Green Preening: Industry Backs Climate Rules That Discourage Sustainability
And exposes the suspect accounting behind net-zero climate pledges
The US is poised to enact rules that could require corporations to lie about their ability and desire to reduce their greenhouse gas emissions. It sounds absurd, but such is the state of America’s climate policy in 2024, and particularly new rules promulgated by the Securities and Exchange Commission (SEC).
The rules are aimed at ensuring transparency and accountability from publicly traded companies that pledge to reduce their greenhouse emissions. Rather than promoting emissions cuts, however, the SEC is likely to discourage corporations from even pledging to shrink their carbon footprint, because the rules expose those firms to a greater risk of shareholder activism, enforcement action and litigation.
Oddly, some of the biggest corporations say the rules don’t go far enough because they allow companies to purchase carbon offsets to help meet their emission- reduction targets.
If our climate policies continue in this direction, they will create an utterly corrupt carbon market where some companies make extravagant sustainability pledges they can’t hope to fulfill, while others make none at all. And nobody takes any meaningful steps to reduce their CO2 emissions.
The corporate do-gooder crusade hits a wall
Governments, environmental groups and activist investors have put significant pressure on corporations to publicly pledge to achieve carbon neutrality within the next two decades. Companies see these pledges as a way to satisfy environmentally conscious investors and regulators; Microsoft, Amazon and Unilever are typical examples of major firms that have promised to reach net zero between 2030 and 2040.
These climate pledges are fodder for self-aggrandizing press releases, but there’s a serious problem: net zero is a fairytale. According to the International Energy Agency (IEA), reaching net zero emissions by 2050 would require rapid and widespread (read: “impossible”) deployment of solar and wind energy, as well as the development of new technologies that aren’t yet commercially available.
“In the net zero pathway,” IEA writes, “global energy demand in 2050 is around 8% smaller than today, but it serves an economy more than twice as big and a population with 2 billion more people … By 2050, almost 90% of electricity generation comes from renewable sources with wind and solar PV together accounting for nearly 70%.”
With a marketplace dominated by energy-intensive tech industries still dependent on fossil fuels, no company can follow this pathway and remain profitable. These firms have maintained their climate-neutrality fiction by investing in carbon offsets, projects (like tree planting and renewable energy development) that are supposed to cancel out their greenhouse emissions in the coming decades.
This is hypothetically possible, but carbon offsetting hasn’t worked well thus far for a variety of reasons. What happens, for instance, when a company pays to plant trees that burn down during a wildfire in the years ahead? The carbon they attempted to offset is rapidly re-emitted into the atmosphere.
The carbon offset conundrum
The problem is magnified under the new SEC rules because companies that have voluntarily adopted climate pledges must report their progress, which will expose them as unreachable. Additionally, some corporations are calling for even stricter rules that don’t allow firms to utilize carbon offsetting to even approach their net-zero targets.
Eyla Ertur, head of sustainability for fashion retail giant H&M, championed this radical perspective in a recent interview with the Wall Street Journal. “Allowing companies to replace decarbonization action with the purchase of credits would ‘deter the investments and innovation we need to achieve systemic change,’” she declared.
With no viable tools to help them get closer to net zero, corporations are left with two options under the current circumstances. First, they can make unreachable climate pledges and hope to fend off accusations of “greenwashing” in court. H&M successfully defeated one such lawsuit last summer and promptly amped up its climate crusade, congratulating itself for switching to more “sustainable” suppliers and demanding that every other company do the same.
This is nothing more than accounting fraud, but with carbon molecules instead of dollars. Buying polyester made from recycled clothing instead of recycled water bottles, as H&M has pledged to do, isn’t “decarbonizing”; it’s promising that your suppliers will decarbonize. But recycling and washing polyester consumes a ton of energy and remains “a major source” of plastic pollution. And that means H&M has merely shifted the carbon burden off its books.
Other firms, like meatpacking giant JBS, aren’t having as much success with this strategy. The company is still battling a lawsuit brought by New York attorney general Leticia James for having "no viable plan" to reach net zero by 2040, though nobody else has such a plan either. The firm is also facing down lawsuits from its own investors on the same grounds.
The second option is to make no climate pledge of any sort. If the SEC rules punish you for setting emission-reduction targets–to the point of threatening your company’s survival–there is zero incentive to set a target, let alone actually cut your carbon footprint.
The way forward
There’s actually a third option as well. Instead of forcing companies to lie about their climate targets or make no pledges at all, we could abandon the net-zero fantasy and incentivize industry to reduce their emissions to reasonable levels with existing technology.
For instance, animal farms–which produce essential ingredients for the cosmetics H&M sells– are increasingly capturing methane and carbon from animal manure and using it to help power their operations and vehicles. This directly cuts the amount of methane released into the atmosphere; it also reduces the use of fossil fuels for energy.
Indeed, the technology so thoroughly cuts methane emissions that “it's sometimes considered a ‘negative-carbon’ fuel that cancels out other greenhouse emissions,” NPR reported several years ago. Importantly, recycling biogas (as it’s called) becomes more economically viable and keeps more greenhouse gasses out of the atmosphere as animal agriculture expands.
The same could be said for wood and plastic production. Increasing the use of wood products (which store CO2), enables the forestry industry to plant more carbon-hungry trees. Producing additional bottled water generates more PET plastic that can be recycled into polyester for clothing—a process H&M (and the fashion industry more generally) relied on for decades before the litigation threat reared its head.
Conclusion
Put simply, we can take practical steps to protect our environment, or we can punish the private sector for making promises they could never keep but were essentially forced to make. The first option is a real solution, the second is a delusion.