A new climate action report cautions about alarming trends in carbon emission initiatives by the corporate sector.

Just 14% of the companies reduced carbon emissions in line with the set targets over the past five years, reveals a new report. This is alarming as climate-related disasters intensify in frequency and severity, creating economic impact on communities and businesses.

Despite a responsibility to mitigate the crisis with emissions reductions in their operations and supply chains, companies have not made much progress over the past year. The new report by CO2 AI and Boston Consulting Group (BCG) is being released ahead of COP28.

Titled Why Some Companies Are Ahead in the Race to Net Zero, the study builds on CO2 AI and BCG’s 2021 and 2022 investigations into the progress that businesses worldwide have made on emissions measurement and reduction.

The two companies surveyed 1,850 executives responsible for emissions measurement, reporting, and reduction in their organizations across 18 major industries and 23 countries. Each organization surveyed had at least 1,000 employees and annual revenues ranging from $100 million to over $10 billion.

“There are encouraging signs of progress in measuring and reducing emissions, but businesses must redouble their efforts,” said Hubertus Meinecke, BCG’s global sustainability leader and a co-author of the study.

Highlights of the survey

• Companies are falling short on reduction ambitions, citing a wide array of challenges
• Companies have significantly improved partial measurement and reporting of Scope 3 emissions—up 19 percent since 2021, from 34% to 53%
• Asia Pacific respondents improved comprehensive emissions reporting by 7 percentage points (PP) since 2021; South American and North American respondents improved Scopes 1 and 2 emissions reporting by 9 PP  and 5 PP, respectively.
• On decarbonization, 40% of survey respondents estimated an annual benefit of at least $100 million to their business.
• Within the next three years, 30% of companies plan to expand the deployment of AI-powered tools to improve accuracy, efficiency, and decision-making in emissions management.

“Businesses are increasingly acknowledging the transformative power of technologies and artificial intelligence in bridging the divide between their reduction ambitions and real, tangible impact,” said Charlotte Degot, CEO and Founder of CO2 AI and a co-author of the report.

Progress on Comprehensive Emissions Measurement Remains Slow

According to the survey, just 10% of companies now report comprehensively measuring all their emissions, revealing no improvement relative to the 2022 survey. More concerning, only 14% of companies report reducing emissions in line with their ambitions over the past five years, down 3 pp from 2022, citing difficult economic conditions and capital constraints as challenges to their reduction efforts.

However, companies that have made decarbonization progress are realizing both financial and non-financial benefits to their businesses, citing reputational value, lower operating costs, and regulatory compliance among the top benefits. When asked to quantify, 40% of respondents estimated an annual financial benefit of at least $100 million from meeting emissions reduction targets, a 3 pp increase compared with last year’s survey.

An Improvement in Scope 3 Emissions Measurement

The number of respondents indicating partial measurement and reporting of Scope 3 emissions has increased by 19 pp since 2021, from 34% to 53%. In tandem, more respondents said they had set Scope 3 reduction targets—up 12 pp since 2021, from 23% to 35%—with the most common areas of focus being waste management and purchased goods and services.

Some regions have demonstrated a clear improvement in comprehensive measurement of emissions in the past two years. Asia Pacific respondents improved comprehensive reporting of Scope 1 (direct emissions from company-owned and controlled resources), 2 (indirect emissions from the generation of purchased energy that an organization consumes), and 3 (indirect emissions that occur in the value chain of a company, including both upstream and downstream emissions) emissions by 7 pp since 2021. The number of South American and North American respondents improved comprehensively, reporting their internal emissions, Scopes 1 and 2, by 9 pp and 5 pp, respectively.

Four Traits of Companies Reducing Emissions in Line with Ambitions

Companies that report reducing their emissions in line with their ambitions were found to display four notable traits more strongly:

• Collaborating with suppliers and customers on emissions measurement and reduction: 75% of companies that reduced emissions in line with their ambition have joint reduction initiatives with most of their suppliers, and 54% have similar initiatives with most of their customers.
• Calculating emissions at the product level: The survey found that 75% of companies attempt to calculate emissions for at least some of their products “from cradle to gate,” that is, from raw materials to distribution.
• Harnessing the power of digital technology in the emissions-management process: Companies with automated digital solutions for measurement are 2.5 times more likely to measure their emissions comprehensively. In addition, 30% of companies plan to expand the deployment of AI-powered tools within the next three years to improve accuracy, efficiency, and decision-making in emissions management.
• Viewing Regulations Positively: They are 2.0 times more likely to view emissions-reporting regulations to be a key enabler of reduction.