ESG Essentials: COP29 host defends fossil fuels and plastic offsets

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New report reveals chemical companies lack actionable climate transition plans

A new report from Planet Tracker reveals that several leading CA100 + companies have ambitious net zero targets but lack actionable and robust strategies to deliver them.

The report ranked the transition plans of several leading chemical companies, including Air Liquide, BASF, Bayer, Dow, Incitec Pivot, LyondellBasell, and Toray Industries.

Air Liquide came out as the clear leader, with commitments to reduce Scope 1 and 2 emissions by 35% by 2035 and specific Scope 3 emissions from fossil fuel use by 60% by the same year. The company also has a net zero target for 2050.

BASF came at the bottom of the ranking, relying on unproven technologies such as carbon capture and storage along with process electrification, putting its 2050 net zero target at risk.

The report’s findings highlight that chemical companies play a pivotal role in the transition, with the industry generating $5.7tn in annual revenue in 2022 and chemical components being essential for 96% of all manufactured goods. Planet Tracker urges chemical companies to assess their memberships of trade associations to ensure they are aligned with their in-house sustainability policies.

(source: Planet Tracker) 

COP29 host Azerbaijan defends fossil fuel expansion  

Azerbaijan, host of the COP29 climate summit, will defend the right of oil and gas-producing nations to invest in the sector, noting that demand for fossil fuels remains strong despite the pressure of climate targets.

President Ilham Aliyev stated that as a nation rich in fossil fuels, Azerbaijan will defend the right of countries in the same position to continue investing in and producing these fuels while also demonstrating solidarity in tackling climate issues.

Last year’s COP ended with a global agreement calling for the “transition away from fossil fuels” to reach net zero by 2050. How countries intend to implement this over the next few years remains to be seen.

Azerbaijan intends to increase natural gas exports to Europe by 20 billion cubic meters by 2027. European countries have some of the world’s strictest targets to cut emissions by 2030, but have raced to secure new gas supply sources since Russia slashed gas deliveries to Europe amidst the current geopolitical situation.

Disclosure of water risks in severe drought

Most companies globally continue to neglect water-related risks in their business operations and supply chains, despite worsening water stress caused by global warming, industry experts warned during Rathbones Greenbank’s 27th Investor Day

Only a quarter of companies disclose water-related risks to the CDP disclosure system, increasing by 23% in 2023, but progress still lags behind other climate and nature-related categories. While there’s been a slight increase in supply chain water risk reporting from 16% in 2021 to 20% in 2023, just 4% of companies reporting to CDP have established water-related targets for their supply chains.

Investors and companies have been underestimating the true value of water, operating on the assumption that its cost price reflects its value. But the mispricing of water poses significant risks, with the financial impact of water risks estimated to reach US$392 billion. 

Understanding and mitigating these risks requires valuing water appropriately and incorporating nature-related risks into financial assessments and risk frameworks.

UN plastics treaty considers offset credits

Companies are pushing for plastic pollution reduction credits to be included in the first legally binding UN plastics treaty. Plastic producers and business groups are lobbying for concessions in the UN treaty negotiations, advocating for plastic offsets similar to carbon offsets.

The food and drink company Danone had announced that it planned to use credits to fund plastic recovery efforts in Indonesia. However, the company suspended its plans following complaints from locals about pollution and certain health issues linked to waste operations.

Critics argue that plastic offsetting allows corporations to continue to finance harmful practices like burning plastic, which poses severe health risks to communities and air pollution. Research has found that a significant portion of plastic offset projects involve incineration, highlighting concerns about the effectiveness of such schemes.

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