Key Takeaways
Companies concerned about the sustainability of their businesses, employees, and customer base are quietly backing out of commitments made during the “ESG movement.”
They have found that meeting net-zero goals is both difficult and expensive, and threatens their sustainability.
Even Microsoft and Google are moving away from previously-declared goals.
Only 4 percent of companies are on track.
The Biden-Harris climate program has led to enormous expenditures for electrical generation and extensive new power line capacity that is needed for wind and solar power.
Microsoft and Google have recently abandoned their carbon neutrality goals, with their emissions rising by 29 percent and 50 percent, respectively, over the past four to five years. Despite over 500 companies worldwide pledging to achieve net-zero emissions by 2040, 96 percent are failing to meet their targets, with some attributing their struggles to “AI” (artificial intelligence). The number of corporate climate commitments surged, with over 500 companies globally aiming for net-zero emissions by 2040. Between June 2022 and October 2023, new net-zero targets increased by 40 percent. However, recent analysis reveals that only 4 percent of these companies are on track to achieve their goals, exposing a gap between corporate promises and actual progress.
Other companies like Shell, Gucci, and EasyJet are also stepping away from their goals, putting a hole in the thesis that it was only due to AI. Shell, for instance, has abandoned its 2035 target of a 45 percent reduction in net carbon intensity–a key milestone towards Shell’s broader goal of net-zero emissions by 2050–citing “uncertainty in the pace of change in the energy transition.” The oil major updated its target to cut the total “net carbon intensity” of all the energy products it sells to customers – emissions per unit of energy – by 20 percent between 2016 and 2030, now setting the reduction between 15 and 20 percent. This change reflects “a strategic shift” to focus less on selling electricity, including renewable power. The company says investment in oil and gas “will be needed” due to sustained demand for fossil fuels and the importance of liquified natural gas for the energy transition, planning to grow its LNG business by up to 30 percent by 2030. Shell has also abandoned its plan to invest in global carbon-offset projects, like forest preservation.
BP has also scaled back its emissions reduction commitment, reducing its target from a 40 percent cut by 2030 due to the financial benefits of continuing with fossil fuels. Gucci, once committed to carbon neutrality through verified carbon offsets, quietly removed its claim of being “entirely carbon neutral” from its website in May 2023. Amazon has rolled back its goal of cutting emissions from half of its shipments by 2030, while Nestlé has shifted its focus away from carbon offsets to concentrate on reducing actual emissions within its operations and supply chain. EasyJet, a proponent of carbon offsetting since 2019, announced in September 2022 that it would abandon its carbon offsetting scheme in favor of directly reducing emissions through investments in more efficient aircraft, sustainable aviation fuel, and operational improvements.
AI Is Affecting Some Companies’ Goals
Training and running large AI models demand substantial computational power, which is typically sourced from data centers located in regions with lower energy costs. This is often because renewable energy sources are not always available around the clock, making them less reliable for continuous computing needs. In the United States, data centers are nearly 12 times more prevalent than those in China. Utilities across the U.S. are rushing to expand their generating capacity to meet both the Biden-Harris administration’s energy transition goals and the rising demands of AI and manufacturing sectors. Goldman Sachs projects that power consumption by data centers will surge by 160 percent by 2030.
Further research indicates that the electricity consumption of AI and global data centers could double by 2026, potentially matching the energy usage of the Netherlands by 2027. Additionally, to accommodate this increased demand, regional transmission capacity will need to more than double by 2035, and interregional capacity will need to increase over five-fold. This expanded transmission capacity is essential to link wind and solar energy, often generated in remote areas, with the electric grid that serves urban and suburban demand, necessitating more extensive power lines. The rapid growth in energy demand is forcing tech companies to choose between advancing AI technology and adhering to their climate commitments. In response to this challenge, the International Monetary Fund (IMF) has recommended that governments consider implementing carbon taxes to address the environmental impact of AI.
Reasons Besides AI for the Rollback
Although many large corporations have made ambitious pledges to adopt sustainable practices, recent research from L.E.K. Consulting indicates that these promises frequently fall short. A major obstacle is the lack of cohesion within leadership teams. The survey reveals that 58 percent of executives face substantial disagreements on how to balance immediate business demands with environmental, social, and governance (ESG) goals. This issue is exacerbated by the absence of effective measurement tools – only 27 percent of companies have any ESG key performance indicators in place across the organization, and just three percent have a comprehensive set. Without robust and meaningful metrics, tracking progress or linking executive bonuses to ESG performance becomes challenging, making it harder to stay committed to sustainability objectives.
Another challenge is external alignment with stakeholders. Around 34 percent of executives noted a lack of strategic alignment with external partners, while 33 percent identified internal cultural issues as a barrier to achieving their ESG goals. Decision-making and accountability are further complicated by a shortage of necessary skills and mindset within the organization. About 43 percent of executives pointed out deficiencies in reward and incentive systems, and 40 percent mentioned a lack of the right culture and leadership involvement. Additional challenges include a shortage of essential skills, insufficient progress in understanding climate-related financial risks, and difficulties in incorporating ESG factors into capital allocation. It seems that ESG has become more of a trend than a genuine commitment, as financial results have not lived up to the hype.
Despite significant investments in sustainable products and services, the survey indicates that many companies are still falling short. Nearly half of the executives admitted that their current offerings do not fully contribute to a sustainable future, highlighting the struggle to fulfill the lofty sustainability promises made.
Not all Scientists believe that Climate Change Policies are Necessary
Around 1,500 scientists and professionals from across the world have declared that “there is no climate emergency.” They are members of an organization known as the Global Climate Intelligence Group (GCIG), a part of the Climate Intelligence Foundation, a think tank operating in the fields of climate change and policy. The members come from countries all over the world, including Australia, Belgium, Brazil, Canada, Chile, Denmark, France, Germany, Greece, Hungary, Ireland, Italy, the Netherlands, New Zealand, Norway, South Korea, Spain, Sweden, the United Kingdom and the United States.
According to the GCIG, there are five main arguments supporting its claim. First, the geological evidence proves that the planet’s climate regularly varies “with natural cold and warm phases.” The latest significant variation, known as the Little Ice Age, began at around the 13th or 14th century and only ended around the middle of the 19th century.
The organization also noted that climate models are “inadequate,” and those that claimed the world was rapidly warming are false. The world has warmed significantly less than predicted by the IPCC [Intergovernmental Panel on Climate Change] on the basis of modeled anthropogenic forcing. These climate models “blow up the effect of greenhouse gases” such as carbon dioxide, which is not a pollutant like climate scientists claim, but an essential ingredient to all life on earth. Additional carbon dioxide in the air has promoted growth in global plant biomass and it is good for agriculture, increasing the yields of crops worldwide.
The group has also pointed out that, despite claims from climate scientists, global warming has not actually increased the rate or severity of natural disasters around the world as there is no statistical evidence that global warming is intensifying hurricanes, floods, droughts, and natural disasters, or making them more frequent. Damages from natural disasters have become more costly, however, largely because of the increased value of coastal and other properties around the world. According to the group, there is ample evidence that carbon dioxide mitigation measures themselves are damaging and they are costly.
Conclusion
Large corporations are pulling back on their climate commitments. But, if the Earth were truly in danger, corporate executives and billionaires, who live on the planet, would be pushing nuclear power and keeping their commitments to protect themselves and their children’s future. Instead, they are grabbing onto the subsidies that governments provide to increase their wealth and while some may have believed that wind and solar power did something useful, their actions show that they are no longer serious believers in the cataclysmic climate change theory.
