Companies are retreating from climate commitments globally

Many companies are backing away from their climate goals, a trend first highlighted by Volkswagen's emissions scandal in 2015. The scandal, where Volkswagen cheated on emissions tests, damaged the company's reputation and finances severely. It sparked skepticism towards corporate sustainability efforts. In 2023, the Science Based Targets initiative removed 238 big companies from its list of those committed to climate goals, stating their ambitions were not aligned with the Paris climate agreement. High-profile companies like Microsoft, Walmart, and Unilever were included in this removal. An example of this retreat is UK oil giant BP. In 2020, BP's then-CEO Bernard Looney announced plans to produce less oil and gas, aiming for net-zero emissions by 2050. However, under new CEO Murray Auchincloss, the company is now increasing fossil fuel production and cutting back on green investments. There are two main explanations for this shift. Some believe it is driven by a growing backlash against climate initiatives, particularly noted with the rise of climate skepticism linked to political changes in the U.S. Others suggest that the strict emissions reduction targets are simply too difficult for many companies to meet. KPMG's Mike Hayes argues that the necessary technology for large-scale emission cuts is often not available. Companies face challenges when local energy grids rely heavily on fossil fuels. Hayes also mentions that firms trying to improve have faced backlash from NGOs, leading some to withdraw from their commitments. Despite these challenges, Hayes remains hopeful. He believes that companies are recognizing the importance of resilient climate strategies that can bring value. Climate-smart companies tend to have better financial outcomes. The upcoming European tax on carbon emissions could further incentivize firms to adopt these strategies. However, time will tell how businesses adapt as global temperatures continue to rise.