Nearly Half of the World’s 100 Largest Private Firms Unprepared For New Climate Regulations: Report

Two-fifths of the world’s largest 100 private firms (40) have net zero targets, compared with 70 /100 of their publicly-owned peers, finds a report from Net Zero Tracker (NZT).

The latest NZT analysis, ‘A Distinctly Private Pursuit: Not going net zero’ compares the readiness of major companies for incoming climate regulation. It shows a widening gap between the climate targets of the world’s largest 100 private companies, compared with their publicly-listed equivalents – creating an ‘unlevel playing field’ for companies, investors and policymakers alike.

40 private companies, with combined annual revenues of more than US$2 trillion, have net zero targets (from almost US$5 trillion of aggregate annual revenues earned by the top 100).

By comparison, seven-tenths of publicly-listed firms (70), with combined annual revenues of US$13 trillion, have net zero targets (from a total of US$18.1 trillion of aggregate annual revenues earned by the top 100 public firms).

In October 2022, less than one-third (32) of the largest 100 private companies had net zero targets. Eighteen months later, there are only eight new net zero targets.

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.”

“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.”

The analysis reflects on the new EU Corporate Sustainability Reporting Directive (CSRD) and Corporate Sustainability Due Diligence Directive (CSDDD). The CSRD requires about 50,0000 companies (both public and the largest private firms) to report their climate impacts, including value chain greenhouse gas emissions (Scope 3), and action taken to address them, from January 1, 2025.

The 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 transition plans to take emissions to net zero later this century.

Beyond the EU CSRD and CSDDD, the direction of travel is towards increasing climate regulation. 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.

Progress in China

Despite the trend, only 52/100 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.

The 48 private firms operating without targets collectively have annual revenues of US$1.7 trillion. Their reluctance to set targets hamstrings the ability of countries to deliver ‘whole economy decarbonisation’ to meet national net zero goals, of which 75% are enshrined in legislation or policy.

Amongst the high-emitting sectors, the analysis found that listed companies are more than twice as likely to have net zero commitments, compared with private firms. 34% (10/29) of high emitting private firms have now set net zero targets, compared to 74% (29/39) of publicly-listed high emitters.

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.

The largest high-emitting private companies without a net zero target are Trafigura Group (annual revenues of US$231bn, Singapore); Koch Industries (US$125bn, US); Amer International Group (US$90bn, China); and Pacific Construction Group (US$79bn, China).

The total lack of net zero targets set by private fossil fuel companies runs counter to the global commitment delivered at COP28 to transition away from fossil fuels.

As well as trailing on net zero intent (the quantity of targets), the world’s largest private firms also lag behind their public counterparts on markers of integrity and transparency for targets, based on key indicators, such as creating detailed plans, covering all emissions, and setting near-term interim targets. For example, on transparency, 58% (23/40) of the largest private firms do not specify whether they intend to use carbon credits, which is widely considered as bad practice.

Interestingly, of the 16 private companies based in China, 25% (4) now have a net zero target, up from only 6% (1) in 2022. The uptick in net zero-committed private firms, which includes TikTok owner, ByteDance, means the group of private companies are nearly on a par with China-based public companies, 29% (5/17) of which have net zero targets.

The analysis conducted by the Net Zero Tracker consortium compares the climate targets of the world’s largest 100 privately-owned companies, with those set by the 100 largest publicly-owned companies, within the Forbes Global 2000.