A recent perspective paper suggests that relying solely on companies’ emissions reduction targets may not accurately reflect their climate ambitions. This approach, commonly used to assess corporate climate action, can inadvertently favor larger companies and hinder innovation, ultimately skewing the playing field against emerging competitors. Published in Science, the paper, led by an international team including researchers from Utrecht University and Imperial College London, calls for updating regulations to better address corporate climate action beyond just emissions reduction.
Companies often set individual climate goals, similar to commitments made by national governments, aimed at reducing greenhouse gas emissions from their activities. These targets can be validated as ‘Paris-aligned’ by the Science Based Targets initiative (SBTi), signifying that they are in alignment with the Paris Agreement’s goals to limit global temperature increase. However, the paper argues that this validation may not adequately capture the climate ambition of emerging companies focusing on green innovation, as it primarily emphasizes emissions reductions without considering other factors.
The authors propose that corporate climate targets should be based on factors beyond just emission reductions, such as emissions intensity per unit of economic or physical output. While these targets may be harder to align to Paris Agreement goals, they could help level the playing field by providing a more comprehensive assessment of corporate climate action. Additionally, the study highlights that voluntary targets may not always lead to a reduction in actual emissions and can sometimes be used as justification for delaying or diluting mandatory regulations.
According to the authors, companies setting their own targets risk complacency and may not be sufficient for achieving rapid global decarbonization. With the urgent need to reduce greenhouse gas emissions to meet the Paris Agreement goals, voluntary targets alone are not enough and should be accompanied by robust regulatory frameworks that ensure transparency and drive innovation across all sectors. The paper emphasizes the importance of governments and intergovernmental organizations in introducing legal frameworks that encourage best practices and innovation while holding companies accountable for their climate actions.
Proposed frameworks could include carbon pricing, green subsidies, and demand-side measures to guide corporate climate action. These frameworks should also consider the products that companies produce in the green transition, not just their emissions, to encourage innovation and support the development of more sustainable alternatives. By implementing such frameworks, companies like the hypothetical solar panel manufacturer would be allowed to innovate and scale up their operations without being constrained by arbitrary emissions reduction targets.
In conclusion, the authors stress the need for regulatory frameworks based on a variety of indicators to assess corporate climate action. These frameworks should promote innovation, transparency, and accountability across all sectors while pushing companies to adopt best practices in reducing emissions. Voluntary targets, while commendable, are not a substitute for mandatory regulations that guide companies in aligning with the goals of the Paris Agreement and driving the urgent global transition to a more sustainable future.
