Raising the bar: What determines the ambition level of corporate climate targets?

Abstract

AbstractSince the launch of the Science Based Targets initiative (SBTi), we have witnessed a steady increase in the number of companies committing to climate targets for large-scale reduction of greenhouse gas (GHG) emissions. While recent studies present various methodologies for establishing climate targets (e.g., sectoral decarbonization approach, near-term, long-term, net zero), we still don’t understand the explanatory factors determining the level of ambition companies demonstrate in target setting. In this paper, a two-stage qualitative study is conducted with a sample of 22 companies from five countries. First, these companies’ publicly disclosed climate targets are evaluated according to four target ambition criteria: target type, scope, timeframe, and temperature alignment. Secondly, multiple explanatory factors for target setting were identified during the content analysis of the interviews to see how present these factors appear in the ambition levels. Within companies with highly ambitious climate targets, the findings indicate that certain factors are highly present, including leadership engagement, continual management support, employee involvement, participation in climate initiatives, and stakeholder collaboration. Conversely, none of these key factors are highly present in companies with less ambitious climate targets. Rather, these companies strongly identify the initiating factors of market-related pressures and non-market stakeholder influence as being the driving forces behind their target setting. This paper contributes to the literature on corporate responses to climate change by expanding our understanding of explanatory factors for different corporate climate target ambition levels.