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Thursday 26 September 2019

tortoise intelligence • responsibility index 100

Harnessing the power of shame

Britain’s biggest companies are not helping the country meet its climate targets. They’re hindering

By Giles Whittell and Tortoise Intelligence

When the parent company of British Airways was named the most improved in the UK last year for reporting on carbon emissions, it drew attention to a problem. If those emissions had gone down it would have meant good PR and good news for the planet. Instead, like profits, prices, passenger numbers and average global temperatures, the emissions went up.

BA and its siblings in the International Airlines Group burned nearly two million tonnes more jet fuel in 2018 than in 2017, releasing 38.5 million tonnes of extra greenhouse gases into the atmosphere. That put IAG firmly in the FTSE 100’s top 10 carbon emitters, which between them produce more CO2 in their worldwide operations than the whole of the UK.

Greta Thunberg speaks at the United Nations climate change summit

“Flygskam” (flight shame) took off. Greta Thunberg took a racing yacht instead of flying to New York, and the aviation business took fright. Their anxiety was on display at a conference in Seoul this summer, when the head of the International Air Transport Association pleaded to journalists: “Stop calling us polluters.”

That seems unlikely to happen.

Data published this week as part of Tortoise’s first Responsibility 100 Index shows that many of Britain’s biggest companies are not helping the country meet its climate targets. They’re hindering. By shrinking their carbon footprints too slowly or not at all, experts say, they are acting as a brake on progress that could otherwise be the fastest for any major industrial economy.

The total carbon burden of the FTSE 100 companies last year was 466 million tonnes of CO2 equivalent. That is 105 million tonnes more than the entire UK where they list their shares. The difference is a result of the huge overseas carbon footprints of companies like Royal Dutch Shell, which for decades has flared off unused natural gas in its Nigerian oil fields. Despite progress on that front the top ten FTSE polluters emitted 390 million tonnes of CO2e last year compared with 361 million for the UK.

Within the numbers there are some striking improvements. Centrica, which owns British Gas, cut its greenhouse gas emissions last year by more than half. Sainsbury’s, the supermarket chain, and SSE, the energy group, each cut their emissions by more than 13 per cent (or 163,000 and 2.8 million tonnes of CO2 respectively).

But these bright spots must be balanced against the fact that 40 overshadowed by two key findings: British companies are cutting emissions slower than the country as a whole, and too often – especially in oil and mining – their actions on climate change fail to match their words.

“We are committed to…reducing the emissions of our operations and our products across their lifecycle,” says Reckitt Benckiser, the consumer brands group, whose carbon footprint expanded by 49 per cent last year because of a major US acquisition.

“We want to play our part and contribute to the global effort to tackle climate change,” says Shell, the FTSE 100’s top emitter, whose record on investment in renewables one academic calls “laughable”.

“The more closely you look, the more emissions go up,” says Professor Bobby Banerjee of the Cass Business School in London, who wasn’t involved in the Tortoise research but has studied the climate performance of the New York-listed Fortune 500 index for more than a decade. He worries that big companies have latched onto “carbon intensity” as a measure of progress – carbon emitted per unit of production – because it distracts attention from rising overall emissions in times of growth.

“There should be one objective measure,” he says. “Are your total emissions coming down?”

By that yardstick there are plenty of CEOs with something to boast about. A total of 59 of the FTSE 100 reported lower emissions last year than the year before and one remained at the same level.

But the other 40 – including Carnival, GlaxoSmithKline, Ocado and JD Sports – recorded increases. Of the 100 firms only 11 undertake to buy all their power from renewable sources, and the total carbon output of the index fell by 2.2 per cent compared with 2.4 per cent for the country.

“Companies are getting better but they are a long, long way from where they need to be on this,” says Jill Duggan of Chatham House, who has praised businesses for engaging more constructively with the 2015 Paris climate talks than with previous UN-sponsored climate conferences.

Most members of the FTSE 100 have pledged to pursue one or more of the UN’s Sustainable Development Goals (SDGs), which Tortoise has used as a framework for the Responsibility100 Index. All are required to publish carbon emissions figures, but so far that is doing little to drive numbers down in the most carbon-intensive sectors.

Six of the top ten climate polluters are in the extractive industries. Shell and BP emitted 117 million tonnes of CO2 last year between them – nearly a third of the UK’s total. The number excludes so-called Scope 3 emissions from the petroleum products they sell. Other names in the top ten include mining giants Glencore, Rio Tinto and Evraz (controlled by Roman Abramovich, the Chelsea football club owner).

The context for the UK is one of largely unheralded success. Between 2012 and 2017 total British carbon emissions from fossil fuel

consumption fell by 112 million tonnes or 22 per cent, the fastest decline for any big industrial economy. This was achieved almost entirely by closing coal-fired power stations, with the shortfall made up by wind and gas. By the end of the period UK emissions were 38 per cent lower than in 1990 and on a par with those of 1890, the year Tchaikovsky premiered The Sleeping Beauty in St Petersburg.

The pace of those reductions has since slowed. In the race to decarbonise, the rest of Europe is now catching up with the UK, and in some cases overtaking. While the UK managed 2.2 per cent last year, France and Germany each posted net carbon reductions of 4.2 per cent last year, equivalent to 445 million tonnes and 869 million tonnes of CO2 respectively.

There are corporate innovations going on when it comes to incentives for driving change. Shell is the first oil major to link cuts in total carbon emissions to executive pay, but its targets are modest and it has made no firm commitments beyond 2021. The company then plans to set “new targets on a short-term basis,” a spokeswoman tells Tortoise. “We have to see change from the demand side. If society moves quicker, we can move quicker too.”

And society may be moving. British Airways has championed a new carbon offsetting scheme, CORSIA, to which airlines representing an estimated 75 per cent of aviation emissions have signed up. After years of negotiations, it is due to start selling offsets from next January.

“It is complicated. It is not very transparent, but the key thing is that it is putting a price on these emissions that has not been there before,” says Annie Petsonk of the Environmental Defense Fund. “The issue is now in boardrooms and C-suites because airlines are going to have to shell out real money for these offsets or on alternative low-carbon fuels. They are very sensitive to reputation and, very importantly, part of that reputation is Greta.”

The Greta effect, ubiquitous on social media since Thunberg’s trans-atlantic crossing, has had “a huge effect in boardrooms”, Petsonk says, not least because so many CEOs have children who follow her.

Consumers – daughters and sons of business leaders included – won’t favour voluntary offset schemes aimed directly at passing on the cost to passengers, she adds, but it will reward airlines that take care of the offsetting themselves. “People believe it’s the airlines’ responsibility.”

Flygskam might actually make a difference.

We’d love to know what you think. How can companies do more to take responsibility for their emissions and how can consumers press them? Email Liz@tortoisemedia.com

Illustration Julia Allum for Tortoise

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Further reading

Full details of the methodology behind the Index are set out here.

A set of FAQs are also on our website, here

And to see the full Responsibility100 Index webpage visit here

Tortoise Intelligence
alexandra@tortoisemedia.com

Led by Alexandra Mousavizadeh, who has more than 20 years’ experience in ratings and indices, Tortoise Intelligence brings together data scientists, data journalists and researchers with wide experience in data analysis.