Companies in the DACH region delay decarbonization: emissions reduction lags behind previous year
Companies in the DACH region delay decarbonization: emissions reduction lags behind previous year
- Top DAX40, SMI and ATX companies have reduced absolute emissions by three percent, compared to five percent in the previous year
- DAX40 companies show the smallest reductions compared to SMI and ATX
- Total emissions in the automotive sector even increased by nine percent on average
- DAX40 companies without a climate strategy increase total emissions by eight percent
- EU taxonomy: taxonomy conformity does not yet clearly correlate with a reduction in companies' greenhouse gas emissions
The major corporations from the DACH region are still on course for decarbonization. However, the pace has slowed overall and does not correspond to what would be required for a realistic 1.5°C perspective. This is shown by the study “Climate Change – Reporting on Decarbonization” by Kirchhoff Consult and BDO AG Wirtschaftsprüfungsgesellschaft. In the study, the current carbon footprints reported by companies from the top DAX40, ATX and SMI indices for the 2023 financial year were analyzed and compared with reporting for the 2021 and 2022 financial years.
More than half of the companies surveyed have reported a comprehensive carbon footprint over the last three years. During this period, they reduced their absolute emissions by eight percent. There was a five percent reduction from 2021 to 2022 and a further three percent from 2022 to 2023. To achieve the Paris climate targets, global greenhouse gas emissions must be halved by 2030, corresponding to an annual reduction of over four percent compared to 2019.[1] Significant differences exist across the indices, sectors, and scopes regarding emissions reduction. While companies in the textile industry, for example, significantly reduced emissions (-16 percent), total emissions in the automotive sector increased by an average of 9 percent.
Scope 3: highest emissions, lowest reductions, but greatest potential
In Scope 1, companies with a comprehensive carbon footprint reduced their emissions by twelve percent from 2021 to 2023 and in Scope 2 by as much as 20 percent, but only by eight percent in Scope 3. “The fact that the lowest relative reduction was achieved in Scope 3 – accounting for 92 percent of total emissions - clearly shows how challenging it is to reduce emissions in the upstream and downstream value chain. At the same time, we see in the data that ambitious companies can succeed in decarbonization even in challenging value chains,” says Dr. Jan-Ole Brandt, Senior Consultant ESG/Sustainability at Kirchhoff Consult and co-author of the study. “Differences between industries cannot be determined solely by the distinction between typically 'green' and 'brown' industries, as the example of the textile industry shows. The anchoring in the strategy and transparent communication also appears to impact the reduction results,” adds Dr. Brandt.
The following correlation suggests that a high ambition level leads to success in reducing emissions: 17.5 percent of DAX40 companies have not published a climate strategy and show an average increase in their total emissions of eight percent. All other companies have achieved significant reductions on average (-9 percent).
EU taxonomy: taxonomy conformity has not yet led to demonstrable reduction successes
Ambitious and productive strategic approaches are prerequisites for decarbonization success. Theoretically, this should also be reflected in EU Taxonomy data. However, only 34 out of 46 companies that report on their taxonomy compliance in accordance with the legislation, could demonstrate taxonomy-compliant activities. The degree of taxonomy-compliant turnover, investments, or operating expenses is expressed in extreme values close to 100 percent or 0 percent. Companies have no influence, however, whether their business model or sector-specific economic activities are covered by the taxonomy. In terms of taxonomy conformity, only a mixture of extreme values can be identified, which vary greatly between sectors and companies. And where a high degree of taxonomy conformity can be identified, there is currently no correlation to a corresponding reduction in greenhouse gas emissions.
“For now, we can only speculate about the interpretation of this missing correlation. It may simply be too early for taxonomy conformity to be reflected in successful reductions in greenhouse gas emissions. In addition, the hurdles of the taxonomy conformity criteria are high and complex to implement.”, says Janina Seufert, Manager Sustainability Services at BDO and co-author of the study.
About the study
The study “Climate Protection - Reporting on Decarbonization” is the second part of a series of studies published jointly by Kirchhoff Consult and BDO. It examines the non-financial reporting of large stock corporations in the top German, Austrian and Swiss indices (DAX40, ATX and SMI). Their annual and sustainability reports published up to the reporting date of March 31, 2024, serve as the data basis. The first part of the study is entitled “Diversity – Reporting on diversity”.
All the results can be found here in the full study (available in German only).
[1] Intergovernmental Panel on Climate Change (IPCC)