The latest research from UK NGO Net Zero Tracker warns that while public companies have been the focus for net zero concern, the plans and performance of private companies remain opaque.
- Failure to address private company net zero plans equals a net zero blind spot of $4.3 trillion.
- Private companies play a key role in the economy: revenues of the top 100 private companies equate to 5% of the global economy.
- ‘Whole economy’ disclosure may be needed to bridge the gap between public and private action.
In recent years the emission-cutting plans of major publicly-listed companies have received an increasing amount of attention. Regulators and investors are increasingly demanding data on climate risk, campaign groups are calling companies to account and there is a rise in activist shareholder groups demand. Much of the attention has focused on targets for net zero emissions, as that has become the dominant approach for decarbonisation pledges and plans.
Yet private companies are not receiving the same level of attention. Private companies, accountable only to their owners, and with less regulatory scrutiny and oversight, make up a large share of the world economy: according to Net Zero Tracker the aggregate annual revenue of the 100 largest private companies in the world amounts to over $4 trillion, almost 5% of the global economy.
John Lang, project lead at the Net Zero Tracker said: “As the shadow of disclosure regulation stretches across the whole economy, those private firms that choose to wave as the net zero train leaves the station risk becoming stranded.”
Privately held companies significantly underperform on net zero
The report, Everybody’s Business: The net zero blindspot, says the number of publicly listed companies with net zero targets are more than double that of private companies. Of the private companies that have set a net zero target, they are less likely to include Scope 3 emissions within it, are less likely to have set interim targets, and give less clarity on their planned use of offsets.
There is a stronger disconnect between talk and action as well. Of the companies that have set targets, one of the key components of credibility is having set out a plan for how these targets are going to be achieved. While 79% of public companies have published such a plan only 13% (or four companies) have done so.
Under one-third (32%) of the world’s 100 largest private firms, with revenues totalling nearly $1.2 trillion, are operating with a carbon reduction target, compared with over two-thirds (69%) of the largest 100 publicly-listed companies.
Amongst the high-emitting sectors, only 17% of private firms have set a #netzero target, vs. 70% of publicly-listed firms. In these sectors, NZ targets cover just 14% of $1.5tn of aggregate annual revenue, vs. 77% of $6.1tn of publicly-listed firms covered by net zero targets.
How the analysis was done
Data on the world’s biggest 100 publicly-listed companies was drawn from the Net Zero Tracker database. Net Zero Tracker then used a list of the biggest 100 private companies and applied the same criteria to their targets, where they exist, that is used in the Tracker.
The report then explores how the world’s biggest private companies compare to publicly listed counterparts in terms of pledges and plans for net zero. The analysis included both the existence and robustness of a net zero target. For example it compared areas which are increasingly seen as a baseline for being serious about net zero. These included whether or not a company has: set interim targets; published a plan outlining how it will reach net zero; committed to report its progress annually; and is clear about the scopes of emissions contained in its target, as well as planned use of offsets.
Public and private companies still have a long way to go on net zero
The situation is even more concerning when considered in the context of other findings by the Net Zero Tracker and others showing that overall, while corporate target-setting continues at speed, the targets of publicly-listed companies themselves show insufficient rigour and integrity. Considered collectively, the net zero performance of major private companies in the report is described as “seriously deficient compared against a benchmark that is itself full of shortcomings”.
Basically the report warns that the lack of integrity of the largest private firms’ net zero pledges is a $4.3 trillion blind spot that is likely to gain much greater interest in the coming years. Constituencies that take an active interest in the decarbonisation plans of publicly-listed companies are likely to bring more scrutiny to bear on their privately-held counterparts.
Ultimately, argues the report, a ‘whole economy’ climate disclosure system is going to be needed to enhance transparency and drive private firm accountability.
