Net-zero transition for companies– hindering and supporting factors : The influence of SBTi, sustainability reporting, and ratings

Abstract: The emissions of greenhouse gases need to be cut by 45% between 2010 and 2030 and reach net-zero by around 2050 (IPCC, 2018) to limit global temperature-rise to 1,5 degrees C. More companies are committing to net-zero emissions, but the overall emissions of greenhouse gases in the world are still going up, and previous research shows that there is an implementation gap and lack of plans in companies. This thesis examines the hindering and supporting factors for companies’ net-zero transition. It is also exploring how SBTi, sustainability reporting, and sustainability ratings influence the net-zero transition in companies according to sustainability practitioners. The key findings are that companies alone cannot do the net-zero transition; they are dependent on other stakeholders and factors such as investors, customers and suppliers. Investors and customers are strong drivers for some companies to make the transition to netzero, but they are also the strongest hindering factors not wanting to pay extra or sacrifice dividends for the transition in companies’ value chains. Companies are also dependent on their suppliers and customers to measure and cut their value chain scope 3 emissions. To reach net-zero, new ways of collaboration are needed across the value chain. Internally, the implementation has not started properly in many companies. The key hindering factor internally is money, the investments needed will impact the profits, and often bonuses of managers, and GHG emission reductions need to be valued on the same level as money. Investors and financial actors play a large role pushing companies to set net-zero targets through SBTi. SBTi is a key framework to make companies cut emissions in line with science, but its control mechanisms are weak. If the control mechanisms are strengthened through audits, accountability and litigation, SBTi has the potential to be a very strong supporting factor for companies’ net-zero transition. Sustainability reports and ratings are the way companies communicate their net-zero performance with their stakeholders, but the reports are a polished truth, and it is difficult to understand the net-zero performance in companies. Ratings such as CDP do not reward emission reductions enough, instead they reward processes and documents which can make the companies look greener than they are.