What do these 20 companies with ~$2.1 Trillion revenue have in common?
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Umut Ozdogan
Energy Projects, Commercial, Execution, Sustainability & Lower Carbon initiatives
Energy Projects, Commercial, Execution, Sustainability & Lower Carbon initiatives
The figure shows an example of 20 companies that had combined annual revenue of ~ $2.1 trillion in 2021 (yes, it is a trillion).
These companies have a global presence and play a key role in shaping consumer behaviors and choices. Apple reported having sold ~50 million iPhones in 3Q 2021. Ford Motors sold about 1.9 million vehicles in 2021. Microsoft indicates more than 1.3 billion devices are running on Windows 10 today.
These 20 companies have one thing in common.
Near-term Decarbonization Focus.
These companies both committed and set near-term science based targets to reduce their scope 1, 2, and 3 emissions*. These companies intend to reduce their near-term scope 1 & 2 emissions by about 55% on average between 2022-2035. Science Based Targets Initiative** (SBTi) approved these near-term science based targets for scope 1, 2, and 3 emissions reductions.
For example, "Ford Motor Company commits to reduce scope 1 and 2 emissions by 76% in 2035 from a 2017 base year. Ford Motor Company also committed to reducing scope 3 emissions from the use of sold products by 50% per vehicle kilometer in 2035 from a 2019 base year" per SBTi website.
These 20 companies are not alone. There are 1,088** other major corporations such as AT&T, Best Buy, BMW, Pfizer that set near-term science-based targets for the 2022-2035 timeframe. These companies shared their carbon emission reduction targets with their investors, shareholders, suppliers, and consumers.
In addition, there are more than 1,100** companies such as Amazon, Facebook, Hertz, Halliburton, United Airlines, and American Airlines that are committed to near-term decarbonization and are in the process of setting science-based targets.
Near-term decarbonization will have important implications for energy companies, suppliers for these companies, and capital markets.
Energy providers will have to accelerate supplying lower-carbon energy for a growing number of companies to help them meet their decarbonization goals in a much shorter time horizon (5 to 10 years).
Suppliers' scope 1 and 2 emissions would be accounted for within their client's scope 3 emissions. For that reason, these companies will likely take the supplier's carbon footprint and sustainability performance into account while they are screening, selecting, or shortlisting suppliers or technology providers. For example, Salesforce.com, Inc. committed that "the suppliers representing 60% of Salesforce scope 3 emissions, covering all upstream emission categories, will set science-based targets by 2024" per SBTi.
Acquisition, Divestitures & Financing. Carbon footprint analysis will likely impact company valuations and transaction space. Companies with ambitious emissions targets will likely divest high carbon intensity assets and acquire lower or no carbon companies, technologies, or services. Public and private capital providers value disclosure of material sustainability information for their investment portfolios or acquisition opportunities. For example, Goldman Sachs, Morgan Stanley, and BlackRock disclose key sustainability topics and metrics aligned with Sustainability Accounting Standards Board (SASB) guidance.
Key Takeaways
Definitions & Sources
* The Greenhouse Gas Protocol defines Scope 1 emissions as "direct greenhouse gas emissions that occur from sources that are controlled or owned by the company", for example, emissions associated with company-owned or controlled equipment, process, use of vehicles, and operations. Scope 2 emissions are indirect emissions associated with the purchase of electricity, steam, heating, or cooling. Scope 3 emissions include all indirect emissions from assets not owned or controlled by the reporting organization (e.g., emissions from suppliers, use of sold products, business travel, purchased goods & services). https://ghgprotocol.org/
** The Science Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature. Companies Taking Action. https://sciencebasedtargets.org/companies-taking-action
These companies have a global presence and play a key role in shaping consumer behaviors and choices. Apple reported having sold ~50 million iPhones in 3Q 2021. Ford Motors sold about 1.9 million vehicles in 2021. Microsoft indicates more than 1.3 billion devices are running on Windows 10 today.
These 20 companies have one thing in common.
Near-term Decarbonization Focus.
These companies both committed and set near-term science based targets to reduce their scope 1, 2, and 3 emissions*. These companies intend to reduce their near-term scope 1 & 2 emissions by about 55% on average between 2022-2035. Science Based Targets Initiative** (SBTi) approved these near-term science based targets for scope 1, 2, and 3 emissions reductions.
For example, "Ford Motor Company commits to reduce scope 1 and 2 emissions by 76% in 2035 from a 2017 base year. Ford Motor Company also committed to reducing scope 3 emissions from the use of sold products by 50% per vehicle kilometer in 2035 from a 2019 base year" per SBTi website.
These 20 companies are not alone. There are 1,088** other major corporations such as AT&T, Best Buy, BMW, Pfizer that set near-term science-based targets for the 2022-2035 timeframe. These companies shared their carbon emission reduction targets with their investors, shareholders, suppliers, and consumers.
In addition, there are more than 1,100** companies such as Amazon, Facebook, Hertz, Halliburton, United Airlines, and American Airlines that are committed to near-term decarbonization and are in the process of setting science-based targets.
Near-term decarbonization will have important implications for energy companies, suppliers for these companies, and capital markets.
Energy providers will have to accelerate supplying lower-carbon energy for a growing number of companies to help them meet their decarbonization goals in a much shorter time horizon (5 to 10 years).
Suppliers' scope 1 and 2 emissions would be accounted for within their client's scope 3 emissions. For that reason, these companies will likely take the supplier's carbon footprint and sustainability performance into account while they are screening, selecting, or shortlisting suppliers or technology providers. For example, Salesforce.com, Inc. committed that "the suppliers representing 60% of Salesforce scope 3 emissions, covering all upstream emission categories, will set science-based targets by 2024" per SBTi.
Acquisition, Divestitures & Financing. Carbon footprint analysis will likely impact company valuations and transaction space. Companies with ambitious emissions targets will likely divest high carbon intensity assets and acquire lower or no carbon companies, technologies, or services. Public and private capital providers value disclosure of material sustainability information for their investment portfolios or acquisition opportunities. For example, Goldman Sachs, Morgan Stanley, and BlackRock disclose key sustainability topics and metrics aligned with Sustainability Accounting Standards Board (SASB) guidance.
Key Takeaways
- Sustainability has global support from the world's largest companies that drive the global economy. The energy transition and electrification are happening at a fast and visible pace.
- 1108 companies set near-term (2022-2035) science based targets for reducing their scope 1, 2, and 3 emissions. Their targets will impact all stakeholders across their value and supply chain.
- Quantifying, managing, and reducing carbon footprint will be crucial for any business to retain its customers, gain new businesses, attract buyers, and raise capital from public or private sectors.
Definitions & Sources
* The Greenhouse Gas Protocol defines Scope 1 emissions as "direct greenhouse gas emissions that occur from sources that are controlled or owned by the company", for example, emissions associated with company-owned or controlled equipment, process, use of vehicles, and operations. Scope 2 emissions are indirect emissions associated with the purchase of electricity, steam, heating, or cooling. Scope 3 emissions include all indirect emissions from assets not owned or controlled by the reporting organization (e.g., emissions from suppliers, use of sold products, business travel, purchased goods & services). https://ghgprotocol.org/
** The Science Based Targets initiative (SBTi) is a partnership between CDP, the United Nations Global Compact, World Resources Institute, and the World Wide Fund for Nature. Companies Taking Action. https://sciencebasedtargets.org/companies-taking-action