How ambitious are the emissions targets of the automobile industry?
Motor Finance analysed the emissions reduction targets of 1,138 companies to find out which are leading the way, and which are lagging on their commitments. This report by Isabeau van Halm, Saywah Mahmood, Mirela Petkova and Mengying Du.
On 22 April, it was Earth Day. This year’s theme was Invest in Our Planet, calling on everyone including government, citizens, and companies, to contribute to tackling climate change.
“Unless businesses act now, climate change will ever more deeply damage economies, increase scarcity, drain profits and job prospects, and impact us all,” wrote Earth Day Network on their website.
Just 100 companies have been the source of over 70% of emissions since 1988, found a study by the international non-profit organisation CDP in 2017. In that light, pushing the private sector to contribute to reducing emissions seems like a necessary step in reducing global emissions.
Most companies have some form of climate strategy in place. However, without clear guidelines and accountability, there is a risk of unclear targets, empty promises, and greenwashing.
When investigating the climate strategies of 25 major global companies, the non-profit NewClimate Institute found that pledges made in these public strategies are often ambiguous and emission reduction commitments are limited.
“All of the 25 companies assessed in this report pledge some form of zero-emission, net-zero or carbon-neutral target,” the researcher wrote. “But just 3 of the 25 companies (…) clearly commit to deep decarbonization of over 90% of their full value chain emissions by their respective net-zero and zero-emission target years.”
With the lack of regulation, there is a growing need for companies to set clear and credible targets. This is where independent certification schemes such as the Science Based Targets initiative (SBTi) come in.
The SBTi is a collaboration between CDP, the United Nations Global Compact, World Resources Institute and the World Wide Fund for Nature. Over 1,300 companies have joined with science-based targets that are in line with the Paris Agreement goals and approved by the SBTi.
Motor Finance analysed the emissions reduction targets of the companies in the database of the SBTi. Because it can be difficult to compare targets between different companies and sectors, the analysis only includes the companies with absolute targets. Absolute targets are only relative to a baseline, while intensity targets – the ones that were excluded – are relative to a unit or economic output, for example, a reduction of emissions per million dollars of profit.
The data shows that fewer companies are committed to Scope 3 than to Scope 1 & 2 and that the targets set for Scope 3 are less ambitious.
Scopes are categories of emissions set by the Greenhouse Gas (GHG) Protocol, a framework for reporting greenhouse gas emissions from the private and public sectors. Scope 1 covers direct emissions from owned or controlled sources, scope 2 covers indirect emissions – for instance from the generation of electricity – and scope 3 covers all other direct emissions from the value chain.
Setting scope 3 targets as a company is just as important, if not even more, as setting targets for scope 1 and 2, explains SBTi: “For the majority of sectors, the largest sources of a company’s emissions lie upstream and/or downstream of their core operation”.
Taking the average of reported targets of the companies in each sector indicates how ambitious each sector is compared to others. Calculating the average target by sector was done by averaging the percentage of the reduction target and averaging the timeframe between the base year and the target year.
Based on an average of 36 companies, the automobile sector has committed to reducing 52.8% of emissions in 11.7 years. That is more ambitious than the average of all companies. Across all companies in the database the average target is for a reduction of 44.6% in a timeframe of 12 years.
Among companies in the automobile industry, Robert Bosch GmbH has the highest commitment, with a reduction of emissions of 85% by 2030. The runner-up was Faurecia S.A. with a pledge to reduce 80% of emissions by 2025.
On the other hand, PSA Automobiles SA and Fortune Parts Industry Public Company Limited lag compared to other automobile companies, with reductions targets of 20% and 25%, respectively, by 2024.
The SBTi categorised each target set by companies based on future pathways. The trajectory can either be towards a 1.5°C, well below 2°C, or 2°C above pre-industrial levels by 2050.
To avoid the most significant consequences of climate change, the rise in global temperature needs to stay below 1.5°C above pre-industrial levels by 2050. However, the latest report from the Intergovernmental Panel on Climate Change (IPCC) shows that the current trajectory will result in global warming of between 2.2 and 3.5°C. In response to the urgent need to reduce emissions further, the SBTi will “only accept target submissions of scope 1 and 2 targets that are in line with a 1.5°C trajectory” as of July 15, 2022.
With a total of 25 companies, most companies with absolute and intensity targets in the automobile sector are in line with a trajectory towards 1.5°C above pre-industrial levels by 2050, while 11 companies wouldn’t be able to submit their targets under future SBTi norms.