Environment

A shocking percentage of world’s CO2 emissions is directly traced to multinationals

New research shows that around a fifth of all carbon emissions in recent years has come from the assets and suppliers of multinational corporations – and the flow of money indicates that pollution is effectively being outsourced from the developed to the developing world.

The team behind the study wants to highlight how much of an impact these companies can have on the environment if they choose processes and suppliers that are more sustainable and eco-friendly.

To improve accountability for increasing carbon emissions and the ongoing climate change that is happening as a result, multinationals should be prepared to assign emissions to the country where the emissions are funded rather than where they’re generated, the study authors conclude.

“Multinational companies have enormous influence stretching far beyond national borders,” says economist Dabo Guan, from University College London (UCL) in the UK.

“If the world’s leading companies exercised leadership on climate change – for instance, by requiring energy efficiency in their supply chains – they could have a transformative effect on global efforts to reduce emissions.

“However, companies’ climate change policies often have little effect when it comes to big investment decisions such as where to build supply chains. Assigning emissions to the investor country means multinationals are more accountable for the emissions they generate as a result of these decisions.”

Multinational corporations have a broad reach and a big impact in terms of carbon output, but that same size makes them difficult to measure and track – a problem that the current study was set up to investigate.

The collected data show that carbon emissions generated from multinational foreign investment peaked at 22 percent of the global total in 2011, before falling to 18.7 percent by 2016. The researchers say a de-globalisation trend, plus more efficient industrial processes, help to explain the fall.

Across the same time period, investment in developing countries rose sharply: for example, emissions generated through investment from the US in India rose from 53.2 million tons to 70.7 million tons, a jump of almost 50 percent.

There was a similar story to be found in emissions generated through investment from China to Southeast Asia, with that figure increasing almost tenfold between 2011 and 2016: from 0.7 million tons to 8.2 million tons.

“Multinationals are increasingly transferring investment from developed to developing countries,” says economist Zengkai Zhang, from Tianjin University in China.

“This has the effect of reducing developed countries’ emissions while placing a greater emissions burden on poorer countries. At the same time it is likely to create higher emissions overall, as investment is moved to more ‘carbon intense’ regions.”

The study authors also picked out individual companies. BP’s foreign affiliates generated more carbon emissions than any foreign-owned oil industry in any country except the US, while Walmart generated more emissions abroad than the whole of the foreign-owned retail sector in Germany.

Then there’s Coca-Cola: its emissions around the world, during the 2011-2016 period studied, were the equivalent of the whole of the foreign-owned food and drink industry hosted in China.

While many multinational enterprises or MNEs have committed themselves to cutting down on carbon emissions, not much data is available to show how much of their CO2 footprint they’re assigning overseas.

Getting this information on record could help to spur more radical climate action from private business, the researchers say – and stop the trend for outsourcing emissions. We all live on the same planet, after all.

“Investment-based accounting of emissions could inform targeted and effective climate policies and actions,” the researchers explain in their paper.

The research has been published in Nature Climate Change.

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