Corporate emissions targets and the neglect of future innovators: Targets can distort competition in favor of incumbent firms

Abstract

Widely recognized as key partners for achieving international climate goals (1, 2), businesses like to indicate that their targets and activities are “Paris-aligned.” In response, research and initiatives have emerged to guide and assess whether companies’ targets represent an adequate mitigation effort to achieve the Paris Agreement. Here, we highlight conceptual limitations of effort-sharing approaches applied to companies and argue that the fundamental assumption of using emission-reduction targets as the central and often sole metric for setting or benchmarking individual corporations’ climate action ambition is simply insufficient because future innovators are neglected. Although emissions targets can help curb emissions, we detail the risks of relying on individual corporation’s emissions targets to guide and track progress in aligning the economy with the Paris Agreement goals. Last, we clarify the distinct roles of companies as agents of innovation and of market regulators and supervisors as either definers or enforcers of market-wide objectives for sustainability.