High-emitting companies with carbon reduction targets largely fail to quantify the impacts of their decarbonisation measures, a study from Clarity AI has revealed.
Despite the CDP finding that the number of companies disclosing their transition plans has risen by 44% in the last year, Clarity AI’s study – Credible Climate Transition Plans: Insights from an AI-Driven Analysis of Corporate Disclosures – shows, while over 80% of the analysed companies reported on their decarbonisation measures, only 40% of all companies made a clear quantification of the impact of these measures. Japanese firms (67%) and European (48%) firms were the most likely to do so.
Leveraging a large language model to collect and process the data, the study analysed the climate transition plans of over 300 of today’s highest emitting companies across sectors such as oil and gas, utilities, aerospace and defence, and others. It identified the number of high-emitting companies with reduction targets that reported and quantified their decarbonisation measures, as well as other key trends.
Nico Fettes, director of climate at Clarity AI, commented that it’s “no longer enough to look at companies’ commitments and ambitions regarding carbon reduction targets”.
He added: “Nowadays, investors are eager to understand the credibility of these commitments and want to know whether companies have a realistic and meaningful plan to achieve them.”
Elsewhere, the study found that over 60% of oil and gas businesses fail to quantify their decarbonisation measures impact, followed by those in the chemicals and automotive manufacturing (44% each) and utilities (43%) sectors.
Furthermore, oil and gas companies were also the least likely to report their decarbonisation measures and quantify their impact, with only 24% doing both. In addition, 14% of oil and gas companies do not report on decarbonisation efforts entirely.
Meanwhile, several sectors rely heavily on controversial decarbonisation levers, with carbon credits and negative emissions technologies featuring prominently in the decarbonisation efforts of several high-emitting sectors.
When analysing the use of carbon credits in decarbonisation, aerospace and defense (38%), trading companies and distributors (38%) and oil and gas (32%) companies were the biggest users. In addition, steel (73%), oil and gas (70%) and trading companies and distributors (46%) were the biggest users of negative emissions technologies.
“Critics often argue that they [carbon credits and negative emissions technologies] should be seen as a complement to, rather than a substitute for, genuine efforts to reduce emissions at the source through emission reduction measures and sustainable practices,” according to the report, which concludes that an overly strong reliance on these approaches by companies “could affect the credibility of their climate transition plans”.
“Our quantitative analysis showed that while they are not very common measures for target achievement among global high-impact companies, the associated risk of greenwashing may be higher for companies in certain regions and sectors.”
