Unveiling the emission reduction plans of multinational enterprises

As the world faces the hottest year on record, national and regional policies to reduce emissions have become a fixture in the public discourse. But for reductions to be achieved, it is important to understand the commitments of the world’s largest companies. The largest companies, especially MNEs, which span borders and whose operations play a substantial role in global emissions, shoulder much of the burden.

One of the leading frameworks for corporate target setting is the net-zero standard, developed by the Science Based Targets initiative (SBTi), and providing standardised guidelines and requirements for companies to achieve a net-zero GHG emissions target. Like countries, companies are committing at different levels over different timelines, but it can be difficult to find information on companies’ progress.

The OECD and the UN Statistics Division recently launched the Multinational Enterprise Information Platform (MEIP), a multipurpose platform filling an informational gap on the largest 500 global companies. The platform includes multiple unique identifiers for each MNE, which users can leverage to match other data sources. When paired with data from the net-zero tracker database, which details the climate reduction plans of the world’s largest companies, it can be used to uncover new insights on the emission-reduction progress being made by MNEs as of 2022. Matching these data with the company ID of MNEs in the net-zero tracker database, a total of 415 of companies remained in the dataset. The resulting dataset allows breakdowns by industry, target date, percentage of emissions reduction and scope of reduction.

A large majority of MNEs express an interest in cleaning up their operations in the fight against climate change. In fact, 84% of the companies in the dataset have put forth specific greenhouse gas (GHG) emissions reduction targets as off 2022. However, not all targets are created equal. Breaking this data down by target category and ambition level can shape a clearer understanding of how much can be expected from multinationals.

While most MNEs have declared emissions reduction targets, deadlines differ between individual companies. These deadlines can be divided into two categories: end reduction targets, and interim reduction targets. Of the companies that have an end reduction target, most aimed for a date between 2040 and 2050. Of those that have intermediate reduction targets, the target date is usually between 2026 and 2030.

While natural to assume that an intermediate target must be set with reference to a specified end target, this is not always the case. In fact, more companies communicate on intermediate targets than end targets, at least according to the available data.

As well as variation in the timelines and extents of firms targets, the method for measuring these goals also vary. Companies can address these goals by reducing emissions within three scopes, which set out a way to divide greenhouse gas emissions:

• Scope 1 covers the emissions resulting directly from the company’s operations.
• Scope 2 covers the “indirect” emissions created by the production of energy that companies consume, such as electricity used to heat the company’s buildings.
• Scope 3 includes both upstream activities (those produced by suppliers) and downstream activities (those produced by the consumers through normal use of the company’s products).

For scopes 1 and 2, measurement remains within the company’s influence and therefore reduction policies are easier to implement. Scope 3 requires a knowledge of supply chains and product usage and is therefore much more difficult to quantify. As seen in Figure 3, there were around 300 companies that declared reductions targets for scope 1 and 2 emissions, while this reduces to around 200 companies when considering scope 3.

In addition to reducing emissions directly and indirectly throughout their operations, companies may also achieve their climate commitments via carbon credits or offsets. Carbon credits are tradeable permits that can be earned by companies by either reducing their own emissions, investing in projects for others to reduce, or removing emissions from the atmosphere. Within this dataset, less than half of the companies are planning to use carbon credits. The use of carbon credits also varies across industries, as classified by the Refinitiv Business Classification (TRBC) system, being least popular with the basic materials industry (32%) and most popular within the energy industry (57%) (Figure 4).

The data-driven insights provided by MEIP combined with the net-zero tracker database reveal that a majority of world’s largest MNEs are making commitments to reduce their emissions. However, there are substantial differences in companies’ commitments on achieving reductions in emissions, both in terms of timing, ambitions and tools used.