The largest companies in the United States are steadily increasing their clean energy and energy efficiency efforts while improving their bottom lines—a trend that is having an important role in the decarbonization of the U.S. electric power sector in recent years. That’s the key finding of our latest Power Forward 3.0 report, which evaluates clean energy data provided publicly by Fortune 500 companies.
Overall, nearly half of the companies in the 2016 Fortune 500 have set targets to reduce greenhouse gases (GHG), improve energy efficiency, and/or increase renewable energy sourcing—up five percentage points from our last report in 2014.
The strongest efforts are among Fortune 100 companies, with 63 percent adopting or retaining goals. In addition to the steady overall increase, the report also shows strong improvement among the smallest 100 companies in the Fortune 500, with 44 percent of these setting goals in one or more categories, up 19 percentage points from 2013. Overall, Consumer Staples sector companies had the highest percentage of companies with targets, while the Energy sector (mostly oil & gas companies) had the lowest percentage by far.
Meanwhile, businesses are reaping bigger and bigger cost savings from energy efficiency projects they have implemented to meet their targets, with 190 companies collectively reporting $3.7 billion in annual savings.
The most significant new trend among the Fortune 500 since the last report is the increasing ambition of goal setting leaders, as more companies move to establish science-based targets and set 100 percent renewable energy goals. A science-based target utilizes the best available climate science to define a company’s appropriate share of the emission reductions required to limit global temperature increases to below two degrees Celsius.
As of January 2017, 210 companies from around the world have set or committed to set such targets through the Science Based Targets initiative.1 Among those are 10 Fortune 500 companies, including Procter & Gamble, General Mills and Kellogg Company. Additionally, 72 Fortune 500 companies (14 percent of the index) have reported to CDP2 and/or the Science Based Targets initiative that they intend to set such a target within two years.
Attracted by plummeting renewable energy costs, nearly two-dozen Fortune 500 companies have committed to power all of their corporate operations with 100 percent renewable energy, mostly wind and solar, compared to only a handful of companies a few years ago. Among the diverse industry giants going all-renewable are Wal- Mart, Bank of America, Google and Facebook.
Growth in overall target-setting over the past several years has been steady, with a net total of 25 companies in the Fortune 500 adding targets since our last Power Forward 2.03 report was issued in 2014. Forty-eight percent of Fortune 500 companies (240 companies) now have climate and/or energy targets, up five percentage points from the previous report. Companies are also doing well in meeting their respective targets. On average, companies reported an 81 percent success rate in achieving or exceeding their targets on time. This results in real emissions reductions.
Pursuing and achieving clean energy goals has also yielded financial benefits to these companies. Nearly 80,000 emissions-reducing projects were behind the $3.7 billion in savings captured by 190 companies in 2016 alone. Praxair, Microsoft, and IBM are among the companies saving tens of millions of dollars every year through their energy efficiency efforts. Companies also decreased their annual emissions by 155.7 million metric tons of CO2 equivalent, which is equal to taking 45 coal-fired power plants offline for a year.
Across the Fortune 500, GHG targets represent the most common target category: 211, or 42 percent, of Fortune 500 companies have either an absolute or intensity- based emissions reduction target—up 4 percentage points from the previous report. Renewable energy target-setting is also on an upward trajectory, with 53 Fortune 500 companies, or 10 percent of the index, setting such public targets in 2016, up from 42 companies in the previous report. Many more use renewable energy to meet their GHG targets. Of those setting public renewable energy targets, 23 companies have staked out leadership positions with commitments to 100 percent renewable electricity targets; 19 (83 percent) are RE100 signatories4.
A breakdown of the 2016 Fortune 500 by industry reveals a significant spread in target-setting between leading and lagging sectors.5 The Consumer Staples sector is the leading sector with 72 percent of companies having set a target. Nearly two out of three companies in the Materials (66 percent), Utilities (65 percent) and Industrials (62 percent) sectors have set targets as well.
Following closely behind is the Real Estate sector, with 60 percent of the five companies in this sector having a target. The Information Technology sector is next at 57 percent. The Telecommunications, Consumer Discretionary and Healthcare sectors are clustered just below the index average of 48 percent, at 43 percent, 42 percent and 41 percent, respectively. The Energy sector, mostly oil and gas companies, again lags all others in the Fortune 500, with just 11 percent of companies setting targets—down from nearly 25 percent in the previous report. Since the previous report, target-setting increased for all sectors except Energy and Consumer Discretionary.
Companies’ ability to adopt and subsequently achieve such ambitious and holistic goals is inextricably linked to several factors, including:
The continuation of favorable policy environments at the federal and state levels;
Continued cost declines in clean energy technologies;
Technical innovations that allow for increased renewable energy grid
penetration and demand-response; and
Advances in enabling financial instruments.