Less than 20% of Euro STOXX 50 demonstrate robust plans to meet net-zero

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EcoAct, an Atos company, has released The Climate Reporting Performance of the Euro STOXX 50, FTSE 100 and DOW 30. The report reveals that while the index performs consistently across a number of sustainability measures, the need to set long-term emissions reductions targets remains with less than 20% of companies exhibiting robust plans to reach net-zero.

If Europe is to deliver upon its Fit for 55 ambitions – a 55% emissions reduction by 2030 – the global commitments and coordinated actions taken as result of COP26 will be pivotal in providing a framework to businesses to achieve long-term emissions reductions aligned to 1.5°C. 

The report, which includes a leader board ranking the top 20 companies for environmental sustainability disclosure, found that 58% of the Euro STOXX 50 have science-based targets in place that are aligned with 1.5⁰C or well below 2⁰C. This compares favourably to the DOW 30 and FTSE 100 where only 57% and 45% of businesses have science-based targets (SBTs) aligned to the same level of ambition. The report also found that 78% of the index achieved Scope 1 & 2 emissions reductions to the same standard, slightly ahead of its peers in the DOW 30 and FTSE 100 (which achieved 70% and 72% respectively). However, the report also cautions this year’s emissions reductions are likely to be artificially high due to the impact of COVID-19.

Stuart Lemmon, Managing Director, Northern Europe, EcoAct, said:Our first report of the climate reporting performance of the Euro STOXX 50 tells a compelling story of consistent achievement across the index. Europe benefits from a strong legislative landscape and ambitious targets which have no doubt spurred companies to be highly engaged and transparent on climate issues.

“However, to achieve net-zero by 2050, businesses need robust, long-term plans. Our analysis shows the hugely positive benefits that frameworks such as the SBTi can have on accelerating climate change action in this regard. As such, COP26 has a vital role to play in creating an environment – through driving ambitious legislation, frameworks, best practice and standards – that will support businesses to plan and achieve consistent decarbonisation to reach Europe’s net-zero target.”

In comparison to the DOW 30 and FTSE 100, the report found that many more European businesses have committed to tackling their supply chain emissions, with 48% of the index having set SBTs for Scope 3. Naturally, the report also found that more Euro STOXX 50 companies achieved Scope 3 emissions reductions in line with a 1.5°C scenario (34% versus 17% for both the DOW 30 and FTSE 100).

Unlike findings for the FTSE 100 and DOW 30, no single sector outperformed another. Instead, the index performed consistently above its peers across all assessment areas from ambition, measurement and reporting to strategy, action and achievement. In total, ten companies from the Euro STOXX 50 achieved a place on the international top 20 leader board including Schneider Electric, Kering, SAP SE, Philips and L’Oréal.

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Globally, top performers across all indices (Euro STOXX 50, FTSE 100 and DOW 30) this year were Microsoft, Apple, Landsec, Vodafone and Schneider Electric. 65% of companies across all indices have now set an SBT, a 26% increase on 2020 (with the addition of Euro STOXX in 2021). Furthermore, many more of these SBTs are in line with a well below 2⁰C or 1.5⁰C scenario – from 20% last year to 51% this year.

Up to nearly 80% across all indices with many commercial sectors including insurance, oil and gas and consumer vehicles and parts demonstrated alignment with the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations – the biggest year-on-year increase since they were launched. Developed by The Financial Stability Board, the TCFD recommendations provide a clear example of how governments globally can come together to create a framework that achieves a common climate goal.

Other key global findings:

Net-zero ambitions versus reductions
There has been an over 40% improvement in the number of companies committed to net zero from last year with 66% of companies in the FTSE 100, 64% in the Euro STOXX 50 and 63% in the DOW 30 committing to net zero. For the DOW 30, this doubles the rate of commitment in comparison to last year. However, across all indices only 19% of companies disclose a long-term emissions reduction target and only 2% of companies disclose targets for sequestration of residual emissions.

74% of companies reported a reduction in their Scope 1 & 2 emissions that is in line with limiting global heating to 1.5°C – a result the report notes is likely to be artificially high due to COVID-19. It was also noted however that only 22% of companies reduced their Scope 3 emissions in line with the same pathway. The change in global emissions from this year to the next could be a defining moment; for targets to be met, all large companies will need to be proactive in achieving sustained emissions reductions and decarbonising their business models.

Not enough is being done to tackle value chain emissions. Across all indices, 65% of companies have set a Scope 1 & 2 SBT while only 39% of companies have set one for their Scope 3 emissions. Of the 178 companies scored this year, only AstraZeneca, Vodafone, Apple, and SAP SE have successfully set 1.5⁰C aligned Scope 1, 2 and 3 SBTi validated SBTs.

Offsetting
The percentage of companies offsetting their residual carbon emissions has increased from 25% to 36% overall. Organisations must reduce emissions in alignment to a 1.5°C scenario, but they also must take responsibility for unavoidable residual emissions. Offsetting is an important mechanism to ensure that organisations are taking urgent action on any emissions they are still working to reduce.