What is the Value of Long-term Corporate Climate Change Targets?
Author: Meiqi Li
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
In response to the growing urgency of the climate crisis, many companies have now adopted long-term corporate climate change targets, often pledging to achieve net-zero emissions by 2050 or earlier. These commitments, frequently guided by the Science-Based Targets initiative (SBTi), aim to reduce both direct (Scope 1 and 2) and indirect (Scope 3) emissions.
These long-term targets are not just environmental commitments. They have strategic implications for companies to help navigate physical climate risks, evolving regulations and shifting investor expectations. They also play a critical role in global climate efforts, helping align business actions with the Paris Agreement’s 1.5°C goal.
My research identified the multi-dimensional value of these long-term targets. In summary, the research found that:
Long-term corporate climate change targets help companies to mitigate climate risks, to drive innovation and to boost competitiveness. In addition, credible targets can help build brand trust and can help unlock new markets.
Investors can use long-term corporate climate change targets as a measure of (or a proxy for) the quality of a company’s management, the long-term stability of the company and the degree to which the company is aligned with climate-related frameworks and standards. The literature suggests that firms with strong targets often have higher ratings and lower downside risks.
For society, long-term corporate climate change targets can contribute to emission reductions, increases in clean energy investment, and investments in climate-resilient infrastructure.
While such targets send a powerful message about corporate commitments to action on climate change, questions remain about their credibility, consistency and real-world impact. Targets have been criticised because of the apparent gap between advocacy and action. At present, there are four key obstacles that limit the impact of long-term climate change targets:
1. Inconsistency and lack of standardisation, especially in how targets are defined and managed across sectors.
2. The absence of short- and medium-term milestones, which undermines credibility and allows for the ‘backloading’ of climate action.
3. Inconsistent disclosures and greenwashing risks, where firms overstate their commitments and/or fail to meaningfully implement the commitments they have made.
4. Dynamic uncertainties, including evolving technologies and regulations, which require more adaptive and transparent corporate strategies.
To close the gap between corporate ambition and impact, my research offers three key recommendations:
1. Use standardised target-setting frameworks: Companies should use frameworks such as the SBTI to set long-term and interim targets, based on both absolute emissions reductions and on sector-specific benchmarks. This would improve comparability and accountability.
2. Mandate robust disclosures: Governments should require companies to report consistently on progress, and the data reported should be assured and underpinned by stronger auditing mechanisms. This can identify and deter greenwashing.
3. Create incentives and collaborative ecosystems: Companies’ willingness to set climate targets, and their ability to achieve climate targets is dependent on the policy environment within which they operate. Governments can play an important supporting role in creating the conditions for companies to set targets. Most obviously, they can encourage and incentivise investments in carbon mitigation and offsetting, and in providing the policy and institutional frameworks that put net zero at the heart of government policymaking. They can also support the development of coalitions for action that include companies, financial institutions, civil society and other actors. For example, they could establish platforms to reduce information asymmetries (e.g. shared databases) and to enhance collaboration among stakeholders, (e.g. cross-sector partnerships, innovation hubs).
Together, these actions can reduce the risk of long-term corporate climate change targets being symbolic gestures, and instead maximise their potential as credible, effective tools for corporate transformation and accelerating global climate progress.
Notes
Meiqi Li’s policy brief ‘What is the Value of Long-term Corporate Climate Change Targets?’ was shortlisted for the Chronos Sustainability Undergraduate Prize 2025. A copy of the policy brief can be found here.
Meiqi Li recently graduated with a BSc in Geography with Economics from the London School of Economics and Political Sciences. She will be pursuing a MEng in Civil and Environmental Engineering at MIT, specialising in sustainable supply chain management and business transitions toward net-zero.
