Privately-owned firms unprepared for incoming climate regulation
Report finds only incremental improvement in climate commitments of the world's largest private companies since October 2022, despite rising regulation.
21 APR 2024
Nearly half (48) of the world’s 100 largest private firms have not set any emissions reduction targets, leaving some exposed to incoming EU climate regulations - the ‘CSRD’ and ‘CSDDD.’
Private firms severely lag behind their public counterparts: 82 of the 100 largest publicly-listed companies have net zero or emissions reductions targets.
E.Leclerc (FRA) and Mercadona (ESP) have no emissions mitigation commitments, despite increasing climate regulation designed to stimulate ‘whole economy’ decarbonisation.
22 April 2024: Two-fifths of the world’s largest 100 private firms (40) have net zero targets, compared with 70 /100 of their publicly-owned peers, finds Net Zero Tracker (NZT).
The latest NZT analysis, ‘A Distinctly Private Pursuit: Not going net zero’ compares the readiness of major companies for incoming climate regulation. It shows a widening gap between the climate targets of the world’s largest 100 private companies, compared with their publicly-listed equivalents - creating an ‘unlevel playing field’ for companies, investors and policymakers alike.
40 private companies, with combined annual revenues of more than $2 trillion, have net zero targets (from almost $5 trillion of aggregate annual revenues earned by the top 100).
By comparison, seven-tenths of publicly-listed firms (70), with combined annual revenues of $13 trillion, have net zero targets (from a total of $18.1 trillion of aggregate annual revenues earned by the top 100 public firms).
In October 2022, less than one-third (32) of the largest 100 private companies had net zero targets. Eighteen months later, there are only eight new net zero targets.
John Lang, Project Lead, Net Zero Tracker (The Energy and Climate Intelligence Unit), said:
“If ‘sunlight is the best disinfectant’ for climate inaction, most private firms are operating nocturnally — beyond the glare of the civil scrutiny, investor pressure and disclosure requirements faced by listed companies.
“New measures being introduced in regions from the EU, to the US and Singapore — some with extra-territorial dimensions, are changing the rules of the game. What goes on in the EU does not stay in the EU. And what goes on in a regulated public company will not stay in a public company: one company’s indirect emissions are another's direct emissions.”
EU firms unprepared for CSRD and CSDDD:
The analysis reflects on the new EU Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD requires about 50,0000 companies (both public and the largest private firms) to report their climate impacts, including value chain greenhouse gas emissions (Scope 3), and action taken to address them, from January 1, 2025.
The CSDDD, once effective, is likely to require more than 5,000 companies (both public and private) to provide information on the integrity of their strategies for achieving net zero emissions or other deep decarbonisation targets. Notably, the CSDDD is expected to require companies to have transition plans to take emissions to net zero later this century.
However, of the 40 private firms with net zero targets, only eight have plans to deliver on them, and even these have serious deficiencies.
23 of the 100 private companies assessed are EU-based. Strikingly, 2/23 firms have not set any emission reduction targets, which provide the guardrails for decarbonisation. The firms without any emission reduction targets are:
E.Leclerc, the French hypermarket chain.
Mercadona, the Spanish supermarket chain.
Of the 28 largest private companies headquartered in the EU and the UK, 75% (21/28) have a net zero target — but only a small minority of three firms have published plans to achieve them. This compares with 92% (22/24) of the EU and UK-based public companies in this analysis that have a net zero target, and the percentage of those companies with plans to achieve their net zero targets is 95% (21/22).
Beyond the EU CSRD and CSDDD, the direction of travel is towards increasing climate regulation. For example, California’s Climate Corporate Data Accountability Act will require many large companies operating in the world’s fifth-largest economy to report both emissions and climate-related financial risks.
Despite the trend, only 52 / 100 largest private firms have set a net zero or emissions reduction target, compared with the vast majority (82) of the 100 largest publicly-owned firms. The 48 private firms operating without targets collectively have annual revenues of $1.7 trillion. Their reluctance to set targets hamstrings the ability of countries to deliver ‘whole economy decarbonisation’ to meet national net zero goals, of which 75% are enshrined in legislation or policy.
Camilla Hyslop, Data Lead at Net Zero Tracker, said:
“Most private companies are swimming against the net zero tide, while most listed firms are lengthening their stroke in the opposite direction, towards a clean, prosperous future.
“The alarming reality that nearly half of the largest 100 private companies, whose revenues make them ‘too big to fail’, have opted out of setting any climate targets, leaves both their home countries and global supply chains exposed to serious transition risk.”
High-emitters: Only 34% of private firms have net zero targets, vs. 74% of public
Amongst the high-emitting sectors, the analysis found that listed companies are more than twice as likely to have net zero commitments, compared with private firms.
34% (10/29) of high emitting private firms have now set net zero targets, compared to 74% (29/39) of publicly-listed high emitters.
None of the private fossil fuel companies investigated (8) has pledged a net zero target, compared with 76% (13/17) of public companies in this sector.
The largest high-emitting private companies without a net zero target are Trafigura Group (annual revenues of $231bn, Singapore); Koch Industries ($125bn, US); Amer International Group ($90bn, China); and Pacific Construction Group ($79bn, China).
The total lack of net zero targets set by private fossil fuel companies runs counter to the global commitment delivered at COP28 to transition away from fossil fuels.
Private firms lag public on net zero integrity, as well as intent:
As well as trailing on net zero intent (the quantity of targets), the world’s largest private firms also lag behind their public counterparts on markers of integrity and transparency for targets, based on key indicators, such as creating detailed plans, covering all emissions, and setting near-term interim targets. For example, on transparency, 58% (23/40) of the largest private firms do not specify whether they intend to use carbon credits, which is widely considered as bad practice.
China private firms nudge ahead on the quantity of net zero targets, overtaking the US in percentage terms:
Interestingly, of the 16 private companies based in China, 25% (4) now have a net zero target, up from only 6% (1) in 2022. The uptick in net zero-committed private firms, which includes TikTok owner, ByteDance, means the group of private companies are nearly on a par with China-based public companies, 29% (5/17) of which have net zero targets.
The target-setting rise in China puts the country’s private firms ahead of the US in percentage but not in absolute terms. Of the 50 largest private companies operating in the US, only 22% (11) have a net zero target, substantially less than US-based public companies, where 65% (28/43) have net zero targets.
Catherine McKenna, Chair of the UN Secretary-General’s High-level Expert Group on Net-Zero Commitments, said:
"The improvement in the climate commitments of some of the world’s corporate leaders is positive, making the pathway to net zero stand out even more clearly. But, we need 2024 to be the year where incrementalism is cast off.
“The policy is unequivocal: three quarters of national-level net zero targets are already enshrined in law or policy. The economics is exponential: $1.7 trillion was invested in clean energy in 2023, 65% more than into fossil fuels. The defining race of these upcoming decades - shaping the net zero economy - will not be won through baby steps, but through bold and credible leadership."
The latest NZT analysis builds on the earlier study, ‘Everybody’s Business: The Net Zero Blind Spot.’ The October 2022 study showed that under a third (32) of the world’s 100 largest private firms had carbon reduction targets, compared with over two-thirds 69 of the largest 100 publicly-listed companies. By comparison, in the last 18 months, net zero commitments have become a corporate norm for public companies. NZT revealed in November 2023 that half of the world’s largest 2000 public companies have net zero targets.
About the analysis:
The analysis conducted by the Net Zero Tracker consortium compares the climate targets of the world’s largest 100 privately-owned companies, with those set by the 100 largest publicly-owned companies, within the Forbes Global 2000. The publicly listed companies were drawn from the existing Net Zero Tracker database. The private companies were identified from this Eqvista list and updated annual revenue figures after 2021 were applied if found. The Net Zero Tracker Codebook was applied to assess their credentials, using publicly-available documents for investigation.
From today, Net Zero Tracker users can simply filter by ‘Private Companies’ for a rolling and near-real time view of the 100 private firms in the scope of this analysis, as well as for the Forbes Global 2000 public firms.
About Net Zero Tracker (NZT):
Net Zero Tracker is the most comprehensive ‘living’ database of net zero commitments made by nations, states & regions, cities and major publicly-listed companies. It includes:
all UNFCCC member states and a selected number of territories;
subnational states and regions in the 25 largest emitting countries;
all cities around the world with populations over 500,000;
Publicly-traded companies that were listed in the Forbes Global 2000 in 2020;
The world’s 100 largest private companies by annual revenue.
Using a combination of automated web data-scraping and manual searching by volunteer data analysts working in a range of languages, the NZT gathers and collates data on the status of net zero targets and robustness parameters across 4000+ entities. Parameters include the existence of interim targets, intentions regarding offsetting, the existence of a published plan, and what the target covers in terms of GHGs and emission scopes.
NZT is an independent research consortium, comprising The Energy & Climate Intelligence Unit (ECIU); Data-Driven EnviroLab (UNC); NewClimate Institute; and Oxford Net Zero.
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