Mars bites at global warming with 2050 pledge

Greetings from London where I have been visiting the Financial Times’s headquarters after a long absence. It’s great to be back in the UK and hear all the chatter about the upcoming COP26 summit in Glasgow (and spend time with Simon, our new Moral Money member in London).

But as I look back at the past two-and-a-half years since Moral Money launched, there is one notable shift: whereas companies used to bombard us with news about their ESG initiatives and credentials, these days they are a little more circumspect. Why? I suspect it is because a mood of maturity and oversight is now in the air. Companies know that merely talking about ESG is no longer good enough, since that will attract scrutiny; they also need to take action — or face calls of greenwashing, woke-washing and much else.

I hope this does not deter corporate leaders from talking about the reforms they are implementing. We are all on a journey and it is welcome that more institutions are embracing ESG. But it is also good that scrutiny — and standards — are rising. In that respect, take a look at today’s story about Mars, the consumer giant, and our interview with David Craig, the co-chair of the new Taskforce on Nature-Related Financial Disclosures — and tell us what you think about this rising surveillance. — Gillian Tett

Mars hits out at net zero targets, while setting its own

As mid-century “net zero” targets have gushed forth from governments and companies around the world of late, we’ve heard a growing number of complaints about the overwhelming emphasis on these long-term goals (see Smart Reads below for a useful new analysis).

Now the snacks and pet food giant Mars has joined the chorus of scepticism about net zero pledges — even as it unveiled its own.

Mars — which is best known for its eponymous chocolate bar, but now earns a huge chunk of its revenue feeding dogs and cats — yesterday joined a host of other major corporations by promising to eliminate its net carbon emissions by 2050. Unlike some of those other groups, its calculations will include the carbon footprint of its whole supply chain and the use of its products, as well as its direct operations.

In the very same announcement, the company levelled a broadside at peers that have made similar pledges — warning that the “gaps” in other pledges risked undermining their credibility, and the broader push to cut emissions. It also nodded to increasingly vocal concerns — including this interesting take from a trio of European scientists — that the focus on long-dated targets could reduce the sense of urgency around emissions cuts.

Moral Money took the opportunity to grill Mars executive Barry Parkin on why his company’s climate vows should be given any more credence than those of other big corporations. British-born Parkin — who wears “chief officer” hats for both sustainability and procurement at Mars — started by pointing to his own role. Some chief sustainability officers face suspicions that their function is primarily ornamental. By giving the CSO title to the man in charge of Mars’s entire global supply chain, Parkin argued, the company had made clear its commitment to serious change.

He also highlighted the company’s revamped pay system for its top 300 executives, who have a piece of their bonuses linked to emissions reduction goals. That’s pretty common at global companies these days. But since the start of this year, Parkin said, Mars had given emissions targets the same weighting as conventional profit-related goals in bonus calculations.

Mars still has far to go to win the trust of environmental groups. When it claimed last year to have achieved a “deforestation-free palm oil supply chain”, it sparked a backlash from the likes of the Rainforest Action Network, which said there was no reliable evidence for the claim, and accused Mars of “empty words”. The latest words from the company do at least show an awareness of the rising pressure on companies to live up to bold-sounding promises. We’ll be watching closely to see if Mars can manage it. (Simon Mundy)

Nature task force meets to plan next steps

If you think assessing a company’s carbon footprint seems an imposing challenge, spare a thought for David Craig.

Craig — a former McKinsey partner who went on to run the financial data group Refinitiv — is now tackling one of the thorniest tasks in the environmental, social and governance (ESG) space: building a reporting framework for corporate risks and impacts across the entire natural world.

Alongside the Tanzanian lawyer and biodiversity expert Elizabeth Maruma Mrema, London-based Craig is the co-chair of the Taskforce on Nature-Related Financial Disclosures, which has given itself two years to put together a system for companies worldwide.

The TNFD — spearheaded by a coalition of major global corporations, with funding from governments and NGOs — is openly modelled on the Task Force on Climate-Related Financial Disclosures, an initiative led by Mark Carney. But the newer project ranges far beyond carbon emissions and climate change, covering everything from industrial water consumption to the disruption of animal habitats and the costs of species extinction.

“There isn’t yet an agreed set of nice, simple numbers to measure the impact on nature,” Craig told Moral Money. The confusion over how to report such impacts has eased pressure on businesses to do so. While a rapidly growing number of companies are now publishing their estimated carbon emissions, Craig noted, far fewer are giving any serious account of their broader environmental impact.

That matters. As Craig pointed out, an overly narrow focus on carbon emissions alone can lead to nasty collateral damage. Planting a single tree species at huge scale can absorb carbon galore while destroying local biodiversity. Lithium mining can devastate an area’s water resources even as it provides the vital material to power zero-emissions electric cars.

Today, the task force will hold the first meeting of its 30 members, representing companies ranging from HSBC and BlackRock to Nestlé and Tata Steel. The body plans to release a preliminary draft version of its framework early next year, with the final document to follow in 2023.

Craig stressed that, like the TCFD, this project was not aimed at setting down a new set of rules, but creating a tool that regulators and policymakers could use to do so. While no reporting framework could ever fully capture such an impossibly complex range of risks and impacts, he insisted, the push for additional transparency in this field was direly needed. “We can’t let the perfect get in the way of the good,” Craig said. Watch this space to find out how he and his Taskforce teammates get on over the next two years. (Simon Mundy)

Tips from Tamami

With “Mr status quo” Fumio Kishida as Japan’s new prime minister, green advocates are concerned whether the country’s path toward decarbonisation will face a fresh challenge.

Leading climate change warriors in Japanese politics such as Taro Kono and Shinjiro Koizumi — the vaccines minister and the environment minister respectively in the Yoshihide Suga administration — were not selected for positions in the new cabinet. Instead, Koichi Hagiuda, trade minister, and Tsuyoshi Yamaguchi, environment minister, will lead the country’s energy and climate change policies.

Hagiuda, who has supported conventional energy sources such as fossil fuels and nuclear power, is unlikely to make a strong push for decarbonisation, said Mika Ohbayashi, director of the Renewable Energy Institute.

Yamaguchi said that the environment ministry would take a “realistic” approach on decarbonisation under his guidance. “[We] would like to hear the opinions from the businesses,” he said on his first day in the office.

At this point, who will represent Japan’s delegates on site at the COP26 in Glasgow, is unclear. Kishida told reporters earlier this week that he would attend the meeting remotely. He called a general election on October 31, the weekend when the gathering of global leaders on climate change begins.

“Ambitious climate goals . . . may take a back seat in Kishida’s administration,” said Kenji Fuma, chief executive of ESG advisory company Neural.

Kishida has committed to keeping nuclear power as an energy option while public trust in the technology was severely damaged after the 2011 Fukushima disaster. However, he has not outlined clear guidance or a timeline on how to achieve a nuclear power revival.

Kishida said he would like to showcase “new Japanese capitalism” with a strong focus on redistribution of wealth, showing a sign that the 100th prime minister is focused on the “S” rather than “E” among ESG factors. But learning the details of Kishida’s agenda will take time.

“We are at a precarious timing where the government has indicated that its current priority is to lead the economic recovery from the Covid-19 pandemic while also preparing for the upcoming elections,” said Kei Okamura, director of investment stewardship of the Japanese equities team at Neuberger Berman.

“Hence, it may be weeks, if not months, before we get any clarity on the current government’s stance on these topics [such as climate change and corporate governance],” said Okamura.

Chart of the Week

Women hold almost a quarter of board room positions globally, according to Credit Suisse’s recent report, which analysed the gender breakdown of 33,000 senior executives from more than 3,000 companies.

The percentage of women on boards around the world increased by 8.9 percentage points from 2015, the report found.

“Although we know for sure gender diversity within management and the boardroom is increasing globally, there is still plenty of room for improvement, particularly in emerging and notable Asian countries,” said Richard Kersley, head of global thematic research at Credit Suisse.

Smart reads (and one listen)

• The outgoing head of Scottish Mortgage Investment, Baillie Gifford’s flagship fund, is departing with some harsh words for ESG screening. James Anderson, manager of the £21.3bn fund, blasted “the ESG dogmatists, who have come to enjoy such unjustified influence” for the way screens hurt Tesla, one of the fund’s top holdings. “Tesla would have changed the world for the better if it had been a normal company paying heed to the standard governance codes,” Anderson said.

• Meanwhile, Kelly Sims Gallagher — a Tufts University professor who served as a policy adviser in the Obama White House — has given a helpful analysis of the shortcomings of “net zero” targets in Foreign Affairs. “Politicians’ pledges of dramatic long-term reductions should not let them off the hook for their failure to achieve more modest progress in the short term,” Gallagher writes.

• Please listen to our colleagues Derek Brower and Attracta Mooney on the latest edition of the FT’s Behind the Money podcast series: Inside ESG. Derek and Attracta go inside the Engine No 1 proxy battle at ExxonMobil.

Recommended reading

• Allbirds walks back ‘sustainable IPO’ claims ahead of market debut (FT)

• CSR careers finally come of age — and are breaking sector boundaries (FT)

• A changing boardroom climate: insurance planning with ESG in mind (Reuters)

• Climate-friendly investment funds are a scam (New Republic)

• Crop of agtechs aim to overturn Brazil’s image as eco villain (FT)