The Role of Governments in Reducing the Risk of Greenwashing in Corporate Net Zero Commitments - By Saoirse Jackson

As climate change becomes an ever more pressing issue, companies are increasingly adopting net zero commitments. There has, at the same time, also been a substantial rise in companies greenwashing their net zero commitments (see Box).

Not only does greenwashing damage the reputation of companies genuinely committed to reducing their greenhouse gas emissions, but it also hinders global efforts to limit global warming to 1.50C above pre-industrial levels. In my research, I identified four main types of greenwashing in relation to net zero:

· Lack of transparency in disclosures. Corporates can create a misleading impression of their performance by selectively disclosing data that creates a positive brand image whilst concealing the negative impacts. In order to mitigate this governments should ensure that there are mandatory corporate disclosure requirements, with clear guidance on the data to be included and on how these data are to be calculated or produced.

· Lack of clear and ambitious interim reduction targets. Delays implementing emission reductions – i.e. emissions remaining higher for longer - could jeopardise the achievements of long-term climate goals. Companies should therefore ensure that their targets are aligned with the goals of the Paris Agreement and the EU Green Deal and should take due account of the capabilities of different industries to reduce emissions.

· Reliance on carbon credits to meet net zero commitments. Companies may rely on carbon credits to deliver some or all their emission reduction targets. However, at present, many carbon credits lack additionality. Companies should, therefore, only use carbon credits where the additionality of these credits has been assured by credible third-party verifiers.

· The exclusion of Scope 3 emissions from the scope of corporate net zero commitments. For many companies, Scope 3 emissions constitute the largest proportion of their greenhouse gas emissions. Comprehensive net zero commitments should, therefore, encompass a company’s Scope 1,2, and 3 emissions.

Governments have a key role to play in ensuring the credibility and effectiveness of corporate net zero commitments. By taking action to enhance transparency, mandate robust interim targets, regulate carbon credits, and ensure that all emission scopes are included in the scope of company net zero commitments, governments can significantly reduce the risk of greenwashing. Together, these measures will help build public trust and accelerate progress towards the goal of a net zero economy.

Note 1: Saoirse’s policy brief, titled ‘The Role of Governments in Reducing the Risk of Corporates Misusing Net Zero Commitments to Greenwash’ was highly commended for the Chronos Sustainability Undergraduate Prize 2024. A copy of the policy brief can be downloaded here.

Saoirse Jackson is graduating in 2024 with a First-class honours BSc in Environment and Development from The London School of Economics (LSE).