A new paper from the University of Oxford’s Smith School of Enterprise and the Environment and Exponential Roadmap Initiative concludes that current climate standards are not sufficiently incentivising the big picture innovations necessary to deliver net zero, and must be expanded to include a company’s broader influence on climate action. The research published in the Journal of Carbon Management comes after a period of fierce public debate about climate standards and offers possible solutions for those seeking to improve both integrity and efficiency of corporate climate action.

Incentivising climate action and innovation in the corporate world is essential says co-author Dr Matilda Becker:

Of the 2000 largest companies, 50% do not yet have a net zero target. We need to incentivise companies to act beyond their boundaries to make up for inaction by laggards, rewarding their contributions in a new beyond-value-chain reporting track.

To date, reporting standards have been created primarily to guide companies in setting targets and to help them track emissions resulting from their activities (eg using the Greenhouse Gas Protocol). While these reporting standards have been essential for reducing the emissions of individual companies, say the authors, they fail to incentivise broader climate action and can even discourage it.

Co-author Claire Wigg, Head of Climate Performance Practice at the Exponential Roadmap Initiative.

It is essential that companies report and reduce emissions across their value chains. But it is also essential that they drive – and are rewarded for driving – systemic change via the products they produce, the purchases they make and the policies they lobby for or against.

Lead author Kaya Axelsson, Research Fellow and Head of Policy and Partnerships at Oxford University’s Oxford Net Zero:

The way reporting standards are currently set up, a high-growth renewable energy company might fare poorly because of the emissions generated in making turbines and solar panels, despite the fact these products will go a long way to reducing emissions globally. We need a way to compare and reward companies that are changing the world, not just their operations.

More resources: 

• Use our 1.5°C Business Playbook to develop a climate strategy across four pillars of corporate climate action
• Find guidance for developing a transition plan 
• Download the Business Associations Climate Action Guide to find out how you can align your membership in business associations with your company’s own climate ambition