'Paris-Aligned' corporate emissions targets create unlevel playing field

With increasing pressure from consumers and regulators, corporations worldwide increasingly seek to certify their targets and activities as 'Paris-aligned'. However, recent research led by Utrecht University unveils flaws lurking behind claims of 'Paris-alignment' and calls for market-wide regulations looking at the role of companies beyond their emissions.

The international collaboration published today as a perspective in the journal Science challenges emissions reduction targets as the sole measure of corporate climate ambition and action. "Our study shows that the role of companies in the climate transition needs to be assessed beyond emissions targets alone, which are insufficient to demonstrate 'Paris Alignment," says Yann Robiou Du Pont, lead author of the study.

Larger, existing companies inadvertently favoured

The study points to how the reliance on top-down 'effort-sharing' approaches, such as those employed by the Science Based Targets initiative (SBTi) may inadvertently favour larger established “climate-aligned” companies, stifling innovation and skewing the playing field against emerging players. For example, a solar panel manufacturer which needs to grow its emissions ten years from now while it scales up a new, highly efficient method of building those panels, may be squeezed out of the market because, in this model, their presence would mean overshooting the climate goal. “This approach therefore risks benefiting larger existing companies, distorting future market competition and hindering the development of more efficient solutions,” explains Robiou Du Pont.

Furthermore, the study highlights the inadequacy of voluntary emissions pledges in driving meaningful climate action, noting a lack of clear causality between target adoption and actual emissions reductions. "Our research underscores the urgent need for robust regulatory frameworks and transparent oversight to guide corporate climate action," says Detlef van Vuuren, co-author of the study. "Voluntary targets, while commendable, are not a substitute for mandatory regulations that ensure accountability and drive innovation across all sectors."

Holding corporations accountable

The study advocates for concrete steps towards regulatory action, including implementing regulatory frameworks that adapt to evolving market dynamics and technological advancements, establishing enforceable standards to hold corporations accountable for their climate commitments and providing transparent oversight mechanisms to ensure compliance and track progress towards emissions reduction goals.

"By fostering a conducive environment for innovation and sustainability through proactive regulation while capping market emissions, we can empower companies to collectively align their objectives with the goals of the Paris Agreement," concludes Robiou Du Pont.