Engagement on the topic of "Net Zero"
We are extremely pleased that your enterprise is considered to be a pioneer in the field of climate protection. Could you provide us with more information on your efforts to achieve your climate-related targets?
Schneider Electric, Union Pacific
In order to achieve a real reduction in greenhouse gas emissions, companies have to have a comprehensive strategy. This must take into account the emissions generated by the company’s own activities (known as Scope 1 and Scope 2 emissions) and upstream or downstream emissions (known as Scope 3 emissions). Companies thus need a well-founded climate strategy featuring a comprehensive approach that covers all business activities.
The French electronics group Schneider Electric has defined several targets in this regard. It is often the case that the largest part of the emissions stems from upstream supply chains. These include the emissions of greenhouse gases from transportation or from the production of essential raw materials for its own products. In order to reduce these emissions in particular, Schneider Electric has set the target of reducing its total Scope 3 emissions by 25% as of 2030, compared to the 2021 basis. To achieve these ambitious goals, the group has taken a number of measures. Schneider Electric is adopting a proactive approach to its own supply chain when it comes to decarbonisation. The company has contacted its 1,000 largest suppliers to address this issue. By 2025, the share of sustainable materials in all products is slated to reach a level of at least 50%. This applies to steel, aluminium, and plastics. Furthermore, the use of one-way plastic packaging is to be discontinued. By 2050, Schneider Electric intends to reduce its Scope 1, 2, and 3 emissions by 90%, also taking 2021 as the base year.
The US railway company Union Pacific wants to achieve climate neutrality by 2050. To reach this ambitious goal, the company is taking a pragmatic approach, and thus intends to continue using diesel-powered locomotives. Every year, 300 of these locomotives are upgraded to use less fuel and be generally more efficient. Additionally, biodiesel and synthetic fuels will gradually replace fossil fuels for diesel applications. In response to our question about hydrogen-powered trains, Union Pacific noted that these were not economically viable, since a hydrogen-powered locomotive needs seven cars just to transport its own fuel in order to reach the same range as a diesel locomotive.
Have you set specific intermediate targets or is there a timeline? Have you achieved your targets to reduce greenhouse gas emissions so far?
As investors, it is very helpful for us when companies communicate their climate targets clearly and comprehensibly. This improves our ability to evaluate and monitor achievement of the targets, also in relation to the targeted timeframes. In our shareholder engagement activities, in addition to inquiring about companies’ plans, we also ask about what targets they have actually achieved.
Companies in the forestry industry bear particularly great responsibility when it comes to climate neutrality. For example, the US company Weyerhaeuser, which is the largest international company active in this area, has announced that it wants to reduce the greenhouse gas emissions from its wood products division by 4% to 5% annually.Plans call for EBITDA in the firm’s internal NaturalClimateSolutions business to grow to USD 100 million by 2025. Weyerhaeuser is a member of the initiative The Climate Pledge and has thus undertaken to stop emitting greenhouse gas after 2040.
Raw materials and the production of materials tend to be energy-intensive processes, which are responsible for above-average amounts of greenhouse gas emissions. The broadly diversified conglomerate Johnson Matthey specialises in refining precious metals and the production of chemical catalysts.In its 2022 annual report, for each of its divisions the company specifies clear targets through to 2040 on its pathway towards reaching climate neutrality.For example, one of Johnson Matthey’s intermediate targets is to cover at least 60% of its energy needs for all business divisions using renewables by 2025. After 2025, the focus will specifically be on supplying clean energy to the company’s production facilities in India and China.
How do you assess your technological progress in lowering greenhouse gas emissions compared to your competitors?
Technological progress is one of the biggest drivers of the transformation into a climate-neutral economy. Sustainable technologies can offer a key market advantage over competitors and are thus more and more in the focus of corporate strategies. Companies’ internal goals can promote innovation and make a valuable contribution to their sustainable development.
The Dutch chemicals giant AkzoNobel views itself as a climate leader in terms of reducing carbon emissions in comparison to its competitors. AkzoNobel was the first paint and coating company to set validated, scientifically-based targets for the reduction of carbon emissions for itself.
Most of the companies we contacted did not want to comment on how they view their competitors.
Are you participating in any external initiatives which require you take action in the field of achieving net zero? If so, what are the features of these initiatives?
Initiatives that require companies to act sustainably are often a good starting point for enabling an honest review of sustainability factors and thus preventing greenwashing.One example for a reputable initiative is the Science Based Targets initiative (SBTi). The Norwegian energy company Scatec has taken the SBTi’s proposals as the basis for its climate targets.SBTi defines and promotes demonstrated practices in setting science-based targets, offers resources and pointers for reducing obstacles for the introduction of such, and provides independent auditing of climate targets that companies have laid down.
In the field of finance, the Net Zero Asset Managers initiative is one of the most well-known initiatives for the support of tangible climate targets. Along with Raiffeisen Capital Management, the insurance company Northern Trust is also a member of this initiative. Together with other companies, Northern Trust is also participating in Climate Action 100+, which uses a joint shareholder engagement process to help move the world’s largest emitters of greenhouse gases towards reducing emissions. Raiffeisen Capital Management is also taking part in this joint initiative (See "The path to Net Zero").
The IPCC released its new report on the state of climate research on 19 March. Are you using the IPCC report as a scientific basis for your sustainability strategy?
Roche, Münchener Rückversicherung
Expertise and information in the field of sustainability can come from many different sources. One of these sources is the annual publication released by the Intergovernmental Panel on Climate Change (IPCC), which also includes proposals and guidelines for resolving the climate crisis for politicians and investors. Raiffeisen Capital Management uses the results of the IPCC as an important source of information in its sustainable investment strategies, but do other companies do this as well?
The Swiss pharmaceutical company Roche employs both internal and external inputs as the basis for its sustainability strategy and targets. Roche describes the IPCC report as “one of the most important scientific publications on climate change”.
For financial services providers, the scenario analyses of the IPCC can provide useful fundamental information for their influence on companies’ position in terms of assets, liabilities, and equity. In its long-term scenarios, the insurer Münchener Rückversicherung uses the climate-related analyses and forecasts of the IPCC. In particular, the IPCC special report on global warming and the sixth IPCC report are of special importance for this German company.
Herbert Perus, Mathias Zwiefelhofer
Sustainability Office, Raiffeisen KAG