Private companies are falling far behind publicly listed companies in addressing net zero emissions, despite a growth in climate and ESG regulation around the world. This is according to a new study from Net Zero Tracker, which shows a widening gap between the climate targets of the world’s largest 100 private companies, compared with their publicly-listed equivalents.
Only half of the world’s 100 largest private firms have set a net zero or emissions reduction target, compared with the vast majority (82) of the 100 largest publicly-owned firms. This includes giants as France’s hypermarket chain E.Leclerc, Spain’s supermarket chain Mercadona, Germany’s second largest bank DZ Bank or largest pharma retailer Phoenix Pharma.
None of the private fossil fuel companies investigated (8) has pledged a net zero target, compared with 76% (13/17) of public companies in this sector. It’s worth noting that the largest high-emitting private companies without a net zero target are Singapore’s Trafigura Group (annual revenues of $231 billion); US-headquartered Koch Industries ($125 billion); China’s Amer International Group ($90 billion) and Pacific Construction Group ($79 billion).
Together, the 50 private firms operating without targets collectively have annual revenues of $1.8 trillion.
While publicly listed companies are expected to respond to new regulations through their statutory reporting, private companies have no such process holding them to account.
John Lang, project lead, Net Zero Tracker (The Energy and Climate Intelligence Unit), said: ‘If ‘sunlight is the best disinfectant’ for climate inaction, most private firms are operating nocturnally — beyond the glare of the civil scrutiny, investor pressure and disclosure requirements faced by listed companies.’
This results in a dual challenge – a potential threat to net zero transition but also a risk blindspot for those private companies unprepared for increasing climate regulation, both at home and across the global supply chain.
Private firms will be subject to new climate risk regulation
Net zero regulation is in place across 140 countries and even though those regulations may vary in degrees of robustness, the UN estimates that roughly 88% of global emissions are covered in some way.
While publicly listed companies are expected to respond to new regulations through their statutory reporting, private companies would appear to have no such process holding them to account.
Much new climate regulation is however designed to stimulate ‘whole economy’ decarbonisation. As Lang points out: ‘New measures being introduced in regions from the EU, to the US and Singapore — some with extra-territorial dimensions, are changing the rules of the game. What goes on in the EU does not stay in the EU. And what goes on in a regulated public company will not stay in a public company: one company’s indirect emissions are another’s direct emissions.’
What the report underlines is the growing transition risks for those companies that are failing to address their impacts, whether from emissions, water use, nature dependencies etc. Ignoring a regulatory landscape that is increasingly focused on mandated climate action looks foolish at best.
Twenty-four of the 100 private companies assessed by Net Zero Tracker are EU-based and despite upcoming mandatory requirements for reporting, yet four out of that 24 firms have not set any emission reduction targets at all, the metric which is intended to provide the supposed ‘guardrails’ for decarbonisation.
In the EU , the Corporate Sustainability Reporting Directive (CSRD) does not distinguish between public and private companies – all companies above a certain size have a ‘duty to disclose.’ That means from that January 2025, CSRD will require about 50,0000 companies (which include the largest private firms) to report their climate impacts, including value chain greenhouse gas emissions (Scope 3), and the actions planned to address them.
If companies wish to do business in the EU, they are going to have to comply with the regulations.
In the same way the Corporate Sustainability Due Diligence Directive (CSDDD), once effective, is likely to require more than 5,000 companies (both public and private) to provide information on the integrity of their strategies for achieving net zero emissions or other deep decarbonisation targets. Notably, the CSDDD is expected to require companies to have created transition plans to take emissions to net zero later this century.
Beyond the EU’s CSRD and CSDDD, the direction of travel is towards increasing climate regulation around the world. For example, California’s Climate Corporate Data Accountability Act will require many large companies operating in the world’s fifth-largest economy to report both emissions and climate-related financial risks. Companies with over $1 billion in revenue in the State will come under disclosure requirements.
It’s time for private firms to pay attention
There has been improvement in climate commitments from some corporate leaders but the reality is that the achievement of net zero goals will require whole economy transition and the private sector must play its part.
As Catherine McKenna, chair of the UN Secretary-General’s High-level Expert Group on Net-Zero Commitments, said: “The policy is unequivocal: three quarters of national-level net zero targets are already enshrined in law or policy. The economics is exponential: $1.7 trillion was invested in clean energy in 2023, 65% more than into fossil fuels.
“The defining race of these upcoming decades – shaping the net zero economy – will not be won through baby steps, but through bold and credible leadership.”
That means that it’s time for private listed companies to get in step with the low carbon transition, and soon.
