With extreme weather conditions becoming more common, conversations around climate change continue to grow louder. Activists and shareholders are putting significant pressure on corporations to do their part and develop sustainability initiatives. According to Equilar data, in 2021, shareholders of companies in the Equilar 500 brought 139 social and environmental proposals up to vote. Additionally, 60 companies in the Equilar 100 disclosed greenhouse gas reduction targets in their most recently filed proxy, with 31 committing to some form of net-zero carbon neutrality.
Greenhouse gas emissions can be broken down into three categories set forth in the Paris Climate Agreement. Scope 1 emissions are those a company makes directly, such as self-produced energy or by operating vehicles. Scope 2 emissions are less direct and come largely from purchased energy. Both are relatively easy to reduce via buying renewable electricity and carbon offsets. Scope 3 emissions are significantly harder to measure and control and can account for up to 70% of a company’s carbon footprint.
Among the Equilar 100, 60 companies disclosed greenhouse gas reduction targets in their 2020 proxy statement, 31* of which committed to net-zero carbon neutrality. The financial services industry led the way with its commitment to achieving carbon neutrality. Goldman Sachs was the first of its peers to achieve scope 2 neutrality in 2015, and MetLife and Bank of America achieved the same goal soon after. In 2018, American Express became the first to reach scope 3 neutrality, a major milestone.
In the technology sector, Google has been carbon neutral in its operations (scope 2) since 2007, making it first in the Equilar 100 to accomplish this feat. Software-focused tech companies can more easily control their emissions as they primarily come from the electricity used to power offices and data centers. Hardware and device manufacturers tend to be significantly more carbon intensive given the power needs of industrial facilities, indirect emissions from suppliers and power usage across the life cycle of their products.
It’s likely more companies will commit to some form of carbon neutrality, or disclose the steps they’re taking to reduce greenhouse gas emissions, as pressure heightens. Facing greater scrutiny from consumers, disruptions caused by extreme weather and oil prices nearing record highs, the costs associated with companies’ fossil fuel usage continue to soar. Corporations must re-evaluate the cost of their carbon dependency until an eventual tipping point is reached where decarbonization is in the best financial interest.
* Some companies may have disclosed this information in a separate sustainability report; however, only proxy statements were reviewed during the compilation of this data.