SUMMARY
Over the past few years Microsoft has managed to build a narrative portraying itself as a leading player on climate action and climate impact investing. Unfortunately, Microsoft’s awful track record on GhG emission cuts stands in strong contrast to its reputation.
From 2018 to 2021, the sum of Microsoft’s Scope 1 + 2 emissions rose by 60%.
Granted, the company’s sales grew fast during that period. But even on a revenue adjusted basis, Microsoft’s carbon intensity has risen. It’s up by 5% over the period in question. With a dire track record on emission cuts, the company’s high profile on climate action is entirely the product of a wide-scale promise of future carbon offsets.
Examples like Microsoft confirm our strong belief that only full-fledged transparency on corporate climate action can bring about real change. The Ziggma Climate Score as well as various data points on individual companies’ emissions are an important step in this direction. In fact, all climate-related information on Ziggma is accessible on the free plan, even screening by Climate Score in the free stock screener.
Microsoft – the ESG poster child
During the ESG investing boom in recent years Microsoft became the absolute ESG darling. You can find Microsoft in literally each and every ETF and mutual fund, and in many cases the stock represents the top holding ever since.
Applauded by ESG rating agencies
In light of the accolades doled out by ESG rating agencies, Microsoft’s status as top ESG stock is unsurprising. In 2021, MSCI Ratings awarded Microsoft a AAA rating, its highest possible rating. Sustainalytics, another big player in the ESG space recognized Microsoft as a top ESG performer in 2021. The Carbon Disclosure Project included Microsoft its Climate A List for climate performance leadership. Refinitiv’s emission score for Microsoft is 96/100.
Great marketing
Microsoft is doing a great job marketing its ambitions on emission reductions. In a blog post back in January 2020, the company stated that “by 2030 it will be carbon negative, and by 2050 it would have removed from the atmosphere all the carbon the company has emitted either directly or by electrical consumption since it was founded in 1975.” These stellar ambitions were widely distributed in the press.
There’s only one problem. Microsoft’s track record on actually reducing its own emissions is anything but stellar.
Microsoft’s track record on cutting emissions: The big shock.
When running data analytics to identify the top performers when it comes to cutting CO2 emissions, Microsoft would never show up. After all the accolades it had received for tackling climate change this caught our attention. So we started digging asking “How good is Microsoft actually when it comes to cleaning up its own act”?
Well, not very. The poster child of ESG has not been cutting its own emissions, at all. From 2017 to 2021, Scope 1 and 2 CO2 emissions increased by 60%. Adding insult to injury, Microsoft’s operations actually became more emission-intensive over this period, as reflected by an increase of carbon intensity by 5%
Data from Microsoft’s sustainability reports
One may argue that the increase in CO2 emissions may be due to the company’s strong growth. Well, even on a revenue adjusted basis (referred to as carbon intensity), emissions increased by 5%. This means for every dollar in sales the company emitted 5% more CO2 in 2021 than in 2017.
Not Microsoft bashing. Rather, a reality check.
No matter how eye-opening and shocking these numbers, it is not our intention to specifically attack Microsoft through this article. There are hundreds, if not thousands, of similar examples.
Rather, we want to provide a reality check demonstrating how far behind the curve we actually are on climate action and accountability. Even companies that are touted to be best performers when it comes to tacking climate change have yet to get serious about cutting their own emissions. Only very few companies put in an honest effort.
A second problem is that way too much credit is given for carbon offsets.
Selling the dream
Microsoft has managed to get massive credit for its climate mitigation activity. It has done a great job marketing a dream vision promising that to be carbon negative by 2030 and removing even its past emissions from the atmosphere. There’s only one problem. These promises rely on carbon removal projects and technologies that have yet to be tested, or worse, do not exist to this day. Today’s carbon offset market is tiny at $2bn according to Ecosystem Marketplace and starts off with a seriously bad rep.
The following chart nicely illustrates Microsoft’s reliance on offsets. 7 years from now, the company’s emission offsets are projected to be virtually identical in magnitude to its own emissions.
Source: Microsoft 2021 Sustainability Report
Is there any silver lining?
Only the hardiest of optimists will see one. Sure, Microsoft’s resources are so vast that it can afford to invest large amounts to fund research and invest in startups developing promising carbon removal projects, such as in January 2021 when Microsoft announced that it had made the world’s largest purchase of carbon removal in history. Though promising, the removal market is extremely young, especially for truly permanent carbon removal. Most solutions are prohibitively expensive, and will thus take a long time to scale.
Sending the wrong signal.
By running a huge marketing campaign promising to be carbon negative in less than a decade while relying on untested technology and startups, Microsoft simply sends the wrong signal. Rather than cleaning up its own act reducing emissions and carbon intensity, the company seeks to simply “buy” climate neutrality, even though it acknowledges the massive shortcomings in carbon removal technology and accounting.
Microsoft’s approach amounts to a massive gamble on technology breakthroughs and entrepreneurial success when the time to act is now.
It’s cases, such as this one, that have greatly motivated us to look beyond the smoke screen. The Ziggma Climate Score reflects companies’ actual track record on cutting emissions as well as its ambitions. Over time, we will carefully monitor firms’ actions against their promises. As part of our features on climate impact investing, Ziggma users can search for companies taking decisive climate action with Ziggma’s free stock screener.