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1NET-ZEROThe Next Frontier for Corporate SustainabilityNet Zero: The NextFrontier for CorporateSustainability9 Data Visualizations that Reveal the US S&P100’s GHG Emissions and Path to Net ZeroDECEMBER 2020Pete Edmunds, Daniela Chona, and Lesley MengYaleCenter for Businessand the Environment

2NET-ZEROThe Next Frontier for Corporate SustainabilityIntroductionWhen it comes to climate change, the science is unequivocal: global temperatures will continueto rise for decades, largely due to greenhouse gases produced by human activities. This will havecatastrophic effects on human health, infrastructure, energy, agriculture, fisheries, sea levels,natural ecosystems, and more. For many, the consequences have felt distant and theoretical — untilnow. Unprecedented wildfires, the world’s first climate-induced war in Syria, PG&E’s climate-fueledbankruptcy, devastating hurricanes, and deadly heatwaves — among a litany of other environmental,social, and economic disasters — have changed this. Following the US’ withdrawal from the ParisAgreement on November 4, it is up to corporations to take direct responsibility for their impact onclimate change.While many corporations, investors, regulators, and consumers agree that corporate sustainability isimperative, identifying best practices and which companies are ‘walking the walk’ can be challenging.Corporate metrics, certifications, and coalitions abound, including the Sustainable AccountingStandards Bureau (SASB), the Global Reporting Initiative (GRI), the Science-Based Targets Initiative(SBTi), the Task Force on Climate-related Financial Disclosures (TCFD), the Greenhouse Gas Protocol,the Renewable Energy 100 (RE100), the Business Roundtable, B Corps, and benefit corporations.Greenwashing — a form of marketing that creates a false perception of a company’s environmentalsustainability — exacerbates this confusion.To cut through the noise, our team from the Yale School of Management narrowed in on one, universalmetric that is the single biggest driver of climate change: greenhouse gas emissions (GHGs), measuredin metric tons of carbon dioxide equivalents. It seems obvious to catalog GHGs from the US’ largestpublic companies and track their goals for reducing them, but after scouring the internet, it becameclear that the data is not publicly available in a free, consolidated format. The Carbon DisclosureProject houses a robust data set on corporate emissions, but requires payment to access, and acrowdsourced Google Doc helps document net zero pledges, but no data source seems to collectand analyze all of this data in aggregate. To change this, we manually tracked down data on the USS&P 100’s historical GHG emissions since 2015, emissions reduction goals, and emissions reductioninitiatives. We then analyzed what we found and have summarized our findings below. While ourinsights cover a range of topics relevant to corporate emissions, two common themes emerged.First, the private sector desperately needs standardized guidelines for GHG emissions measurementand disclosure. Second, the goal of reaching ‘net zero’ emissions, defined by the IPCC as the equalbalancing of anthropogenic greenhouse emissions with anthropogenic greenhouse gas removals overa specific period, has become the new North Star for corporate sustainability.

NET-ZEROThe Next Frontier for Corporate Sustainability3Our goals are to:1inspire companies to learn best practices from their peers on the path to ‘net zero,’2provide a publicly available data source and collection of insights for academics, nonprofits, thinktanks, corporations, and others to study, and3empower concerned global citizens and consumers with information on the culpability of specificUS corporations in fueling climate change so that they can more effectively vote with their dollars,select their employers, and support climate policies.The report is structured around nine data visualizations that communicate the current state of GHGemissions among the US S&P 100 and their stated goals for reducing them. Each visualization isaccompanied by an explanation of select insights that can be drawn from them. A full list of the 100companies included in the analysis can be found in the appendix, and the assembled data source canbe downloaded here, in support of goal #2 described above.The State of EmissionsThere’s no consensus yet on emissions measurement and disclosure practices and what it means tobe ‘net zero.’The lack of consolidated, universal analysis of corporate GHG emissions is due in part to theheterogeneity of companies’ measurement and disclosure practices. Measurement variables include: Value Chain Scope: Scope 1 measures direct emissions from sources owned or controlled by thecompany, such as on-site fossil fuel combustion or fleet fuel consumption. Scope 2 measuresindirect emissions from the generation of purchased electricity, i.e., emissions from utility providersproportional to the amount of energy purchased and consumed. Scope 3 measures all otherindirect emissions from entities not controlled or owned by the company, such as emissionsfrom purchased materials, employee commuting, and use of sold products. Almost all of the 100companies measure and disclose their Scope 1 2 emissions (93 in 2018 and 90 in 2019), but fewercompanies report their Scope 3 emissions (78 in 2018 and 77 in 2019). The companies who failed todisclose this information in either 2018 or 2019 are named in the table below. The key question is:should Scope 3 reporting be required? Geographical Scope: Some US companies separate out their emissions by country borders, whileothers report on global emissions broadly. For the purposes of this analysis, all global emissionswere included due to the global and interconnected nature of climate change, while recognizingthat some of the US S&P 100 companies have larger international footprints than others.

NET-ZEROThe Next Frontier for Corporate Sustainability4 Business Unit Scope: When it comes to GHG emissions reduction goals, some companiesapportion specific business units to strive for the cache of touting ‘carbon neutral flights,’ or ‘netzero cloud computing.’ While these efforts are a step in the right direction, in general they tend tobe misleading claims that obfuscate the total carbon footprint of a company. For this analysis, allbusiness units were included in companies’ GHG emissions data. Use of offsets: 24 of the 100 companies discussed purchasing carbon offsets to mitigate theircarbon footprint. Most subtract out their carbon offsets when reporting on their GHG emissions, butnot all. While carbon offsets can be a powerful, market-based tool that allows companies to reducetheir net carbon emissions in a cost-effective manner, not all carbon offsets are created equal. Forexample, a company might purchase an offset to help pay for a new wind farm, only to find outlater that the wind farm would have been built anyway. According to the American MeteorologicalSociety, for an offset to be effective it must meet the following criteria: (1) additionality: theemissions reduction would not occur without the offset, (2) no leakage: the reductions cannotsimply shift the emissions to another location, (3) no double-counting: offsets for the sameprograms cannot be sold more than once, and (4) no perverse incentives: an organization that sellsoffsets through emissions reduction projects should not have an incentive to fight climate policyfor self-gain. Despite the range of effectiveness of carbon offset programs, this analysis honoredcompanies’ claims of subtracting out offsets from their emissions totals.No Emissions Reporting*Scope 1 2 Reporting Only (No Scope 3)*Berkshire Hathaway Inc.Altria Group IncDanaherCharter Communications Inc.AIGEmerson ElectricKinder Morgan Inc.American TowerExxon MobilNetflix Inc.Booking Holdings Inc.Facebook, Inc.Bristol Myers SquibbGeneral DynamicsCaterpillar Inc.Nextera Energy Inc.Coca-ColaTexas InstrumentsComcastThe Walt Disney CompanyCostcoThermo Fisher Scientific*Companies included on this list failed to meet the stated criteria in both 2018 or 2019. If a companyreported their emissions in either 2018 or 2019, they were credited for their reporting and omitted fromthis list.

5NET-ZEROThe Next Frontier for Corporate SustainabilityThe 5 biggest emitters contribute over 60% of total S&P 100 Scope 1 and 2 emissions.Scope 1 & 2 Emissions by Company & Sector*Note: Click on the visual above and the others in the report to explore interactive versions of the data.In the visual above, the size of each bubble corresponds to the total number of each company’s 2019Scope 1 and 2 emissions. For a handful of companies who have not yet reported 2019 figures, 2018data was used as a proxy.Exxon Mobil, Nextera, Duke Energy, Southern Company, and Chevron contribute a significantlyoutsized proportion (64%) of the S&P 100’s total Scope 1 and 2 emissions. It is not surprising to see thesefossil-fuel-intensive oil and gas and utilities companies at the top of the list, but the magnitude of theiremissions is striking.

6NET-ZEROThe Next Frontier for Corporate SustainabilityWhile some of these companies have begun modest transitions to lower-carbon business models,others have resisted entirely and are starting to pay the price. Take Exxon Mobil, for example, whichembodies “Big Oil” in the US. Exxon emits more Scope 1 and 2 emissions than any other US company,and recently leaked documents revealed the company’s plans to increase their emissions by 17% by2025, which represents an increase greater than the current GHG emissions of the entire country ofGreece. Nextera, by contrast, is shifting to a renewables portfolio. In early October, Nextera usurpedExxon as the most valuable energy company in the US – a powerful symbol of renewables’ eclipseof oil. Exxon, which was the most valuable company in the world just seven years ago, has sincelost roughly 60% of its value and has faced greater scrutiny by activists, governments, and investorsregarding their handling of climate risk. With renewable energy prices below fossil fuel prices in moststates, similar economic collapses are likely within the oil and gas sector, with Exxon serving as asalient example of what can happen to companies that resist the natural transition to a low-carboneconomy that is already underway.Notably, Conoco made recent headlines as the first US oil company to announce a carbon neutralgoal, with plans to reach net zero by 2050. Other oil giants hold a significant opportunity to curtail UScorporate emissions by following suit.

7NET-ZEROThe Next Frontier for Corporate SustainabilityAutomotive and retail companies’ emissions increase significantly when accounting for Scope 3.Scope 1, 2, & 3 Emissions by Sector & IndustryWhile Scope 1 and 2 emissions point to clear culprits in the oil and gas and utilities sectors, accountingfor Scope 3 emissions provides a more complete picture of companies’ total impact on the planet. Asdescribed above, Scope 3 measures indirect emissions including purchasing of raw materials and useof sold products. Under this accounting method, GM and Ford are held responsible for the emissionsthat result from the cars they put on the road, and these companies jump to the third and eighth highestemitters, respectively, of total Scope 1, 2 and 3 emitters among the 78 companies reporting. This isrelatively unsurprising given that the transportation sector recently toppled electricity as the largestemissions sector in the US, at 28%, but it highlights the importance of incorporating a Scope 3 lens andaccelerating the shift towards electric and hybrid vehicles.

NET-ZEROThe Next Frontier for Corporate SustainabilityThe retail industry within the Consumer Discretionary sector similarly climbs the list of biggestemitters when accounting for Scope 3, trailing only oil and gas. These companies include Procter &Gamble, Home Depot, and Walmart, who rank second, fourth, and fifth, respectively, among thosereporting total Scope 1, 2 and 3 emissions. These companies sell a high volume of products withubiquitous usage, so the emissions from their supply chains and use of sold products (both Scope 3)are astronomically high. Procter & Gamble’s emissions, for example, are approximately 98% Scope 3.These emissions include high volumes of plastic procurement, consumers running washing machineswith Tide detergent, and consumers showering with Pantene shampoo.Contextualizing companies’ emissions relative to their revenues separates sustainability leadersand laggards.2019 Revenue & Emissions by Company2019 Revenue82019 Scope 1 2 Emissions*

9NET-ZEROThe Next Frontier for Corporate SustainabilityWhen considering the carbon footprints of US companies, it is useful to consider them in the context oftheir revenues, with the understanding that the more revenue a company contributes to the economy,the more it should be permitted to emit. For example, one would not hold Walmart accountable to thesame absolute GHG emissions standards as a small mom and pop shop. To account for this, the abovegraph plots revenue against Scope 1 and 2 emissions (the emissions axis is presented on a logarithmicscale to compress outlier data points, as well as a reverse scale, so that the upper right quadrantrepresents a more favorable position). The color of each point indicates the sector of the company.Companies that fall in the top right quadrant represent the sustainability leaders who have keptemissions in check while earning high revenues. These sustainability leaders include Apple, UnitedHealth, Bank of America, and Wells Fargo. The top left quadrant holds the companies with both highrevenues and high emissions, and therefore should be viewed as some of the biggest opportunities foremissions reduction. These corporate behemoths include Exxon, Amazon, Chevon, AT&T, and CVS. Thebottom left represents the ‘worst offenders,’ who emit disproportionately high levels of GHG relative totheir role in the US economy. Some of the worst offenders are Nextera, Southern Company, AmericanTower, and Occidental Petroleum. Finally, the bottom right quadrant includes companies with lowrevenues and low emissions. Like the companies in the top left, these companies meet the status quo interms of proportional emissions and revenues, and include Adobe, Nvidia, Biogen, and BlackRock.

10NET-ZEROThe Next Frontier for Corporate SustainabilityThe Race to Net Zero26 of the US S&P 100 companies have a net zero goal in place.Count of Company Net Zero Goals by SectorCorporate sustainability has a new North Star: net zero. 26 S&P 100 companies have set goals to reacheither carbon neutrality or net zero emissions for their Scope 1 and 2 emissions, and of these 26, 20announced their goals in 2020. Pressure from industry peers, activist NGOs, consumers, employees,and public policy have ushered in a new wave of corporate sustainability commitments that align withthe Paris Agre

3 NET-ZER The Next Frontier for Corporate Sustainability Our goals are to: 1 inspire companies to learn best practices from their peers on the path to ‘net zero,’ 2 provide a publicly available data source and collection of insights for academics, nonprofits, think tanks, corporations, and others to study, and 3 empower concerned global citizens and consumers with information on the ...