footprint needs to be halved by 2030 to keep temperature rises within the relatively safe 1.5°C limit, but corporations have committed to cutting only 15% of their real emissions within that timeframe.

The report also identifies some corporations developing technologies to monitor and match renewable energy consumption and production round the clock.

This sort of leadership suggests corporate and climate goals can credibly coexist, providing achievements match claims, Linsday Otis Nilles, global carbon markets expert at Carbon Market Watch, tells Impact

Impact Investor (II): Is climate noise drowning out the real good work being done?

Lindsay Otis Nilles (LON): We’re at a critical point in the climate crisis and corporations are under increasing societal pressure to take climate action. So they have adopted climate strategies ranging from highly misleading carbon neutrality claims to “net zero by 2050” targets.

The problem is that the vast majority of these climate plans lack any real commitment to the deep decarbonisation urgently needed to limit global warming to maximum 1.5C.

These corporations have launched massive PR campaigns highlighting how “green” or “climate friendly” they are … how they have “neutralised” or “compensated” their climate impact. There is a risk that all this noise can, indeed, drown out the work of the businesses (SMEs, for example) trying to do right by the climate, making a real and credible effort not misleading claims. […]

Stronger regulations and restrictions on greenwashing … are necessary to level the playing field and create an atmosphere conducive to real climate action.

II: What’s your view on the compatibility of business and climate goals under the right conditions?

LON: Businesses and climate goals/claims should not be mutually exclusive. They must, however, be credible. With respect to neutrality claims made by companies on their current business practices (rather than future goals): this misleading practice must be stopped immediately.

Any claim that would imply that emissions have been compensated, offset, neutralised … should be replaced with more accurate “contribution” claims.

A company can purchase credits on the voluntary carbon market that will fund a particular mitigation project – avoided deforestation, for example. But the end communication would be something more like “We are proud to have made a financial contribution towards an avoided deforestation project in Thailand”.

Instead of falsely claiming that their emissions have been neutralised, they are simply stating the truth about their contribution towards a project. This contribution claim model is gaining traction, but not nearly fast enough, as the CCRM findings indicate.

Companies must have credible, science-based plans to back their commitments. To improve the quality of climate targets, actual emissions reductions must be clearly separated from unabated emissions and dealt with differently. 

II: You call for better regulation, but what about the need for well-validated impact metrics and evidence of companies being champions of real change?

LON: Yes, well-validated impact metrics and evidence of companies making “real change” are needed. The European Financial Reporting Advisory Group’s draft sustainability reporting standards – under the EU’s Corporate Sustainability Reporting Directive – essentially present metrics for companies to report their actions and impacts.

The standards would require companies, for example, to set clear and absolute reduction targets reported separately from carbon credit purchases.

This could be a good way of identifying the real climate leaders because it would be easier to see who is doing what in regard to reductions/contributions instead of just having one net number that hides the nuances and differences between the companies.

While this can help shareholders and investors differentiate between climate leaders and those with subpar climate action, it does not necessarily help the average consumer who may not have the time to find and understand this kind of investor-targeted information.

That’s another example of why we really need to strengthen regulations around misleading climate-related communications in the EU consumer protection legislation. 

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