Climateworks Centre has created an assessment approach to provide insights on ASX200 companies’ commitments and alignment with the Paris Agreement goal aiming to limit global warming to 1.5°C.
Achieving this goal requires limiting global cumulative emissions to 336Gt from January 1, 2020. For Australia, this translates into a 74% emission reduction in 2030, compared with 2005, and achieving net zero by 2035.
This assessment is based on one specific analytical output developed by Climateworks Centre in 2020: Decarbonisation Futures’ ‘1.5C All-in’ scenario which illustrates one possible pathway for Australia to reach net zero emissions limiting global warming to 1.5°C. In instances where electricity generation is concerned, the Australian Energy Market Operator’s 2022 ISP Hydrogen Superpower scenario is used.
Net zero and interim emissions reduction targets were assessed against a company-specific 1.5°C trajectories derived from the scenarios above. ‘1.5C All-in’ shows that when accompanied by carbon sequestration efforts, warming can be limited to 1.5°C when most sectors achieve near zero emissions by 2050. However, the electricity generation and buildings sectors achieve this by the early 2030s. Therefore, companies where the majority of emissions come from generating electricity or use of buildings need to aim to be net zero by the early 2030s to be 1.5°C aligned.
This analysis covers companies who were ASX200 listed in December 2021. Data used for report analysis was captured reflecting publicly disclosed information as of 31 March 2022. Data in the table was validated in November 2022.
The analysis assesses absolute emissions reduction targets. Emissions intensity and other targets – for example renewable energy targets and targets linked to a specified mass of greenhouse gas reduction without a baseline year – are not the subject of this analysis.
This analysis also considers whether commitments set up at a company level cover the company’s full carbon footprint, understood as all the significant operational (scope 1 and 2 emissions) and value chain emissions (scope 3, or downstream and upstream emissions, and financed emissions where relevant).
Climateworks Centre has reviewed the materiality of scope 3 emissions across each ASX200 company to assess its applicability. As a rule of thumb, scope 3 is deemed not applicable for companies predominantly involved in emission-intensive operations where the majority of their emissions stem from scope 1 and 2, such as steel manufacturing, airlines operation, aluminium smelting and cement manufacturing. However, in the real world, companies are often diversified with business activities spanning multiple sectors. Combining this with limited scope 3 reporting, the following approach, in order of priority, were adopted based on existing best practice:
- Proportion of reported scope 3 emissions was identified (considering scope 3 as ‘material’, and thus deemed to be applicable for assessment, when these represented at least 40% of total emissions).
- When a company emissions profile was not available or the information available was limited, a combination of company-specific value chain activities, information obtained from Climate Action 100+ benchmark methodology for scope 3 applicability on a sector level, sectoral reports, and S&P Global Sustainable1 data was used to determine scope 3 applicability.
As a result, scope 3 was assessed as being applicable for 95% of companies assessed.