Explained | What is Net-Zero Greenwashing and why was it highlighted by the UN Secy-Gen at COP27

Since the Paris Agreement was adopted in 2015, non-State players from the corporate and financial sectors, as well as from local governments and regions, have made an increasing number of net-zero pledges. This has been followed by a multitude of standards and benchmarks for establishing net-zero commitments with varying degrees of reliability across the world. 

This raised significant concern about “greenwashing,” particularly because of statements made by significant fossil fuel businesses that they were working toward net zero emissions by the year 2050 while at the same time they were supporting additional coal, oil, and gas projects and heavily utilizing offsets.

A High-Level Expert Group on the Net-Zero Emissions Commitments of Non-State Entities was established by United Nations Secretary-General António Guterres on March 31, 2022, with the goal of strengthening and clarifying the standards for net-zero emissions commitments made by non-State entities, such as companies, investors, cities, and regions, and accelerating their implementation. 

Net-Zero Greenwashing

At the UN Climate Conference (COP27) in Sharm el-Sheikh, Egypt, on November 8, 2022, the Secretary-General announced the Group’s report and declared, “A growing number of governments and [companies] are pledging to be carbon-free – and that’s good news. The problem is that the criteria and benchmarks for these net zero commitments have varying levels of rigour and loopholes wide enough to drive a diesel truck through,” he said. “We must have zero tolerance for net zero greenwashing.”

While greenwashing is about companies or entities trying to prove themselves more climate and environment-friendly than they really are, net-zero greenwashing is about entities claiming to be having net-zero targets but supporting additional coal, oil, and gas projects.

Recommendations of the Expert Group

The report said that non‑state actors cannot claim to be net zero while continuing to build or invest in new fossil fuel supply. It highlighted that coal, oil and gas account for over 75% of global greenhouse gas emissions and net zero is entirely incompatible with continued investment in fossil fuels. Similarly, deforestation and other environmentally destructive activities also need to be counted as a disqualification in terms of being a yardstick for the Net-Zero Emissions Commitments of Non-State Entities. 

The expert group report also questioned the validity of cheap carbon credits. It said that non-state actors cannot buy cheap credits that often lack integrity instead of immediately cutting their own emissions across their value chain. The report further stressed on the fact that non-state actors cannot focus on reducing the intensity of their emissions rather than their absolute emissions or tackling only a part of their emissions rather than their full value chain.

The report also pointed out that non-state actors cannot lobby to undermine ambitious government climate policies either directly or through trade associations or other bodies. Instead, they must align their advocacy, as well as their governance and business strategies with their climate commitments. This includes aligning capital expenditures with net zero targets and meaningfully linking executive compensation to climate action and demonstrated results, the report stated. 

The report also recommended the introduction of the concept of regulated requirements for net zero rather than voluntary initiatives to effectively tackle greenwashing and ensure a level playing field for the non‑state actors. “Verification and enforcement in the voluntary space is challenging. Many large non-state actors— especially privately held companies and state-owned enterprises —have not yet made net zero commitments which raises competitiveness concerns. This picture is changing fast, but it still requires the resolve of governments and regulators to level up the global playing field. This is why we call for regulation starting with large corporate emitters including assurance on their net zero pledges and mandatory annual progress reporting,” the report said. 

Only one Indian Company has set a net-zero target compliant with SBTi’s corporate net-zero standard

In an email to CFC India, Varun Agarwal, Senior Project Associate – Climate Program – World Resources Institute, India, said that the report rightly reiterates the importance of net-zero pledges to be well-defined, verifiable, transparently communicated and accompanied by action on the ground, in order to inspire confidence. Standards can play an important role in ensuring that net-zero targets by non-state entities are credible and comparable, he added. 

“For example, the corporate net-zero standard released by the Science-based Targets initiative (SBTi) last year defines standardized criteria for setting net-zero targets in the corporate sector, ensuring that these targets conform to the Paris Agreement goal of limiting global temperature rise to 1.5°C,” Agarwal said “The corporate sector in India has demonstrated leadership by undertaking voluntary emission reduction targets. In fact, our analysis of voluntary targets of 50 leading Indian companies indicates that they can reduce India’s national emissions by an additional 2% in 2030, over and above announced government policies.” 

Agarwal further said, “However, as far as the specific question of net-zero targets is concerned, while many Indian businesses have announced net-zero plans, only one company so far, namely Wipro, has set a net-zero target compliant with SBTi’s corporate net-zero standard, according to data available on SBTi’s website.” 

He stressed on the fact that in the near future, more Indian businesses should strive to align their net-zero plans with recommendations of standards like the SBTi – which would imply covering emissions from all value chain activities in net-zero targets, setting near-term targets aligned to the net-zero target, and annual public disclosure of progress in a standardized, comparable data format.

Expert View

(A short take on the topic by our in-house expert, Dr Partha Jyoti Das, Senior Climate and Environmental Scientist)

The report released by the UN SG on November 8, 2022, during COP 27 at Sharm-El-Sheikh, Egypt on net zero emission (NZE) promises of the non-state entities (NSE) is very important for several reasons. The timing of bringing out this document could not be better.

First, it serves a set of guidelines to the non-state actors, mainly, businesses(corporates), financial institutions (development agencies) cities and regions (sub-national governance agencies) both in terms of four fundamental principles viz. environmental integrity, credibility, accountability, and the role of governments (which may be interoperated as good governance within the NSE as well as the national regimes) combined with policy tenets in the form of the ten commandments that it has recommended.

Second, the report suggests a mechanism through which commitments of NZE from the NSEs can be examined, monitored, and assessed. So far, many NSEs all over the world have come forward to announce their NZE plans and targets. But there was no mechanism in place to bring them all under one framework so that there is more clarity, uniformity, and comparability in assessing the outcome of these commitments. The report provides for such a framework and lays out the principles, procedures, and pathways for planning, pitching, and executing net zero pledges based on factually correct and verifiable data and information and robust methodology made available in the public domain in a transparent manner.

However, one must remember that these are guidelines with recommendations to the NSEs only, which are not usually legally binding on them. Whether the NSEs follow such processes will depend on the national policies and legislations under which they operate. But, with nations endorsing and taking this report seriously, the NSEs working under their regulatory regimes will, hopefully, respect the framework and its basic principles and suggested processes.

Coming to the Indian situation, the corporates that have made their NZE commitments public, must have been working with their own organizational policies and keeping in mind the existing national policies. On many occasions, there is doubt and suspicion over the quality of information furnished by some of the corporates in India and their sincerity in making such promises because of their dubious and track record in the past. Very often, one can see contradictions between what they commit and what they actually do on the ground.

There is criticism against such business sectors for indulging in greenwashing in the name of pledging their plans for decarbonization with various targets and commitments. Transparency in public affairs is a troublesome parameter in the case of dealing with information and data by the Indian industrial sector when it comes to the assessment of the impact of their operations and management on the environment, livelihoods, or any other social aspects. 

Therefore, being transparent, just, and equitable in their transition to a carbon-free entity by the year 2050, as required by the mechanism recommended by the UN report, will be the acid test of the integrity, credibility, accountability, and good governance of the Indian corporate world. It will also be an indication of to what extent the financial; institutions, development agencies and corporates in India would like to fall in line with the country’s INDCs (Intended Nationally Determined Contributions) and work in collaboration with the Indian Government for achieving their respective NZE targets within scheduled timelines and helping the country’s NZE commitments at the same time.

It will be desirable on the part of the Government of India to give a clarion call to the country’s NSEs to commit to their NZE pledges with implementable, verifiable, and assessable data and methods keeping in mind the recommendations of the UN report.