Only One of Eight Corporate Climate Strategies Tracks With Falling Emissions

Of eight corporate climate strategies, only one — a target validated by the Science Based Targets initiative (SBTi) — correlates with declining emissions at close to 150 of the world's largest companies. One strategy, linking CEO compensation to climate goals, tracked with emissions going up, not down.

The finding comes from a study published earlier this month by Michael King, a finance expert at the University of Victoria in Canada, and Paul Beamish of Western University. The researchers examined the emissions of 146 companies from 30 countries between 2012 and 2023, testing which of eight common governance and strategy levers actually moved the carbon numbers.

Why does SBTi validation work when other levers do not?

King attributes the link between SBTi validation and emission reductions to several factors. Companies already committed to decarbonization seek SBTi approval as a way of signaling ambition. "When companies want to distinguish themselves, they can go just one step more and have their targets validated," he said.

Validation then creates its own momentum. King found that the longer a company keeps an SBTi target in place, the more likely it is to achieve significant emissions reductions. Time in the scheme, in other words, predicts depth of cuts.

What does this change for corporate decarbonization planning? It separates signal from ceremony. Strategies such as publishing a climate plan, assigning board responsibility for climate, setting internal targets or commissioning emissions verification showed no independent link to falling emissions in the study's dataset.

The authors caution against reading that as proof the other steps are useless. Every company in the sample with SBTi validation had previously taken at least one of four earlier steps: creating a climate strategy, giving the board responsibility for climate efforts, setting internal targets or having emissions data verified.

"Our findings highlight the importance of a staged approach: build internal climate oversight, pair it with externally validated science-based targets, and sustain these commitments long enough for measurable reductions to emerge," King and Beamish wrote.

Why did CEO pay incentives track with rising emissions?

The study's most counterintuitive result concerns compensation. Linking CEO pay to climate goals was the one strategy among the eight associated with emissions increases. King offers two explanations.

First, the practice is more common in industries where emissions are already rising, such as the tech sector, so the correlation may reflect sector dynamics rather than the incentive itself. Second, companies typically tie only a small fraction of CEO pay to emissions goals.

"If you are a CEO in that position, the question is: If it's immaterial for your compensation, how much do you pay attention to that goal compared to your other KPIs?" King asked.

What is the baseline?

The paper is the second in a pair from the two researchers. Their first study, published in January, examined a similar group of companies and found that 71 percent had reduced operational emissions. A smaller fraction — less than 45 percent — was cutting at the pace required to meet Paris Agreement goals.

Together the two papers sketch a corporate landscape where majority participation in emissions reduction coexists with a minority hitting the required rate. The staged model King and Beamish describe — internal oversight first, external validation second, sustained commitment third — is the mechanism their data says separates the two groups.

The milestone to watch now is SBTi validation uptake and target age across heavy-emitting sectors, the variable the study ties most directly to measurable reductions through 2023.