Amazon's Plan to be Carbon Neutral in 4 Years Hit Snag When a Major Supporter Backed Out

Key Highlights:

  • Inc. loses endorsement from the Science Based Targets initiative (SBTi), a United Nations-backed entity validating net zero plans
  • Amazon claims SBTi's requirements have changed and current metrics aren't aligned with its business model
  • SBTi introduced a stricter compliance policy, giving companies 24 months to set a specific target after commitment
  • The policy initially affects non-financial corporates, while financial firms have until April 2024 to comply

Dive Insight:

Amazon has suffered a setback in its efforts to eliminate carbon emissions as the Science Based Targets initiative (SBTi), a United Nations-backed entity that validates net zero plans, removed the company from its roster of climate action-taking firms. This move comes four years into Amazon's carbon reduction plan, raising questions about its status among environmentally-conscious investors.

The SBTi's decision followed Amazon's failure to implement a credible carbon emissions reduction target. This development puts Amazon's position in funds marketing themselves as ESG (Environmental, Social, and Governance) investments into question. Notably, the world's largest ESG exchange-traded fund managed by BlackRock holds Amazon as a top holding, and over 900 ESG funds in the European Union also include Amazon shares, representing about 2% of outstanding shares.

Amazon's response indicates that the company remains engaged with the SBTi, aiming to establish a collaborative path forward for submission. However, Amazon also expressed its intention to set science-based targets with other organizations alongside this effort.

The company had initially committed to eliminating or offsetting its carbon emissions by 2040, with the goal of submitting its targets through SBTi's verification process. Although Amazon has been working on electrifying its vehicle fleet and transitioning away from fossil fuels in its energy sources, it has not provided a comprehensive roadmap for eliminating other sources of carbon emissions.

Interestingly, Amazon's carbon emissions have risen by about 40% since setting its net zero target in 2019, although there was a slight decrease in 2022 due to reduced growth and the implementation of renewable energy projects. The company also retracted a previous sustainability goal to deliver half of its packages with zero carbon by 2030, replacing it with an overarching net zero goal.

SBTi's growing influence in financial markets is evident, as seen with Euronext launching indexes solely comprising companies with SBTi-approved emissions reduction targets. This move aligns with the increasing demand for sustainable investment tools.

In response to the removal of companies failing to meet commitments, SBTi introduced a stricter compliance policy. This policy requires companies to establish a specific emissions reduction target within 24 months after making a commitment, enhancing transparency and accountability. This shift encourages companies to match their commitments with tangible actions.

Although Amazon has encountered obstacles in aligning with SBTi's metrics and methodologies, the organization's efforts to ensure that climate commitments translate into effective actions remain crucial. This development underscores the significance of corporate climate progress in line with global agreements, such as the Paris Agreement, and highlights the growing importance of environmental considerations in investment decisions.


About AMZPro

AMZPro Group is an Amazon Marketing Agency based in New York, USA that provides Amazon marketing services to small businesses, medium and large-sized enterprises around the world.