Meet 2023’s Net Zero Leaders

To quote a famous frog, it’s not easy being green.

To make significant progress on environmental change, companies can’t just focus on their own operations. They must consider how green their suppliers, shareholders, investors and even customers are. Doing the right thing means managing 100 things.

The 2016 Paris Agreement international treaty on climate change set a global goal of reducing emissions by 45% by 2030. The ultimate goal is to achieve carbon neutrality—a balance between emitting carbon and absorbing carbon from the atmosphere—by 2050.

An annual update last fall from the United Nations said the vast majority of the 193 countries in the Paris Agreement are not keeping up with the changes needed under the treaty. But the news is not all bleak.

Forbes’ first-ever Net Zero Leaders list highlights the 100 U.S. public companies that are best positioning themselves to reduce their greenhouse-gas emissions and ultimately offset them by 2050. That includes initiatives not only to reduce carbon emissions from the company’s own operations but that of its power suppliers, vendors and customers. Also considered are the company’s management structure to aid in risk assessment, governance, strategy and metrics for achieving those goals, as well as its financial strength to withstand industry competition and economic turmoil. The list was created using raw data from research providers Sustainalytics and Morningstar.

Clark Barr, who directs climate-solutions methodology at Morningstar, cautions that even though these companies are best aligned with ultimate carbon neutrality, there’s still a long way to go.

“It’s not a sunny picture right now,” says Barr. “There are companies that are better along this transition journey than others. Are they all the way there? Likely not.”

Topping the list are financial services firms Moody’s and MSCI and aerospace and defense contractor Northrop Grumman. Moody’s, a founding member of the Net Zero Financial Services Provider Alliance, placed at or near the top in three pillars of the list: overall carbon-emissions trajectory, management strength and economic position. According to its 2022 Stakeholder Sustainability Report, the company is moving toward completing its net-zero transition by 2040, 10 years earlier than the Paris Agreement.

Spokespeople at Philip Morris International (No. 7, topping the Food Products sector) and Eli Lilly (No. 10, highest in pharmaceuticals) tell Forbes that their companies link environmental, social, and governance (ESG) goals directly to executive pay with explicitly measured performance indicators. Sustainability is an increasing priority also among their investors and potential employees.

“One of the notable trends is that our stakeholders, including employees, investors or customers, are asking us more informed questions,” says Annette O’Hanlon, chief corporate responsibility & diversity officer at data analysis firm S&P Global, No. 5 on the list. “They are becoming more sophisticated and have developed a better understanding of not only the specific issues but also the interconnectedness between the issues, such as the relationship between DEI and climate change.”

The United Nations Environment Programme’s Emissions Gap Report 2022 calls for investors to target climate-friendly industries, particularly in developing countries.

In that regard, Bank of America (No. 4 overall) in 2021 set a goal to mobilize and deploy $1.5 trillion in sustainable finance by 2030, of which $410 billion has already been spent. The bank is also part of a coalition focused on funding projects to support the transition of the power grids in Indonesia and Vietnam to sustainable alternatives, according to Karen Fang, the bank’s global head of sustainable finance.

Fang adds that the company has issued $13.85 billion across five green, two social and three sustainability bond offerings. “Transitioning to a low-carbon economy is increasingly becoming an expectation, and many companies are looking for ways to understand how they can make the transition,” she says.

Sustainability is a hot business for banks and their customers. The Inflation Reduction Act alone may add up to $370 billion of incentives and $3 trillion of investment in green sectors, says Robyn Luhning, chief sustainability officer at No. 11 Wells Fargo.

Another strategy for some companies: pressuring suppliers and other beneficiaries of company funds. Gartner Research predicts that, by 2026, 75% of companies will transfer business to IT vendors with sustainability goals and timelines. “We recommend that firms partner with suppliers that are sustainability leaders themselves,” says Katrina Rymill, SVP of Corporate Finance & Sustainability at digital infrastructure company Equinix (No. 23).

PayPal Holdings, No. 16 and the list’s top software and services company, aims to have 75% of its spending on suppliers go to firms with science-based emissions targets in 2025, says Kristina Friedman, PayPal’s head of global ESG strategy. She says that vendors represented 95% of the company’s third-party environmental impact last year, adding: “You can’t manage what you don’t measure.”

Learn more: Forbes