How climate-friendly are the DAX companies?

Corporate Emissions: How Climate-Friendly Are DAX Companies?

How well are German companies implementing their climate targets? A climate report from a Frankfurt-based consultancy attempts to make progress measurable. The benchmark used is the contribution to global warming — measured in degrees of temperature.

What if the entire world operated like a particular company? And by how many degrees would it then heat up? These are the questions posed by Frankfurt-based sustainability consultancy "Right.based on science," which fittingly calls its analysis "What if."

The team evaluates the sustainability reports of companies. This year, it covers emissions and financial data from a total of 71 DAX companies, drawn from the benchmark DAX index, the MDAX and the SDAX. The data is then measured against the targets of the Paris Climate Agreement, with a threshold of 1.7 degrees of global warming by 2100.

Temperature Figure Intended to Clarify Climate Target

The methodology is designed to produce a single, simple number at the end, enabling comparisons of climate protection efforts. Deutsche Telekom, for example, sits just above the Paris target — at 1.8 degrees. It started at 5 degrees. The trend is therefore positive, something Robert Metzke, Head of Corporate Responsibility, welcomes.

The group is focusing on "green" electricity and greater efficiency, keeping total energy consumption constant despite steadily rising data volumes, and has reduced "energy consumption, for example, from over 90 kilowatt-hours per terabyte to 48 kilowatt-hours per terabyte," said Metzke. Telekom aims to be climate-neutral by 2040.

While Telekom is a positive example, the report as a whole does not show an entirely positive trend, says Hanna Helmke, Managing Director of "Right.based on science": "We have more companies that have deteriorated than have improved." This shows that "some momentum has been lost." Her consultancy has been calculating degree targets for several years and also sells software designed to help companies on their path to climate neutrality.

Emissions and Value Creation

The report's calculations examine emissions but also companies' balance sheets, setting the two in relation to each other. Put simply, this means: if the balance sheet worsens, emissions must also shrink; if that does not happen, the degree figure deteriorates. One example is the Leverkusen-based group Bayer. In the report, it is currently on a trajectory toward 7.5 degrees.

This is partly due to the billion-euro legal disputes weighing on its books, according to Helmke. Bayer itself does not share this assessment. The full picture must be considered, emphasises Daniel Schneiders, who is responsible for sustainability issues at Bayer. Bayer's business model, combining pharmaceuticals and agriculture, is unique: "And we also see that this is not reflected in the report's methodology."

The company is, however, in contact with the report's authors. The group aims to be climate-neutral by 2050 at the latest. Bayer also faces a number of challenges, such as decarbonising its supply chain and raw materials, which is "challenging."

Which Sectors Are Struggling?

At first glance, the report does not provide a clear statement about which industries are finding it hardest to operate with lower CO2 emissions. With the exception of the chemical industry. This sector continues to struggle with reducing emissions, according to Managing Director Hanna Helmke. She notes that data from recent years already shows that companies' self-imposed climate targets often bear no relation to reality. Some companies have set ambitious targets but are making too little effort.

Others have no targets or low ones, yet according to the analysis are performing very well. Helmke is watching with interest the sectors that she believes have significant potential to shift course by a few degrees — such as the steel industry.

According to the report, Salzgitter AG is currently on track for 6.4 degrees of warming, but plans to save significant amounts of climate-damaging gas in the coming years through the purchase and in-house production of hydrogen. The company currently emits around 8 million tonnes of CO2. According to the company's own statements, it aims to be climate-neutral by 2030.

The influence of climate reports

Climate economist Paul Lehmann from the University of Leipzig notes critically that in times of economic downturn, some companies may show worse emissions figures.

Nevertheless, such reports can provide motivation and also put pressure on companies. It is therefore important to have a range of different instruments to drive progress toward climate neutrality, including emissions trading, for example.