Climate pledge rating
What is a “climate pledge rating”?
Besides countries and individuals, companies also must drastically reduce their greenhouse gas (GHG) emissions in order to limit global warming to 1.5°C. In recent years, the majority of international corporations have come forward with pledges to become “carbon neutral”, “carbon-negative”, to reduce their emissions to “net zero”, or to switch to “100% renewable energy”.
However, interpreting a company’s climate pledge and their real impact is often complicated, takes time and effort, and is hindered by lack of transparency and information. With the introduction of our “climate pledge rating” we want to bring transparency to companies’ climate response and enable our users to better understand how each company contributes to the fight against the climate crisis.
The “climate pledge rating” shows our evaluation of the company’s publicly available response to the climate crisis, such as pledges to reduce or offset emissions. The rating takes into account the credibility and ambition of these pledges, and their implications for global warming. To make the rating clear, we have given each response a grade on a scale of A–F, which you can see next to your search results. The best possible rating is A which stands for a “Leading” response and the worst possible rating is F which signifies a “Failing” response.
In the case of large conglomerates the climate pledge evaluated will be that of the parent company. For example, in the case of YouTube we will estimate the response of Alphabet Inc., the company behind YouTube and Google, and show that next to your search results.
We assign climate pledge ratings based on the web address of an organisation. For instance, on a link to a YouTube video with the web address www.youtube.com/example we will show the climate pledge rating for YouTube.
How is a “climate pledge rating” determined?
The Technical University Berlin and Ecosia evaluate companies jointly based on their publicly available responses to climate change, which are usually made in the form of climate pledges or included in their sustainability reports. This causes the company’s rating to be influenced by the information we can find online. The actual impact or efficiency of a company’s emission reductions cannot therefore be included in the evaluation. However, if there is credible evidence that a company is not making progress towards reaching its climate targets, we will consider downgrading the company’s rating. An exception is made for the highest “Leading” ranking, which considers whether a company is making progress in emission reduction. We acknowledge that some companies’ business models are more sustainable than others, e.g. eBay provides users with an online marketplace that enables them to buy and sell used items, which helps reduce resources and emissions that would occur during the production of new products. However, our rating does not evaluate business models, and focuses instead on companies’ commitments to reduce their direct and indirect emissions. Therefore we acknowledge that the “climate pledge rating” is a limited look at the complex topic of climate responses and the differing challenges companies face.
What is the rating scale for climate pledges?
To evaluate companies’ climate responses, we use a scale from A to F, wherein A is the highest and F the lowest grade.
Grade A or “Leading response”: A company that pledges to reduce its overall emissions by at least 50% and reach net zero emissionsby 2030. On track with progress towards targets.
This is the highest possible rating. If everyone followed this approach the chances are high that global temperature increase could be limited to 1.5°C. For companies to receive this rating they must pledge to reduce their overall emissions (direct emissions, energy emissions, and indirect value chain emissions) by at least 50% and offset the remaining emission by 2030. Additionally, they must provide credible evidence that they are on track toward reaching their emission reduction targets. Such evidence can be in the form of third-party verification or credible sustainability reports.
Grade B or “Good response”: A company that pledges to reduce its overall emissions by at least 50% and reach net zero emissionsby 2030. No evidence to show progress towards targets.
Companies with the B rating have good and credible climate commitments. If everyone followed such targets and fulfilled them, the chances are high that global temperature increase could be limited to 1.5°C. For companies to receive this rating they must pledge to reduce their overall emissions (direct emissions, energy emissions, and indirect value chain emissions) by at least 50% and offset the remaining emission by 2030.
Grade C or “Modest response”: A company that pledges to reduce its overall emissions and reach net zero emissionsl by 2030 or pledges to reduce overall emissions by at least 50% and reach net zero by 2050.
The “Modest” rating is given to companies that aim to reduce their overall emissions (direct emissions, energy emissions, and indirect value chain emissions) and offset the remaining emission by 2030. This also includes companies that clearly pledge to reduce their overall emissions but don’t have clear, publicly available reduction targets for all emission scopes and companies that pledge to reduce overall emissions by over 50% by 2050. A company that has targets to reduce overall emissions by 2030 but no direct net zero pledge also receives a “Modest” rating since we prioritise emission reduction over offsetting.
Grade D or “Weak response”: A company that pledges to reduce some emissions and reach net zero emissionsby 2050. No clear and credible plan for reducing emissions across the entire value chain.
A “Weak” rating is given to companies that pledge to reduce emissions andreach net zero emissionsby 2050, but don’t state concrete reduction targets for their overall emissions. Additionally, their goal to reach net zero emissions is so far in the future that it might be too late to prevent global temperatures from rising dramatically.
Grade F or “Failing response”: No publicly available climate pledge and no evidence of credible climate action.
Companies receive the “Failing” rating if we could not find any evidence of a credible climate response or if the responses are far from having any positive impact on climate change. If everyone followed such a climate response, global temperatures would rise far above 1.5°C and have devastating consequences for human life and ecosystems within this century.
How can companies measure and reduce their emissions?
Each company produces a different set of emissions, depending what products and services it offers, which suppliers and energy sources it uses etc. To reduce emissions, a company first needs to know where those are emitted. The most established tool for companies to take inventory of their emissions is the GHG Protocol Corporate Standard which provides requirements and guidance for companies. The GHG Protocol classifies a company’s Greenhouse Gas emissions into three scopes.
Scope 1: Direct emissions from sources owned or controlled by the company, e.g. fuel used by company vehicles
Scope 2: Indirect emissions from the generation of purchased energy that the company uses
Scope 3: All indirect emissions (not included in scope 2) that occur in the value chain of the reporting company, including both upstream and downstream emissions – in other words, all emissions from raw material extraction to the use of the end product. For many companies, Scope 3 emissions account for the largest share of their carbon footprint but they have less control on how Scope 3 emissions are addressed.
To simplify, we use the term “direct emissions” when referring to Scope 1 emissions, “indirect energy emissions” for Scope 2 emissions, and “indirect emissions” when referring to the company’s Scope 3 emissions.
While it is comparatively easy for most companies to measure their direct emissions and indirect energy emissions, indirect emissions occurring along the entire value chain are often difficult to measure and even harder to reduce. However, for many companies these indirect emissions make up the largest part of their overall emissions. For example, the audio streaming provider Spotify states in its 2021 “Equity and Impact Report” that 99% of its emission are occurring along the company’s value chain.
Scope 3 emissions occur along a company’s value chain, for example through the goods and services the company uses, or by consumers using the company’s end products. The value chain emissions of one company can overlap with the emissions of another company, e.g. the direct emissions of a supplier. However, to ensure a sufficient reduction of emissions, large companies in particular must also measure and reduce their scope 3 emissions, for example by giving their suppliers incentives to reduce their emissions.
Measurements of indirect emissions are often inconsistent and not comparable between companies, as individual companies use different criteria for which emission sources to include in their calculations.
In spite of the challenges, it is vital for companies to reduce all emissions within their scope of influence — including all of their indirect emissions.