The Evolution of Corporate Climate Action
Over the past few decades, corporate climate action has transformed from a peripheral concern to a central business imperative. This evolution reflects experience in reducing emissions through implementing cost-saving measures, growing awareness of climate risks, changing stakeholder expectations, and emerging opportunities in the low-carbon economy.
The turn of the millennium marked a gradual shift in corporate attitudes on climate change. As scientific consensus solidified and public awareness grew, more businesses recognized the need to address their environmental impact. Early initiatives like the Carbon Disclosure Project (now CDP) launched in 2000 provided a framework for companies to report their emissions, lending unprecedented transparency to corporate climate disclosure. Around the same time, with the publication of The Greenhouse Gas Protocol, companies began to inventory their greenhouse gas emissions from their direct operations (Scope 1) and purchased electricity (Scope 2). With the GHG Protocol’s publication of its Scope 3 standard in 2011, companies could now measure and report the emissions from their upstream and downstream value chains–emissions resulting from how products are sourced, manufactured, shipped, and disposed of.
The devastating effects of extreme weather in recent decades, growing recognition of the role companies can play in reducing global emissions, and investor concern over climate risk, pushed climate change up the corporate agenda. The landmark Paris Agreement in 2015 provided a clear signal to businesses about the global commitments needed to tackle climate change and catalyzed a wave of climate pledges. As more sophisticated approaches to corporate climate action emerged, science-based targets encouraged companies to align their emission-reduction goals with global climate objectives. Leading companies began to look beyond Scope 1 and Scope 2 emissions—many having incrementally reduced their emissions over a decade—and began to set more aggressive climate targets to address Scope 3 emissions. In 2019, companies at the forefront of climate action set a new precedent by announcing net zero and, in some cases, carbon-negative targets. Since then, half of the world’s largest companies have established a net zero climate target, setting a new expectation for corporate action in support of the Paris Agreement.
For many companies, setting net zero targets marked a departure from previous target-setting. In the past, companies typically set targets based on emission reductions they could clearly achieve through improving processes and using proven, cost-effective technologies like renewable energy. Net zero targets, however, often require solutions that are less certain or not yet fully developed.
Today, thousands of companies have ambitious, climate targets, including interim targets by 2030, where many are exploring how to meet them and facing a lack of available, cost-effective clean technologies and solutions. As such, many more companies are advocating for climate policies that could help unlock economy-wide climate technology solutions at scale, recognizing that no individual company can address the many interdependencies inherent in the low-carbon transition. At the same time, many companies are also at the forefront of investing in new technologies across their value chains. With the tax incentives and investment in R&D resulting from the Inflation Reduction Act, greater opportunities exist for private investment to help scale solutions like hydrogen, long-duration energy storage, engineered carbon removal, sustainable aviation fuel, and more.
Climate-related financial risks are also increasing, and more companies are turning their attention to assessing, managing, and reporting on transition risks (e.g., changes in regulation, investor preferences, and consumer behavior), and the physical risks from a changing climate. To this end, recent climate disclosure rules from the U.S. Securities Exchange Commission, from California, and within the EU and other countries, indicate growing interest in standardizing how companies report on climate performance–– providing a more holistic picture of how companies are managing their climate-related financial risks, how they are reducing their climate impacts, and how they are preparing for decarbonization and building resilience to climate change.
Today’s corporate climate leaders are going beyond emissions reductions. They’re investing in climate resilience, exploring innovative technologies and business models that support the low-carbon transition, and advocating for practical climate policies to accelerate progress. At C2ES we’ve worked alongside businesses throughout this journey. As corporate climate action continues to evolve, we remain committed to fostering collaboration, sharing best practices, and advocating for solutions that enable businesses to lead the way to a low-carbon, climate-resilient future.
