Unfulfilled green ambition: firms scale back impractical sustainability targets
When it comes to sustainability targets, the risk of over-promising and under-delivering erodes trust.
The number of companies making lofty pledges to enhance their environmental sustainability practices is on the up, with the number of companies with net zero targets more than doubled in the last 2.5 years1. Yet the intricacies of these ambitious pledges are often overlooked. Consequently, there has been a recent surge in the number of companies adjusting their net zero and sustainability commitments. For example, over 200 companies including tech giants Microsoft and X (formerly Twitter) as well as consumer goods leaders P&G and Unilever, recently had their short-term emission goals or net zero commitments ‘removed from the Science Based Targets initiative (SBTi)2. As reality bites, doubts arise about the sincerity, accountability, and seriousness of sustainability promises.
The risks of overly ambitious sustainability targets
Consumer goods giant Unilever, once hailed as an ESG poster child3, was recently in the spotlight for backtracking on its sustainability targets. The company has abandoned its pledge to half the use of virgin plastic by 2025, instead aiming for a one-third reduction by 20264. Additionally, they have scrapped commitments to pay fair wages to direct suppliers by 2030 and spend €2 billion annually on diverse businesses by 20254.
This is not the first time the company has back-pedalled on their sustainability goals. It highlights a harsh truth – when companies commit to sustainability targets, they must have a credible plan and follow through on it. Unilever’s repeated revisions; have undermined its credibility, raising doubts about whether it ever had a realistic roadmap to achieve its lofty environmental pledges. If the original plan was overly ambitious, companies should acknowledge their mistakes and change their strategy, rather than downgrading their targets.
3. https://www.bloomberg.com/news/features/2024-04-19/esg-unilever-scales-back-sustainability-goals
Shareholder pressure vs. environmental commitments
Unilever is not alone in scaling back sustainability ambitions. In 2023, BP announced that they were now targeting a 20-30% cut in emissions by the end of this decade, rather than their previously stated goal of a 35-40% cut5. Climate-focused investors were disappointed, stating that “the material change to BP’s 2030 emissions reduction target, raises a significant governance question, given the high proportion of investors that supported the original (emission reduction) target only nine months ago at BP’s annual general meeting”6. BP’s decision highlights the need to strengthen the link between total shareholder returns and green efforts, as well as the importance of ensuring that company’s responsible strategy totally underpins their business strategy.
“As companies struggle with the realities of their sustainability pledges, back-pedalling on ambitious targets risks eroding trust. When ambitions are authentic and linked to a well-thought-out strategy, companies can track their performance, and use the findings to course correct if needed.”
Building credibility through sustainability reporting
Companies face a delicate balancing act; meeting investor demands for short-term results while upholding long-term sustainability commitments. Robust corporate communications are essential for demonstrating accountability, alignment of stakeholder interests, and progress towards a sustainable future. By fostering a shared vision of environmental stewardship as a shared responsibility that creates value for all parties in the long run, companies can rally stakeholders around a common purpose and build the support to make it happen. Thanks to the current review of the UK Stewardship Code, reporting burdens should be reduced for issuers and signatories, whilst focusing on long-term value creation, when the revised Code is published in, likely, 2025.
As companies struggle with the realities of their sustainability pledges, back-pedalling on ambitious targets risks eroding trust. When ambitions are authentic and linked to a well-thought-out strategy, companies can track their performance, and use the findings to course correct if needed. By admitting missteps transparently and explaining the rationale behind any changes, companies maintain stakeholder confidence and take them on a complicated but crucial journey.
If you’d like to discuss this, or any other subject, please get in touch with Richard Costa, Senior Corporate Communications and Reporting Consultant at richardc@gather.london
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