How Can We Strengthen Long-term Corporate Climate Change Targets?
Author: Tianyu Zou
The below article is one of a series of blogs based on a Policy Brief shortlisted as finalist for the 2025 Chronos Sustainability Prizes at the LSE
Driven by escalating global climate change and by increasingly stringent public policies, a growing number of companies have adopted long-term greenhouse gas emission reduction targets.
These targets are pivotal in addressing global climate commitments. They offer value to both impact and institutional investors through systemic transformation, self-regulation, and strategic capital allocation. When accompanied with a feasible action plan and appropriate interim milestones, corporate targets can play a major role in aligning companies with the Paris Agreement’s goals.
Benefits to corporates
Long-term climate targets provide a range of benefits to companies. First, substantive targets based on absolute GHG reductions can support transformative change within the company. They provide a clear direction of travel and can ensure that the company’s strategy and actions are aligned with the goal of transitioning to a low carbon economy. The literature suggests that, for many companies, climate targets have reshaped internal governance processes, increased transparency and encouraged innovation in operational practices
Second, they can encourage and enable companies to take responsibility for emissions reductions across their supply chains. For example, the literature suggests that companies with ambitious long-term targets tend to apply these to their supply chains and aim to decarbonise these supply chains over time.
Third, long-term climate targets help guide investment toward low-carbon technologies. By making climate transition plans visible to investors, companies can attract capital and reduce the risk of stranded assets.
While the potential benefits of long-term targets are clear, it is also the case that they have yet to deliver on their full potential. My research suggests that well designed long-term climate change targets should:
Frontload climate action. Economic models demonstrate that frontloading climate action, combined with long-term planning, is the most cost-effective way to achieve climate targets. Acting earlier helps to overcome “lock-ins” in technological and economic systems. It enables corporates to realise learning and scale effects, which brings down the operation costs of low-carbon ways of production. Early efforts also maximise the growth potential of cleantech innovations and reduce the risk of investing in stranded assets, or outdated technologies rendered obsolete by more efficient alternatives.
Focus on opportunities not just on risk: Framing the transition as a cost amplifies the tension between allocating retained profits for shareholder dividends versus financing low carbon initiatives. Viewing climate targets as a roadmap for innovation and efficiency improvements offers a more constructive approach to drive positive systemic change. Rather than lobbying to delay carbon pricing policies, corporates could lobby for mechanisms that reward corporate-led climate governance.
Adopting these two recommendations would result in a step change in the ambition that underpins many companies’ climate change targets. Such a change would not only benefit the environment but would ensure that these companies are better placed to respond to the ever-growing landscape of climate regulation.
Notes
Tianyu Zou’s policy brief “What is the value of long-term corporate climate change targets” was shortlisted for the Chronos Sustainability Prize 2025. The policy brief can be downloaded here. Tianyu has recently completed her BSc in Economics at the LSE and is commencing an MSc inthe Oxford Smith School’s MSc Sustainable, Enterprise, and the Environment programme in October 2025.
