Colgate’s climate disclosures show a positive change

Emissions, Food Systems, Financial Risk & Reward, Shareholder Engagement, Equity

In corporate sustainability, ongoing dialogue and continuous improvement are integral to fostering positive change. In the spirit of transparency and collaboration, in this update we revisit our assessment of Colgate-Palmolive’s (CL) climate transition plan, taking into account the valuable disclosures made by the company in response to our previous report. This update is a testament to our commitment to fair and comprehensive evaluations, the acknowledgment of evolving narratives, and the need for continuously enhancing our analysis model.

Methodology update: Enhancing ‘Climate Alignment’ Precision

In our initial analysis, we reviewed Colgate-Palmolive’s GHG emissions evolution from 2017 to 2021 to determine the potential trend of the company’s emissions up to 2030. To forecast these emissions a straightforward extrapolation model compounded the annual emissions change rate from 2017 to 2020 forward. This trend exercise presumes no additional mitigation actions by the company. Hence, examining Colgate’s forward-looking engagement and investments was crucial in determining the company’s climate transition overall alignment.

However, after publishing our report the company pointed out that in 2022 the Science-Based Targets Initiative (SBTi) approved Colgate’s new targets. These updated targets will start with 2020 as the base year, and according to the company’s disclosures, the new 2020 and 2021 data includes significant updates to its Scope 3 emissions inventory reporting. Thus, Colgate-Palmolive clarified that some figures represent restatements or more comprehensive emissions reporting in 2020 and 2021 rather than actual increases from 2017. Company representatives pointed out that from 2015 to 2019 the company disclosed Scope 1 and 2 fully, and Scope 3 only partially (although incremental improvements to Scope 3 coverage were made between 2015 and 2019), whereas from 2020, the company started disclosing Scope 3 fully as well1. Consequently, in the spirit of fairness and transparency, Planet Tracker reviewed its ‘Climate Alignment’ assessment.

Firstly, we examined the dual disclosure of the 2020 GHG emissions to determine the increment of GHGs due to the restatement of the old emissions data. Accordingly, the restated figures indicate a 7% increase in Scope 1, a 1% increase in Scope 2 (location-based), and a 61% increase in Scope 3 (upstream) emissions, as outlined in Table 1.

Secondly, in our commitment to maintaining a comprehensive five-year historical assessment, we incorporated the newly disclosed 2022 GHG emissions data2 into our calculations and restated the 2018 and 2019 historical emissions data points3, as illustrated in Table 2.

Next, instead of calculating the annual compounded change of Colgate’s GHG emissions from 2018 to 2022, we used a scenarios approach. This updated ‘Climate Alignment’ assessment aims to provide a spectrum of potential outcomes, taking into consideration the company’s historical emissions evolution over the past five years (2018-2022), while eliminating the limitations of a linear projection. Instead of relying on a single five-year emissions change ratio, we now use three scenarios based on the annual compounded changes in GHG emissions from 2018 to 2020, 2019 to 2021, and 2020 to 2022, as outlined in Table 3.

This scenario approach, coupled with the newly disclosed GHG emissions data in Colgate’s 2023 CDP Climate Response, would lead to the expected emissions level detailed in Table 44.

Colgate-Palmolive has set ambitious targets, aiming to reduce its Scope 1, 2, and Upstream Scope 3 emissions by 20% by 2025 and 42% by 2030, relative to a 2020 baseline, to align with a 1.5°C pathway. While we do not contest the 2020 baseline, for our extrapolation exercise, we initiated with the most current data available — specifically, the 2022 emissions, as illustrated in Figure 1.

Figure 1: Colgate-Palmolive Climate Alignment Scenarios Assessment. Source: Colgate-Palmolive’s Climate Change CDP Answers 2019-2023 and Planet Tracker Calculations

The presented data analysis (Figure 1) reveals that under Scenario 1, reflecting the economic landscape of the 2018-20205 period and Colgate’s mitigation efforts at that time, the company is projected to exceed Science-Based Targets (SBTs) by 128% by 2030. This overshoot corresponds to an alignment of approximately 2.0°C when compared with other companies in the Consumer Goods sector. If Scenario 2 and 3 are used – representing the 2019-20217 and 2020-2022 environments – the company would overshoot SBTs by 65% and 13% respectively, with an approximate alignment of 1.8oC and 1.6oC. This shows the importance of the starting point in this type of extrapolation exercise highlighting the sensitivity to the end result. In addition, while company representatives would argue that the company is on the Scenario 3 pathway, as the last data set is the most relevant for them, Planet Tracker has had companies argue that climate transition does not follow a linear pathway. Therefore, considering a range of outcomes leads to a fairer assessment in our view.

In light of this finding, we have adjusted the previously assigned +3.0oC ‘Climate Alignment’ when reviewing the 2017 to 2021 period to a 2.0oC when applying the new methodology for the 2018 to 2022 timeframe6.

However, it is important to remember that ‘Climate Alignment’ is a backward-looking assessment of emissions aimed at informing us of the potential outcomes if additional mitigation measures are not implemented.

For an overall climate transition assessment, a forward-looking analysis is imperative. Our earlier report highlighted that the main gaps in Colgate’s Climate Transition plan were related to the quantification of potential financial impacts associated with climate-related risks, as well as the quantification of climate mitigation initiatives in terms of costs, expected GHG mitigation, and progress.

Other Updates: A Step in the Right Direction

In a positive move towards mitigating Upstream Scope 3 emissions, Colgate-Palmolive revised its No Deforestation, Palm Oil, and Soy policies in July 20237. Notably, the company has set a 2030 deforestation-free objective for its palm oil materials and began reporting on progress against this target from 2023 onwards.  Details of this progress can be found in Colgate’s Palm Oil Implementation Plan, which also provides comprehensive information on landscape projects. These projects involve collaboration with local communities, governments, and smallholder farmers to enhance livelihoods, build resilience, and preserve remaining forests8. Moreover, while the company has not yet established deforestation-free targets for soy or pulp and paper-based packaging, company representatives have shared that these are likely to be disclosed in the coming months.

Furthermore, in addition to direct engagement with suppliers and landscape project activities, Colgate is a member of the Consumer Goods Forum – Forest Positive Coalition (FPC). Through this coalition, the company argues it collaborates with 22 peer brands and retailers to eliminate deforestation and exploitation across forest-risk commodity supply chains.  The FPC has also released a progress report in 20239.

The Financial Disclosure Gap: An Ongoing Concern

Despite these commendable steps, our reservations persist regarding the lack of a clear correlation between investments and anticipated mitigated emissions, as well as the identification of qualified transition and physical risks. While we applaud Colgate’s recognition of these concerns, we urge the company to provide more detailed information, particularly regarding its plans for mitigation investments. Such disclosure would likely raise confidence in the alignment of capital allocation with emission reduction objectives.

Moreover, while the company’s acknowledgment of risks related to Carbon Pricing Mechanisms and Water Scarcity is a positive move towards enhanced transparency, we encourage the company to delve deeper, offering specific details and quantified metrics for managing these risks. In line with this recommendation, company representatives disclosed that the company is currently piloting several climate scenario analysis approaches to improve such disclosures over time. However, until such improvements are made public, Planet Tracker’s overall climate transition assessment does not position Colgate-Palmolive in alignment with the 1.5°C target by 2030. Instead, we argue that if Colgate maintains its historical trend, it will likely avoid a Business as Usual (BAU) scenario and instead align with a +2.0°C pathway, as illustrated in Figure 2.

Figure 2: Planet Tracker’s Climate Transition Assessment of Colgate-Palmolive’s Plan – Summary10.

The Climate Transition Journey: Closing Thoughts

In conclusion, our revaluation of Colgate-Palmolive’s climate transition plan underscores the significance of ongoing communication and continual improvement in corporate sustainability efforts. We commend Colgate-Palmolive for its responsiveness and commitment to transparency and we recognise that the journey toward sustainability is a dynamic process.

As we move forward, we remain committed to fair evaluations, constructive dialogue, and the pursuit of credible transition plans. Colgate’s journey provides valuable insights into the broader corporate landscape, highlighting the importance of continuous improvement and collaboration in the face of climate challenges.

Note: This update reflects the information available up to 2 February 2024 and future assessments will have to consider further developments in Colgate’s climate transition plan.

1 This includes the addition of Hill’s supply, contract manufacturers, indirect spending, upstream transportation of raw/pack, and downstream transportation emissions.

2 Source: Colgate-Palmolive’s Climate Change CDP Answers 2023.

3 To restate the 2019 and 2018 GHG emissions data points we used the same percentage difference between the 2020 old GHG data points and 2020 restated data points.

4 Be aware that this emissions extrapolation exercise does not factor in Colgate’s future commitments and actions, and therefore, for a full assessment of the company’s alignment with the Paris Agreement our forward-looking assessment pillars, namely, Policy and Governance, Risk Analysis, and Strategy Assessment, should be considered.

5 Restated figures.

6 This conclusion is reached as the average outcome of the three scenarios would be an alignment with 1.8oC, which numerically is closer to 2.0oC than to 1.5oC.

9 For more details see:

10 The change in our overall assessment from a +3oC transition alignment to a 2oC alignment is the result of the material update on “Climate Alignment”. Based on our new three scenarios analysis we concluded that Colgate-Palmolive’s historical changes in emissions would lead to a 1.8oC estimated outcome (i.e., Climate Alignment). However, for the overall assessment, the rest of the forward-looking considerations (i.e., Policy and Governance, Risk Analysis, and Strategic Assessment) are factored in.

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