Biden’s impact on US SBTI commitments: analysing the recent past and predicting the future
It was announced in October last year that a significant milestone for the Science Based Targets Initiative (SBTI) had been passed. Over 1,000 companies had committed to set climate targets in line with the latest science. With President Biden hosting the Leaders Summit on Climate on Earth Day, involving 40 other world leaders, will we see another surge in companies making commitments to the SBTI?
It was announced in October last year that a significant milestone for the Science Based Targets Initiative (SBTI) had been passed. Over 1,000 companies had committed to set climate targets in line with the latest science. These companies span 60 countries, they include one-fifth of the Global Fortune 500, and have a combined market cap in excess of $15.4 trillion USD.
With President Biden hosting the Leaders Summit on Climate on Earth Day, involving 40 other world leaders, will we see another surge in companies making commitments to the SBTI? Following the October milestone, I took a look at the figures, which may also give us a hint as to which areas might see the biggest uptake after the events of the coming days.
Many of the first 1,000 businesses have huge up- and downstream impacts, so publicly making these commitments will have helped to create huge momentum within their industries and within business as a whole. At the same time, we all watched with bated breath as Joe Biden became the 46th President of the US, taking office at the start of 2021, and subsequently re-joining The Paris Agreement.
But did US industry, especially it's major global brands, ever really stop progression on climate action? The data below should help to give us some answers.
There are many great companies based in the US doing really positive work on climate impact reduction, not all of whom are SBTI members - we work with some - so this is not to suggest if a company isn't in the SBTI list then they are not progressing. It's just a useful sample to review.
Using information which is all publicly available on SBTI’s great website, I first took a general look at momentum of the SBTI as a whole.
Here is, tracked by date of commitment, or the date on which targets were approved:
Looking at the dates on which companies either committed or had their targets approved doesn't quite give us a full picture of growth of the SBTI. Those with targets approved (teal) had up to 24 months from their commitment date to do this, so the volume of the dates is shifted to more recent months, making growth look more extreme.
This aside, there has definitely been a shift in momentum of new companies making commitments as of Q3 2019 - this is an initiative on the up with positive momentum.
There were some companies who committed to have targets approved more than 24 months ago. A few of these were in the financial sector and had been working with SBTI on the newly launched financial sector pathway. There were also some well-known names in that group who were overdue having targets approved, it'll be interesting to see if any start to get removed by the SBTI as time passes. I'm sure the internal challenges of target setting and sign-off have delayed a few.
Company Headquarters (HQ) - region
Next I looked at where these 1,000 companies were based (by HQ). Was the US behind the rest of the world?
It was very clear in October that Europe has a leading role in the SBTI to-date. There will no doubt have been many factors behind this.
At a glance, given the market capitalisation of the US and Asian stock exchanges, compared to European ones, it seemed that, at the time of writing, Europe was very much overrepresented, if we only considered where large businesses in the world are headquartered. So, perhaps pulling out of The Paris Agreement had slowed progress.
Looking at global climate attitude surveys from the likes of YouGov and Pew Group, there was also not a clear match with the regional differences, suggesting that consumers are not the ones driving regional variation.
Without doing a full analysis, I would put this down to the prominence of the initiative itself (i.e. awareness in each region), or the current regulatory environments. European countries tended to be further ahead with their GHG commitments on the whole, which drove the difference in the figures.
Six months on, and with SBTI currently at over 1,400 companies having committed to or set targets, North America now sits at 250 companies - an increase of 28%. There have been 14 US companies committing to SBTIs during Biden’s reign alone. A further 10 have now set their targets, though as mentioned previously, they could have begun this process ahead of his election. Following on from the summit on the 22nd and 23rd April, there will no doubt be calls for more to follow. The President has been urged by many to reinstate climate policies which were rolled back by his predecessor.
From a business perspective, US companies will now know even if one administration pulls out of the agreement, in all likelihood they will end up re-joining. You'd hope that it therefore makes strategic sense to stay aligned with the goals as many plans and investments have a longer timeframe than the four- to eight-year terms of presidents.
For context, since ambitious CO2 targets were announced by Japan, China, and South Korea at the tail end of 2020, a further 37 companies that fall under Asia on the SBTI website have now added their commitments, meaning a 30% increase, and demonstrating that the regulatory environment may indeed be a key factor. Europe meanwhile has increased by over 200 companies (a 49% increase), with 82 businesses committing to targets from February to March - Biden’s first full two months in office.
Looking at the commitment and target approval dates by region broadly matched the pattern of all regions originally, however while there did not seem to be any material difference in growth rate in October 2020, recent months have seen Europe’s growth increase by almost half, while the North America still lags behind Asia in terms of overall growth. This is something that I am sure President Biden will be keen to rectify over the next six months.
Finally, I briefly looked at the sectors that the first 1,000 or so companies who committed to the SBTI represent. As above, this highlighted visually how banks and finance companies had been waiting for the updated guidance before setting their targets. Recent figures have started to see these companies' commitments arrive steadily. It also flagged that some major industries key to carbon reductions were under-represented.
Hopefully, many major emitting industries will fall into the upstream emissions of other signatories with Scope 3 targets, and influence on these sectors can still be exerted by a concerted effort from all leaders in attendance on Earth Day.