Understanding the climate impact of the companies we buy from
Introduction
Today, consumers who are alarmed about climate change have a hard time holding the companies they buy from accountable. As interest in sustainability from consumers surges, a recent survey found that 72% on North American company executives admit that their companies engage in greenwashing. Marketing claims by companies can often be at odds with on the ground reality, and upselling sustainable products to sustainably minded consumers can sometimes have a bigger positive impact on corporate profits than on the planet.
In this article, I document my journey to understand the climate actions of the companies I buy from and share what I’ve learned along the way.
In short, I found that while information about the climate actions of some large public companies does exist, there are huge gaps when it comes to private companies or smaller businesses. Even among large public companies whose investors have pressed for disclosure, the coverage is uneven and information that exists is time consuming to analyze. Despite this, I’ve been able to identify more and less climate friendly alternatives in several areas, and have made changes to what companies I buy from. I’m hopeful that legislation will require additional information disclosure in the future and consumers will join investors in pressing companies to be more accountable for their climate actions.
Personal Motivation
I remember when, after rolling back the much needed Obama era fuel efficiency standards at the federal level, in September 2019 the Trump administration moved to block California’s fuel efficiency rules.
What shocked me at the time was that a number of car companies, including Toyota, which I’d thought of as being pretty progressive on climate, sided with the Trump administration — cynically prioritizing short-term shareholder profits over maintaining a livable climate for our children. The company I had bought my car from, Mazda, was also siding with Trump. A number of car companies including Ford and Honda sided with California. And under intense public pressure, GM and Nissan — who initially sided with the Trump administration — switched sides.
It is then, as I resolved to never buy a Mazda again, that I started thinking about how difficult it is for consumers to be aware of the actions of the companies they buy from. There is substantial evidence that public/consumer pressure works, but without solid and timely information it’s hard to know which brands to buy from and which to avoid & shame on Twitter.
For example, as I searched for a more sustainable bank I saw a giant billboard on the US-101 for BNP Paribas — advertising itself as the “leading sustainable bank”. However, as I dug in, I found out that BNP Paribas was the only major bank to increase its funding for fossil fuel projects in 2020. In fact, they increased it by a whopping 50%. Guess that didn’t make it in the initial marketing brainstorms! And presumably BNP’s stated commitment to not use the funds in your Climate Saving(s) account to “drill the Arctic” apply only to those specific funds and perhaps only literally to the Arctic.
Lets see the data
To start learning about company climate behavior I audited my own purchases and discovered many rich sources of data on the climate relevant behavior of companies behind the brands I buy. First I’ll go over these data sources and considerations for using them. After that I’ll share the actual takeaways I had in each category of purchases.
Emissions
The first question to ask of any company is: what are your emissions? The current state of the art for tracking and evaluating company emission disclosures is a non-profit called CDP. It primarily works with investors to pressure companies into disclosing emissions (it also works with cities). When a company fills out the CDP disclosure form, it goes into detail about its Scope 1, 2, and 3 emissions (defined below) as well as any targets that it has, the governance around them and other related issues. CDP then scores these disclosures.
Scope 1 emissions are the emissions from the fossil-fuels the company burns directly in its operations (including in the vehicles that it owns and operates). Scope 2 emissions are the emissions from the generation of electricity that the company consumes. Scope 3 emissions are the emissions from the use of the company’s products as well as the emissions of the companies’ suppliers. These are frequently the biggest source of emissions for a company.
About 10k companies have had their investors request disclosure via CDP. Of those, 6,500 have disclosed their emissions or have committed to do so in 2022. It’s important to note that CDP doesn’t score the “amount of emissions” or the company’s performance in reducing emissions.
The scoring is focused on the quality of the disclosures, targets, action plans and management practices — not on actual progress in reducing emissions. As a result, there are some pretty legitimate criticism of how CDP scores companies, so it’s important to only use it as one of several signals (or actually dig into the individual disclosures).
Despite any criticism, disclosures are clearly a step in the right direction. This is so much so that the SEC is currently considering requiring all public companies to report their GHG emissions. If this rule goes into effect as expected, we can look forward to a dramatic increase in available data.
Even with the expected SEC action, the focus remains squarely on empowering investors. Consumers don’t currently have any role in how CDP operates or in the SEC’s goals. As a result private companies and smaller businesses do not have much pressure (or appropriate guidance) for disclosing emissions and setting targets. The SME Climate Hub is one effort to address this. It is working to develop an emissions questionnaire and commitment framework for smaller companies. Unfortunately sharing the data publicly doesn’t appear to be part of the plan and there’s minimal uptake so far — a few hundred companies in the US.
Targets
Once we know about a companies’ emissions, we can start asking questions about their targets. Any company can set a target to be net-zero by 2050 with minimal accountability, especially if it’s imprecise about the scopes it is targeting and avoids setting any near term goals.
What makes a good target is:
- Near term (2030 at the latest, ideally sooner)
- Aligned with limiting warming to 1.5°
- Inclusive of Scope 3 emissions
- Supported by concrete planned actions
There are a few different places which track and rate company targets. One great one is the Science Based Targets Initiative. It tracks high quality targets for 2000 companies. Additionally, the UN tracks less strictly evaluated targets from 7.5k companies at this moderately functional dashboard.
Once high quality targets are set, we can ask questions about whether a given company is on track to hit its targets. Shockingly, there is not currently a dashboard that does this. Occasionally a news organization will do one-off analysis on some set of companies and whether they are meeting their goals — here’s one such analysis from 2020 by Bloomberg.
Political Influence
The next area I dug into is understanding the political influence that the companies are exerting for or against climate-friendly policies. The primary way companies exert political pressure is through lobbying. This can be direct lobbying by the company or indirect lobbying by an industry group that the company belongs to and supports. While direct lobbying has to be disclosed, lobbying via industry groups is the dark underbelly of lobbying by companies. This is because industry groups don’t have to disclose membership and companies don’t have to disclose the industry groups they belong to.
Industry group membership is one area where tech companies end up not looking too good. Despite overall being mostly ahead of the pack on emission disclosures and progress to net-zero, large tech companies contributed to funding the campaign to kill the 2021 climate bill through groups such as the California Chamber of Commerce, Business Roundtable and others. More recently there has been work by the tech companies to change the climate politics of the Business Roundtable in particular, but it will always be an uphill battle, given the membership of large fossil fuel companies and general anti-corporate tax consensus.
The best source for information about climate related lobbying by companies and their industry groups is LobbyMap — a project of InfluenceMap. In addition to lobbying, InfluenceMap scores also consider statements by executives, the contents of the websites of the companies, etc. They even have a weekly newsletter of lobbying activity by the companies. Unfortunately the coverage is pretty low due to lack of available information. Only 350 companies are tracked and ~150 companies’ ratings are published freely. The primary users are again investors.
Another way that companies can wield political influence is through donations. The FEC makes it possible to look up political donations by individuals or employees of a given company. A company (or company owner) who donates heavily to politicians with bad climate track records is in fact supporting an anti-climate political agenda. For small companies this information can be some of the only verifiable information that is publicly available about the company owners’ or executives’ values, but it’s obviously an imprecise and un-satisfying proxy, and doing the analysis is quite painstaking.
What about ESG Scores
One question folks ask is “What about ESG? Could we just use ESG scores to evaluate companies?”. This can be an appealing idea because of the relatively broad coverage of the leading ESG scoring providers. The top provider, Sustainalytics, covers 20k different public companies in its index.
In many people’s minds a company that has a good ESG score equates to a company with good impact or good values. Unfortunately that is a pretty fundamental mis-reading of ESG. As explained by MSCI (the second largest ESG ratings provider) — the audience for ESG ratings is investors and the main question the ratings are trying to answer are “what is the financial risk” from the company’s practices — not whether the practices are actually aligned with positive impact or values. As a recent example the S&P 500 ESG index recently dropped Tesla but rates Exxon Mobile very highly.
This misreading of what ESG is leads many retail investors to waste a lot of money in fees for ESG funds with the notion that investing with an ESG lens is more sustainable or punishes companies who are having bad impacts. This is not only false, it’s actually being cynically abused by financial institutions and the SEC is about to take action.
An additional issue with ESG ratings is that they are completely proprietary — operated by for-profit entities — and different ratings providers produce quite different scores for the same companies. The correlation between scores from the top two providers (Sustainalytics and MSCI) is only 50%.
MSCI does offer a proprietary “Climate Score” for 3.5k of the companies covered by its ESG index. This score is based on the companies’ CDP disclosures as well as other factors and is provided in the handy form of “Implied Temperature Rise”.
ESG Score Alternatives
One scoring methodology that is more compelling than ESG is the one implemented by JustCapital. JustCapital is a non-profit which annually surveys Americans on what they believe U.S. companies should prioritize most when it comes to just business behavior. It is notable but not surprising that Americans on average are a lot more concerned about companies paying their employees fair wages than they are about environmental or climate issues.
They then evaluate 1000 top companies on each of these metrics and weight the results by the importance of the metric to the American people. It’s possible to zoom in on each of the sub-areas and components — for example the climate rankings are here. While the criteria are relatively limited and too simplistic — at least they are fairly transparent and straightforward. For climate they relate to the Scope 1 and 2 emissions of each company and the public commitments of each company.
Financial Sector Data
In the financial sector, the bulk of the emissions that institution is responsible for are from the fossil fuel projects that it funds. This is a specific category of Scope 3 emissions (as a reminder, Scope 1 and 2 emissions are from the direct operations of a given business) that deserves significant scrutiny as it locks in long term fossil fuel infrastructure and emissions for many years to come. The excellent InfluenceMap has a project around this called FinanceMap. It covers the fossil fuel loans, governance and policy engagement of (unfortunately only) the top 30 finance companies. From the data they collect, it is easy to calculate what percentage of the loans of a given finance company go to fossil fuel projects.
Another recent analysis looks at the way that the large cash holdings of major corporations funnel into these financial institutions and as a result into funding fossil fuel projects. For tech companies with relatively low emissions, the carbon impact of their cash and investment holdings being used to fund fossil fuel projects ends up being many times as large as their direct emissions.
Certifications
A final way of evaluating the climate impact of companies is through the lens of a set of certification efforts that have sprung up, such as Climate Neutral, Carbon Free, Carbon Neutral and Carbon Neutral (yes, again). Some of the certifications look at individual products and others at brands as a whole. All of them allow the companies to offset any emissions without too much scrutiny of the quality of the offsets, which can be rather low quality.
Climate Spending Audit
To perform my own climate spending audit, I pulled all the transactions from my credit and debit cards, PayPal and Amazon from the last several months. I then sorted by transaction amount (to make the research more manageable) and identified the owning entity or individual for each brand. Finally, I used the data sources above, as well as some old-fashioned Googling, to learn about each company and its climate actions.
Banks
I started by digging into the financial institutions that I have accounts with. The first thing that jumped out at me was that the credit card through which I did much of my purchasing was issued by J.P. Morgan Chase — the top funder of fossil fuel projects (2021 article).
JPMorgan Chase was the world’s worst “fossil bank,” contributing $51.3 billion in fossil fuel financing last year alone, and a total of $317 billion from 2016 to 2020. That’s 33 percent more than the second-worst, Citibank, which spent $48.4 billion last year and a total of $237 billion since 2016. Wells Fargo came in third, with $26 billion in 2020, though the report notes that the bank’s fossil fuel financing actually fell by 42 percent in 2020.
I didn’t even really think of myself as a Chase customer because I’d only gotten the Chase credit card due to the 5% cash-back on Amazon purchases which they offered through an Amazon partnership. I immediately canceled my account.
Then, digging in more into the data, I started to question the conclusion. One of the reasons that Chase is the biggest funder of fossil fuel projects is that it’s, well, the biggest bank. Using FinanceMap, I looked at the percentage of loans that fossil fuel projects represent for each of the top banks, and Chase’s 4.4% (in 2020–2021), isn’t particularly high. When a friend went through the audit process, TD Ameritrade Holding Co. was flagged for him as having >17% of its loans be for fossil fuel projects.
Still, having already cancelled my Chase account, I went looking for a pro-climate alternative — ideally one with a hefty cash-back.
One bank I dug into as a potential alternative is BNP Paribas (Bank of the West). As mentioned in the introduction it has had a giant billboard on the US101 in San Francisco for the last few months with various claims of being “the first pro-climate bank” and offering you a way to “sign your own Paris accord” (presumably a reference to the bank being headquartered in France). Unfortunately the bank turns out to be the epitome of cynical with its climate claims. Something about having green in your logo makes green-washing extra attractive. Turns out that at the same time that the bank was launching its “Climate Saving(s) Plan”, the bank was expanding its funding of new fossil fuel projects by a whopping 50% in 2020.
Conclusion
In terms of traditional banking, Amalgameted Bank quickly stood out as the only bank with a science based emissions reduction target. For cash-back focused climate aligned debit and credit cards I tried out Aspiration.com.
Aspiration lets you “plant your change” by rounding up your purchases to the nearest dollar and using the proceeds to plan a tree (and presumably help fund its own operations). The approach has its limits. Aspiration additionally offers 0.5% cash back on purchases from “values aligned vendors”, of whom it doesn’t maintain a public list. The only one I’ve discovered so far is Whole Foods. Then it has a 3–5% (or even 10% with paid membership) cash-back on purchases from the Conscience Coalition (about 30 brands).
The tricky thing with something like the “Conscience Coalition”, is that many of the brands featured are quite premium. While all the brands included are clearly trying to do the right thing in one way or another, it’s not entirely obvious the extent to which eg. buying 4x more expensive paper towels which are made from bamboo (or direct air capture diamonds), is an effective way of combating climate change per dollar spent.
Another similar product I stumbled upon is the Future credit-card. Its cash-back is more focused on public transit, second hand stores, and electric charging.
A final option I’ll mention is Atmos — I’m a fan of how it doesn’t just avoid funding fossil fuel projects with your money but actively commits to only funding pro-climate investments like renewable energy, regenerative agriculture, etc. The debit card features a 2–5% cashback on a fairly large selection of vendors that vary from the National Parks to EV Charging providers to sustainable food and clothing providers.
For a more thorough list of socially responsible financial institutions check out https://www.nerdwallet.com/article/banking/socially-responsible-banks
Retailers
We do a lot of our online shopping at Amazon, so this was another place I dug in. Turns out that despite lots of buzz about setting climate goals and pre-buying 100,000 EV trucks for deliveries, Amazon “Drastically Underestimates Its Carbon Footprint”.
When Target or Walmart sell you something, they count the emissions associated with that item in their Scope 3 emissions. As a result, when they set emission reduction goals (for example Target’s SBTI aligned goals) — they take responsibility for reducing the emissions associated with all the items they sell. On the other hand Amazon asserts that the emissions of the goods it sells are between the manufacturer and the buyer — none of their business.
In terms of alternatives, Amazon can be pretty hard to replace due to the breadth of its offerings and its well honed customer service. (Never-mind the lock-in associated with Amazon Prime). Still, we’ve now started to shop at Target by default as well as trying to buy directly from smaller retailers where it makes sense. Initially the lack of eg. free shipping is a barrier, but free shipping as well as a 5% cash-back are available with the “Red Card”.
Another alternative we’ve tried is https://donegood.co/, which imagines itself as an ethical Amazon, but the main issue is that the coverage is pretty limited. A search for “toddler sneakers” returns no results.
Big Tech
The other big tech companies we purchase from (Netflix, Google, PayPal, etc) tend to be pretty good on climate change. Part of it is that the problem that they have to solve is relatively straight-forward — they mostly just need to procure renewable electricity for their datacenter operations. While sometimes that’s easier said than done, it’s much simpler than decarbonizing manufacturing, heavy industry, or travel at scale.
The place where big tech isn’t great, as mentioned, is in continued membership in industry groups which oppose major climate legislation. And, as mentioned, more attention is probably needed to the climate impact of their vast cash holdings.
Large Private Companies
Once you move away from public companies towards private companies and smaller brands, it becomes increasingly difficult to assess the climate relevant behavior of companies.
As an example, Raley’s is a major privately owned grocery chain with over $3B in annual revenues. Since there are no investors to demand emission disclosures or climate action, there’s very little information available. The company does put out an ESG report in which there is a single slide which mentions emission reduction and water conservation actions (solar panels installed in multiple locations, led lightbulbs, refrigeration system updates). Refrigeration system maintenance and upgrade in particular can be a big lever for grocery stores due to the large warming potential of the gases used in such systems.
Due to the lack of information on any lobbying, I looked up the political donations of the owner. Turns out the current owner has donated to a number of climate change denying republican candidates — but mostly a long time ago and not at a huge scale.
Talking about groceries, one interesting concept which hasn’t really taken of is that of mapping out the climate friendly-ness of grocery store refrigeration systems. It feels like there is a need for creative ways to collect data from smaller & private businesses.
Small brands and sellers on Amazon
Trying to figure out the climate relevant actions of most Amazon sellers is pretty difficult. Amazon has minimal disclosure requirements of its vendors (basically none). It has even successfully resisted a bi-partisan effort to require labeling of country of manufacture in online stores. The only signal available is usually the political donations of the owner (for US based brands). Amusingly, these can frequently be guessed from the product that the company manufactures. Can you guess the owners of which companies are more likely to back climate denying politicians:
- weightlifting equipment manufacturer
- kids scooter manufacturer
- SPA chemicals manufacturer
- nicely designed household goods manufacturer
Direct To Consumer brands
Eg. Allbirds, Casper, Dollar Shave Club, etc
Usually modern DTC brands have some sustainability focused messaging or a blog post for earth day. It’s hard to know how this translates into actual focus on emission reductions. We ended up emailing a number of DTC brands to ask them about their practices. Most responded with pointers to existing information, but a DTC pasta manufacturer wrote up a detailed and thoughtful report of their sustainability practices.
My recommendation with respect to DTC brands its to reach out to them and:
- 1. ask them about their practices
- 2. ask them about what 3rd party certifications they have or are considering
A few places to look up smaller brands which do have some certification or commitment are:
Consumer Electronics: Printers
We had bought a new Canon printer a few months ago, so I ended up looking into the emission disclosures and targets of Canon and Epson. It’s not dramatic, but across pretty much every metric Epson gets better grades. CDP rates them better as does MSCI and they have SBTI aligned targets.
My next printer will be from Epson!
Car Companies
Since Mazda was one of the original inspirations for this deep dive, I thought it only made sense to asses the major car companies. As you can see below Toyota, Ford and GM have the highest CDP scores with Ford and GM being the only two with SBTI targets. MSCI’s assessment seems to differ from SBTIs and it gives GM (and Honda) the edge with the lowest projected implied temp rise. InfluenceMap/LobbyMap scores confirm that Ford and GM are among the least bad options, but coverage is sparse and eg. Mazda is not scored at all.
My conclusion here is that Tesla aside, GM is probably the furthest down a path towards a sustainable future with Ford not far behind.
Airlines
I haven’t flown since the pandemic, so I didn’t have any airlines to analyze, but one of my teammates has, so I ended up adding the major US airlines to the Airtable. Here are their scores:
American Airlines seem to be the further ahead in terms of having well rated disclosures and targets, but everyone’s InfluenceMap scores are D and below.
Restaurants
Looking into restaurant emissions, I learned that for a nearby restaurant which had its emissions analyzed >75% of the emissions are from the ingredients and about half of that is from beef and lamb. This implies that one way to evaluate the climate friendly-ness of restaurants is through their menu. One might ask: what percentage of the entrees offered come with lamb or beef by default? What percentage are available with low emission protein options?
Additional sources of emissions at restaurants are: the sourcing of the ingredients and their transportation, energy use for heating (think heat lamps), cooking and lighting, and finally refrigerant leakage and refrigeration efficiency. Unfortunately none of this data is publicly available.
You can probably guess which restaurants are low emission by looking at their menus. If they’re vegan, vegetarian or at the very least full of tasty non-beef/lamb options.
Ski Resorts
The final category I dug into is ski resorts. I had recently visited Heavenly with my family on our first outing to the mountains since the beginning of COVID. Unfortunately there is minimal verifiable information about the big ski resort holding companies on CDP/SBTI/etc. I was able to find some news releases that refer to a Net Zero by 2030 commitment from Vail, which they claim to be well on their way to.
I did find an organization that has developed a sustainability certification specifically for ski resorts. It doesn’t seem to be gaining much traction but it did lead me to discover that Diamond Peak, a Tahoe area community owned ski resort is certified. We’ll be checking it out next year!
Conclusion
I hope the above is helpful to you as you think about spending in accordance with your values when it comes to climate. Having gone through this exercise I’m left wanting a lot more information about a lot more companies and easier ways of accessing this information. Personally I would like to have every company I buy from, regardless of size:
- publicly disclose its emissions (including Scope 3)
- publicly set targets and report progress against those emissions
- avoid lobbying (directly or indirectly) against mainstream climate legislation
If you have ideas on how to accomplish this, or would like to join us on the journey of holding companies accountable on climate, please reach out to me at igor@actnowcoalition.org!
