Road to Zero Emissions

The scorecard presents an assessment of the progress made by 100 of the largest U.S. corporations in reducing greenhouse gas (GHG) emissions to align with the Paris Agreement to limit global temperature rise to 1.5°C [1]. These corporations collectively represent a market capitalization of $21 trillion across all 11 sectors of the economy. This scorecard is the second iteration, building upon the 2022 analysis of 55 U.S. companies, allowing for year-over-year comparisons and broader company coverage.

Amidst accelerating climate change, it is crucial for companies and shareholders to assess, mitigate, and reduce climate risks, spanning climate-related physical and transition risks as well as broader systemic climate risks to the global economy. Despite growing awareness, these risks are often neglected by investors and not disclosed by companies, creating difficulty to price these factors into the market. The SEC’s proposed Climate Disclosure Rule, California’s Climate Corporate Data Accountability Act, and regulatory changes in the EU highlight the need for emissions disclosures and climate-related accountability. While many companies have established net zero by 2050 goals and interim reduction targets, a gap persists between commitments and actual year-over-year performance on reducing emissions. Urgent and ambitious actions are required to align with 1.5°C net zero targets and avert catastrophic financial impacts associated with climate risks.

This report scores companies on its actions across three pillars for an overall net zero grade: (1) climate-related disclosures, (2) GHG reduction targets, and (3) GHG emissions reduction performance. Given the importance of emissions reductions, the overall net zero grade is weighted most heavily to success in achieving year-over-year, 1.5°C-aligned, GHG reductions.

Corporate net zero progress is growing; 65% (36/55) of companies saw an improvement in their overall scores from last year’s assessment. However, companies still lag on critical indicators. While more companies are disclosing value chain (Scope 3) emissions (56/100 companies in 2023), nearly half of the companies assessed do not report all relevant value chain emissions — creating material disclosure gaps for investors assessing climate risk. Many companies are setting net zero or carbon neutral goals by 2050 or sooner; however, only 29% of companies included all relevant Scope 3 value chain emissions in net zero goals. Demonstrating emissions reductions aligned with limiting global warming to 1.5°C remains a critical gap for companies. In 2023, a majority of companies received an “F” for Pillar 3: GHG Reductions; 45% of companies did not receive credit for Pillar 3 as they failed to disclose all relevant emissions data. Only 7% of companies earned an “A” under Pillar 3, which remains a key area for improvement.

A summary of key findings of the net zero scorecard is set forth below. Annex A provides the full list of grades by pillar. Annex B provides the list of indicators met or not met, and Annex C provides the detailed scoring methodology

KEY FINDINGS

Overview

This scorecard assesses 100 companies across 11 sectors of the economy — representing the largest U.S. companies by market capitalization — based on three crucial pillars.

Pillar 1: GHG Disclosures reflects the importance of transparency in understanding a company’s climate impacts. The scorecard assesses whether companies disclose Scope 1, 2, and 3 GHG emissions and carbon offset metrics. Pillar 2: GHG Targets emphasizes the significance of ambitious and measurable goals. It assesses corporate goals to reduce GHG emissions in alignment with 1.5°C and achieve net zero emissions by 2050 or sooner across the full value chain of emissions. Pillar 3: GHG Reductions holds the highest weight of the three pillars. It assesses actual performance in meeting 1.5°C-aligned, net zero by 2050 targets by measuring year-over-year absolute emissions and intensity reductions.

The evaluation process relies entirely on publicly available information such as published reports, press statements, and website materials. Annex C provides the complete scoring methodology.

Scorecard Highlights

Four companies were awarded an overall “A” grade: Apple, Nike, Oracle, and Trane Technologies. Alphabet and Colgate-Palmolive received overall “A-” grades. Prologis received an overall grade of “B+”. Microsoft, Weyerhaeuser, and Visa received an overall grade of “B.”[2] Bunge, Equinix, Ford Motor, and PepsiCo received overall “B-” grades. The rest of the companies assessed received “C” (23/100 companies), “D” (40/100 companies), or “F” (23/100 companies) grades.

The number of companies disclosing all relevant value chain (Scope 3) GHG emissions continues to grow. In 2023, 73% of scored companies received either an “A” or “B” grade for Pillar 1: GHG Disclosures. Almost every company assessed reported operational (Scope 1 and 2) emissions (98/100), 56% of companies publicly disclosed all relevant value chain (Scope 3) emissions. This is an improvement over 2022’s scores in which only 36% of companies (20/55) disclosed all relevant Scope 3 emissions.

Disclosures of carbon offsets purchased during the reporting period are improving. During 2023, 68% of companies met the requirements of this indicator, an improvement from last year where only 20% of companies (11/55) met this indicator. Of the companies that met this indicator in 2023, 41 companies stated it did not purchase any offsets over the reporting period. A quarter of companies assessed disclosed the number of carbon offsets purchased and provided a description of the carbon offsets projects used and the verification status of these offsets.

T-Mobile is the only company to receive an “A” grade for Pillar 2: GHG Targets, and 16% of companies (16/100) companies received a “B” grade. T-Mobile received an “A” grade for Pillar 2 by having set a 2050 or sooner net zero goal covering all Scopes with limited use of offsets and interim 1.5°C-aligned GHG reduction targets for Scopes 1, 2, and 3. Aligning GHG reduction targets with 1.5°C — which requires an equivalent of 4.2% or more absolute emissions reduction per year in the near term — is critical to avoiding the worst impacts of climate change. Currently, 37% of companies (37/100) have both Scope 1 and 2 GHG emissions reduction goals that are aligned with 1.5°C, and 6% of companies (6/100) have 1.5°C-aligned goals that also include its relevant Scope 3 emissions.

A growing number of companies are now setting net zero or carbon neutral goals by 2050. Of the companies assessed in this report, 78% (78/100) committed to a net zero or carbon nuetral goal by 2050 or sooner, up from 70% of companies (39/55) last year. Given this growth, there is a corresponding need for increased clarity and accountability from companies on what emissions these goals cover. In addition to defining terminology and methodology, corporations can clarify net zero goals by providing a transition plan describing what emissions reductions are planned; stipulating when they will occur; and, if carbon credits are likely to be used, providing the percentage of credits to be used. Companies that plan to use offsets to achieve net zero or carbon neutral goals should limit use to less than 5 to 10% of residual emissions and procure high-quality offsets that lead to permanent carbon removals. Companies that do not rely on offsets to meet GHG reduction targets are encouraged to make this clear. Over 2023, only 5% of companies (5/100) have a net zero or carbon neutral goal that covers the full value chain of emissions (Scopes 1, 2, and 3) and projects using offsets for less than 10% of residual emissions.

Demonstrating GHG emissions reduction aligned with limiting global warming to 1.5°C remains a critical gap for companies. Only 3% of companies are reducing Scopes 1, 2, and 3 absolute emissions by at least 4.2% averaged year-over-year — 4.2% is a pace that indicates reduction performance for these companies aligned with 1.5°C. Of the companies included in this report, 62% received an “F” for the GHG Reductions pillar while only 7% of companies earned an “A.” A majority of companies failed this pillar due to non-disclosure of all relevant emissions data, so this remains a key area for improvement. While strides have been made in GHG disclosures and target setting, significant challenges remain in effectively reducing emissions in alignment with the 1.5°C goal. The findings of this scorecard emphasize the urgency for companies to not only set bold, ambitious targets but also to implement rigorous measures to achieve tangible emissions reductions across value chains.

A summary of the overall 2023 Net Zero grades is shown below. Grades are based on the combined points earned in each of the three pillars: GHG Disclosures, GHG Targets, and GHG Reductions. Pillar 3, GHG Reductions, is weighted most heavily given the importance of reducing growing global climate impacts and ensuring company competitiveness in a transitioning economy. The maximum number of points available is 18, with four points available for GHG Disclosures, six points for GHG Targets, and eight points for GHG Reductions. A full list of company grades by pillar is provided in Annex A.

Endnotes

1. “What Is the Paris Agreement?” United Nations Climate Change, accessed September 14, 2023, https://unfccc.int/process-and-meetings/the-paris-agreement.

2. Microsoft declined from an “A” to a “B” grade this year due to increasing GHG emissions from 2021 to 2022, mainly stemming from an increase in Scope 3 emissions, which negatively impacted their Pillar 3: GHG Reductions score as the emissions reduction performace was not aligned with 1.5°C. “Achieving More: 2022 Impact Summary,” Microsoft, accessed September 14, 2023, https://query.prod.cms.rt.microsoft.com/cms/api/am/binary/RE5b9S0.

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