Governments are being called on to put some regulatory muscle behind corporate net-zero pledges to ensure they don’t amount to mere greenwashing.
That’s a key recommendation from a United Nations expert panel led by former federal environment minister Catherine McKenna and comprising 17 business and government leaders from around the world.
“We must have zero tolerance for net-zero greenwashing,” said UN Secretary-General António Guterres at the launch of a report by the panel, which he called “a how-to guide to ensure credible, accountable net-zero pledges.”
Notably, the panel is also calling on corporations and financial institutions such as banks and pension funds to end all investment in new fossil fuel supplies – a recommendation that comes as Canada and other oil and gas producers are being urged to increase supply to make up for lost Russian production and help bring stability to global energy prices.
Guterres established the expert panel to recommend ways of ensuring that climate pledges made by “non-state actors” (corporations, financial institutions and local and regional governments) are implemented.
The panel’s report, which was released this week at COP27 in Egypt, lays out a truly ambitious prescription that both private sector and lower levels of governments will have to embrace to do their part to limit the increasingly dire impacts of climate change.
It comes at a challenging time for those who want more aggressive climate action.
With the likely loss of the House of Representatives in the midterm elections, U.S. President Joe Biden will be hamstrung in getting more climate legislation passed, although he can still wield executive powers.
Calls to end investment in fossil fuels facing challenges
Despite the growing urgency of the climate crisis, the twin spectres of inflation and a looming global economic slowdown will make it politically difficult for governments to impose any emissions-reduction measures on the private sector that are seen as having short-term costs. Europeans are facing a tough winter that will test the notion that the energy crunch resulting from the Russian invasion of Ukraine will accelerate the transition from fossil fuels rather than delay it.
Some of the panel’s recommendations – like the end to fossil fuel investments – are likely to land with a thud. The world is too focused on elevated fuel prices and their impact on inflation and even democratic stability to foreswear all spending on new supply. And there is too much money to be made to expect that the financial sector will voluntarily end its support for oil and gas companies. Just last month, former Bank of Canada governor Mark Carney’s net-zero banking alliance backtracked on mandatory net-zero requirements as some members balked at the more prescriptive approach.
A more nuanced message would be to end investment in new fossil fuel infrastructure that would significantly boost supply over the longer term.
We must have zero tolerance for net-zero greenwashing.
-UN Secretary-General António Guterres
Still, McKenna and her colleagues are laying down some crucial markers. Taken together, their recommendations are a needed blueprint to transform net-zero pledges into fully funded, science-based plans that deliver in the short and long term.
Corporations, financial institutions and local governments “will either help scale the ambition and action we need to ensure a sustainable planet or else they strongly increase the likelihood of failure,” McKenna said in the foreword to the report. “The planet cannot afford delays, excuses, or more greenwashing.”
A fundamental point made by the McKenna panel is that we cannot continue to rely on voluntary plans – too often vague, riddled with loopholes and lacking in enforcement mechanisms – to meet our goals.
“To effectively tackle greenwashing and ensure a level playing field, non‐state actors need to move from voluntary initiatives to regulated requirements for net zero,” McKenna said in the report.
The expert panel is also categorical about carbon offset credits: companies and local governments should avoid using “cheap credits that often lack integrity” and instead focus on immediately cutting their own emissions. We need to focus on “zero,” not the “net.”
There are 10 recommendations in all. They all demand big changes, to be implemented quickly:
Net-zero plans must have short-term targets that are consistent with global emission reductions needed to achieve a 1.5°C target for average global temperature increase – that is, a 50% reduction by 2030.
They must also:
- include annual performance reports that report progress in clear language with data that can be compared to other companies in their sector
- focus on absolute emissions – not “intensity based targets,” which are relative to the portfolio’s size and have been adopted by several Canadian banks
- lay out how the company or government is aligning its governance, pay structures, capital spending research and development and public advocacy with those goals.
As well, companies that claim to be climate leaders should not be lobbying against legislation that would reduce emissions, or supporting industry associations that do so.
Will Canada regulate corporate net-zero pledges?
The panel’s call for governments to add some regulatory heft to net-zero commitments is particularly germane in the financial sector. In Canada, the federal regulator expects all federally regulated financial institutions to disclose climate-related financial risks. Neither the Office of the Superintendent of Financial Institutions nor Finance Minister Chrystia Freeland have shown any inclination to go beyond mandatory disclosure to regulate the details of the net-zero plans.
It would be easy to dismiss McKenna’s report as wishful thinking. Canada certainly faces a lengthy list of climate challenges. The Liberal government in which McKenna served as minister is still funding the Trans Mountain pipeline expansion and supporting construction of liquefied natural gas plants on the West Coast.
The country’s big banks have strenuously opposed federal regulations prescribing the details of their net-zero pledges, or any suggestion that they refrain from financing oil and gas operations.
And then there’s Alberta. The province’s environment minister, Sonya Savage, is attending COP27 in Egypt, intent on voicing the “views of Albertans” – as she told Toronto Star columnist Graham Thomson – in defence of the province’s oil industry. Six of Canada’s biggest oil producers – who account for 95% of oil sands production – have signed on to the Pathways Alliance, which commits to net-zero production by 2050. However, there are gaping holes in that plan as it does not consider emissions from burning their fuel and will rely heavily on technologies such as carbon capture and storage and on the purchase of carbon offset credits from other industries.
After the panel’s report was released this week, Pathways Alliance spokesman Mark Cameron said in an email that it “presents a lot of challenges for us since our pledge is about net zero production by 2050 but the report calls for the complete phaseout of oil and gas by 2050.”
Still, the panel has laid down important markers that will allow us to assess the credibility of net-zero pledges. It will now be up to the thousands of advocates in business, environmental groups, government and politics to take those criteria and see that they are given some teeth.
