Corporate net zero targets: have they achieved anything?

Corporate commitments to reach net zero greenhouse gas emissions by around the middle of the century have spread rapidly in recent years and are now a prominent feature of corporate climate strategy. These targets are often used to judge corporate climate leadership and shape engagement with investors and other stakeholders. Yet it is unclear whether these targets lead to meaningful near-term change or are largely symbolic.

In this paper, the authors address this issue by examining whether firms that adopt long-term net zero targets subsequently reduce their carbon emissions or strengthen their climate-related management and governance.

Drawing on multiple datasets on emissions and corporate climate practices, and comparing firms that have adopted net zero targets with those that have not, the authors assess how companies change before and after making these commitments.

The results show little evidence that adopting a long-term net zero target leads to large or immediate emissions cuts, or to broad changes in climate governance. However, the findings do not support the view that these commitments are purely empty promises.

Carbon emissions estimates are consistent with gradual reductions, while some of the more demanding and forward-looking management practices improve around the time of adoption. Overall, the paper suggests that corporate net zero targets are best understood as part of a gradual process of organisational change, rather than as either purely symbolic gestures or immediate drivers of transformation.

Key points for decision makers

• Long-term corporate net zero targets do not appear to trigger large immediate cuts in carbon emissions. Across multiple emissions measures, the estimated effects of adopting net zero targets are generally consistent with gradual reductions in emissions, but these estimates are imprecise and do not provide clear evidence of large short-term reductions.
• Long-term corporate net zero targets are associated with more demanding management and governance practices. While most broad and aggregate measures of climate management and governance show little improvement after adoption, companies that have adopted net-zero targets perform more strongly on advanced, forward-looking management practices, particularly related to strategy.
• The weak average effects of net zero targets reflect the narrowing gap in climate change-related practices between firms that have adopted targets and those that have not. The use of basic climate management practices, such as disclosure, board oversight and climate policy statements, has become more widespread across all firms, reducing the differences between adopters and non-adopters.
• Long-term net zero targets are neither purely symbolic nor immediately transformative. Instead, they appear to formalise a broader shift to more strategic practices, such as undertaking climate scenario planning or disclosing an internal price of carbon, that may already be under way inside companies.