Set Ambitious but Realistic Environmental Goals

How far from business realities can companies stretch when setting critical goals to reduce carbon emissions?

- Kate Isaacs, Jason Jay, Jeremy Gregory, and Elsa Olivetti

IN THE YEARS SINCE THE 2021 ROUND OF global climate negotiations, more than 2,600 companies have responded to alarms raised by scientists and policy makers by setting aggressive targets to reduce carbon emissions.¹ Walmart aims to become powered by 100% renewable energy by 2035; Ikea has made a commitment to produce as much renewable energy as it consumes by 2030; General Electric aims to transform itself into a net-zero company by 2050; and American Electric Power plans to reduce its carbon emissions 80% by 2030, with a goal of net-zero emissions by 2045.²

These sustainability goals address demands from a broad array of stakeholders that companies disclose material risks and improve their environmental and social impacts. They also serve to focus the attention and resources that are required within organizations to drive social and environmental progress on the ground.

However, setting appropriately ambitious sustainability goals that can pull a steady line of progress through today’s uncertain business landscape is an exceedingly difficult task. Economic volatility, evolving stakeholder demands, scientific and technological developments, and variable sociopolitical pressures mean that the ground is constantly shifting under leaders’ feet.

Activist stakeholders in particular are watching company performance on these issues closely, demanding corporate transparency around goals and progress, and faulting companies that fail to follow through on their pledges. A 2022 study published by the nonprofit organizations NewClimate Institute and Carbon Market Watch identified 25 large corporations with net-zero commitments and rated 21 of them as having “low integrity” or worse because their plans would reduce emissions by only 40% on average, not the 100% implied by net zero.