Most corporate emissions reduction strategies won’t deliver Paris Agreement goal

A majority of public companies won’t deliver the cuts needed to keep global temperature increases under 1.5 degrees Celsius, according to data from MSCI and Accenture.

Listed companies will emit an estimated 11 gigatons of greenhouse gases in 2024, almost 20 percent of the entire world’s footprint, predicts MSCI Sustainability Institute in the latest edition of its net-zero tracker. That’s just for Scope 1, or emissions directly attributable to their operations.

Put another way, current corporate strategies will contribute to global temperature increases of more than 2.8 degrees Celsius above pre-industrial levels sometime this century.

Remember, 2024 is the first year the world has recorded temperature increases of more than 1.5 degrees C, the threshold advised by the Paris Agreement and the North Star for net-zero pledges. That’s almost twice as hot.

Companies are likely to burn up their share of the carbon budget — the amount of emissions they could produce and still achieve the Paris goal — by November 2026, MSCI’s latest net-zero tracker predicts. 

Emissions slow in China, India and Indonesia

What gives? The pace of Scope 1 emissions reductions is slowing for companies in most developed economies, according to MSCI. U.S. companies in aggregate, for example, are likely to record absolute reductions of 1.8 percent for Scope 1 from 2023 to 2030, compared with an average 3.7 percent cut during the six years ended December 2022.

The news from developing economies is trending differently, which represents somewhat of a bright spot. While the footprint of Chinese companies is expected to grow 1.2 percent annually between 2023 and 2030, it grew much faster — at 6.9 percent annually — for the previous six years.

India’s companies could do even better: They’re predicted to achieve a 1.2 percent decrease in their emissions, compared with an annual average increase of 9.1 percent over the previous six years.

40% of companies have net-zero goals

The emissions data reported by MSCI only reflects listed companies that actually report that sort of information. Fewer than 40 percent of the Global 2000 largest companies (37 percent) have a net-zero commitment that covers the entire range of their emissions including Scope 1, Scope 2 (from their purchased energy) and Scope 3 (from their suppliers and products), according to a separate analysis published Nov. 11 by Accenture.

That’s pretty much the same as 2023, but 10 percentage points higher than 2021. 

There were vast differences in net-zero commitments, depending on the industry sector. 46 percent of consumer goods and services companies, for example, have pledges compared with just 20 percent of the health companies on the Global 2000.

Companies are more likely to have a commitment that applies to just Scope 1 and Scope 2: about 65 percent of the companies studied by Accenture fell into that category.

Just 16 percent of the Global 2000 companies that reported emissions data are on track to meet their 2050 net-zero targets, Accenture reports, down from 18 percent in 2023.

Big expectations for AI

Companies with net-zero targets are adopting a broad range of practices to reduce emissions, with 89 percent leaning on energy efficiency as a way to deliver cuts. Next-generation levers with far less adoption were:

• Carbon removal (34 percent)
• Travel policy (34 percent)
• Carbon pricing (29 percent)
• Green IT (23 percent)
• Business model change (21 percent)
• Artificial intelligence for decarbonization (14 percent)

AI has the potential to be a “super level” for cutting emissions, although it’s increasing energy consumption in the short term, the Accenture analysis suggests. Those emissions could rise tenfold between 2024 and 2030 to 718 million metric tons, the firm predicts.

Despite that concern, corporate leaders are optimistic about AI’s potential: About two-thirds of the chief executives surveyed by Accenture believe the technology will decrease emissions over the next decade. 

Specifically, AI will “supercharge” other measures that companies adopt to cut their emissions, helping automate decision-making in real time to make the most of other best practices and providing insights into whether investments in decarbonization might pay off most quickly. 

“This is whether AI comes into play, embedding carbon intelligence capabilities to ensure that levers are integrated seamlessly into strategic and operational decision-making,” Accenture said.

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