Carbon targets—formal, public commitments by companies to reduce greenhouse gas emissions in the future—are now prevalent. Companies also routinely update their carbon targets ostensibly in response to evolving stakeholder expectations, regulations, and market conditions. We studied changes in carbon targets for a broad sample of global firms over time and discovered a novel form of policy-practice decoupling, wherein companies update targets to appear outwardly more ambitious, but in reality less stringent, allowing firms to “kick the can down the road” on costly efforts to reduce greenhouse gas (GHG) emissions.  

Our motivation: dissonance between carbon targets and emissions trends 

Our study, recently published in the Journal of Management Studies, was motivated by the dissonance between recent proliferation of corporate carbon targets with greater stated ambition and steadily increasing GHG emissions from much of the corporate sector. While carbon targets represent an important aspect of global efforts to reduce emissions and mitigate the worsening effects of climate change, we grew concerned that companies setting long-term targets may take license to delay costly efforts to cut emissions in the near term, when they are more sorely needed, while taking reputational credit for superficially ambitious targets set with a plausibly enlightened, long-term view.  

Relieving pressures through decoupling  

We theorized that firms face two countervailing pressures in their decisions to adopt and subsequently update carbon targets—a pressure to meet heightening expectations of influential stakeholders that induces firms to set larger (more ambitious) targets, and a pressure to ultimately attain targets that induces firms to weaken existing targets. A firm may seek to relieve this tension by decoupling its policy (the carbon target) from its practice (costly emissions reduction activities in support of the target, or lack thereof)—providing the appearance of target strengthening while in reality loosening targets. These two pressures are likely to be felt more intensely by firms with relatively small and large targets, respectively, hence our expectation that we would observe greater propensity for such decoupling when a firm’s target was small or large (i.e., a U-shaped relationship).  

We analyzed carbon targets disclosed by firms to CDP (formerly Carbon Disclosure Project) over a 10 year period and found that firms regularly change multiple numeric values (e.g., percentage emissions reduction, baseline emissions, target year) of existing targets over time, and do indeed often exhibit the form of decoupling we theorized—increasing the size of the target in terms of total percentage reduction in emissions, while reducing the intensity of effort required to meet the target by shifting the ultimate target date further into the future. We also identified conditional factors that exacerbate this use of decoupling (long-term institutional ownership and climate-related shareholder resolutions) and other factors that mitigate it (increased media scrutiny of company’s climate performance). Critically, we also found that companies using this form of decoupling demonstrated significantly greater increases in near-term emissions.  

Questioning the notion of long-term orientation as enlightened management 

A key implication of our study is that it forces us to rethink our view toward business sustainability as managing for the long term. A longer-term carbon target may be seen as more forward thinking, but the gravity of the climate crisis requires that firms take action in the near term, and long-term targets are decidedly more distant and thus appear less urgent. As such, the mere adoption of “net zero” or comparably ambitious long-term carbon targets is not sufficient to drive corporate accountability for near-term emissions reductions. Despite claims to the contrary, our findings cast doubt on whether such an appetite exists among even climate-oriented institutional investors. We hope that investors, regulators, and other concerned stakeholder groups take note of our findings and continue to pressure firms for more meaningful interim progress toward long-term carbon targets.  

We note that while our study data is limited to the pre-COVID era (2010–2019), other pressures have recently intensified that are changing the way companies position their carbon target ambitions to external audiences—notably, the walking back of commitments. These trends add complexity to firms’ decision making on climate commitments and offer ample opportunity for ongoing research in the area. More importantly, however, we hope our study emphasizes the role of management research in not only promoting best practices for business management, but also exposing flaws in corporate practices and governing policies that demand remedy.