The consequences of missing emissions targets? For many companies, none

The majority of companies that set and fail to achieve emissions reduction targets suffer no negative consequences, researchers have revealed.

Shirley Lu at Harvard Business School and colleagues looked at CDP disclosures from just over 1,000 firms that set targets for 2020. Their sample covered 2.5 billion tons of Scope 1 emissions, around 5 percent of annual global emissions, and covered multiple sectors. 

Setting targets often brought praise: Lu and team found that companies that announced goals benefited from positive media coverage and improved ESG ratings. 

Yet just 88 companies would go on to hit their targets; the others either failed (633) or stopped reporting on progress, which the researchers dub a “disappeared” target (320). Lu and colleagues then looked for consequences. For each company in the failed group, they checked whether the organization suffered negative media coverage, was hit by a decline in stock price, attracted more shareholder resolutions or saw lower ESG ratings. On average, no metrics showed a change. “Overall, our findings suggest that firms do not face penalties for failing their emissions reduction targets,” the researchers wrote.

Disclosure danger

A lack of transparency around missed targets may be part of the reason. Unsurprisingly, no firms that failed issued press releases announcing the news. Disclosure in sustainability reports was better, but still far from complete. The researchers examined 78 reports from companies in the failed group; 26 acknowledged missing targets and only 16 did so using explicit language such as “failed” or “missed.”

The team also found anecdotal evidence that explicitly acknowledging a failure may be one way to break the no-consequences rule. Three firms that came clean — Fedex, Kraft Heinz and Gildan Activewear — all attracted negative press. In the case of Fedex and Kraft Heinz, news articles mentioned the failed target in the headline. Following the articles, both firms experienced a decline in stock price relative to the market and later received environmental-related shareholder proposals.

“What this primarily says to me is that no one in the media is doing proper research,” said Alison Taylor, a sustainability expert at New York University. She noted that sustainability professionals will sometimes privately admit that emission targets are treated as “stealth marketing,” a strategy that can be maintained if failures are not held to account.

The tendency to penalize more transparent companies also results in missed learning opportunities, Lu said. If a company misses a target because of a lack of regulatory support for a particular climate solution, for example, that company can raise that lack of support when discussing why it failed to hit its goal. But that can’t happen when targets disappear. By looking at emissions disclosures, Lu estimates that almost two-thirds of companies with “disappeared” absolute emission targets had in fact missed their targets. “All of these failures could be learnings that we’re not seeing because they just go dark,” she said.

Instituting frameworks

To shore up the system, Lu suggests we should look to the institutional frameworks that underpin financial reporting. She outlined three components: agreed accounting standards; legal enforcement of those standards; and a robust discussion by independent experts, including journalists and analysts, about company results. 

Emissions accounting lacks such robust frameworks, but institutions such as CDP and the Science Based Target initiative form the basis for some of it. Other components have been added since 2020, including the Security and Exchange Commission’s 2024 climate disclosure rule, which requires large companies not only to disclose targets but to report on progress toward them. When asked what she expected to find if the study were repeated for 2025 targets, Lu said, “I hope the results would be different.”