Net zero commitments have become a central feature of corporate climate strategy. This column analyses whether firms adopting such targets subsequently reduce emissions or strengthen climate governance. While there is only weak evidence of immediate emissions reductions, firms with net zero targets appear more likely to adopt forward-looking strategic management practices. Net zero targets appear to formalise transition processes already emerging in firms with relatively strong climate governance but are not reliable indicators of near-term emissions performance. Net zero commitments matter, but they are not, on their own, a gamechanger.
In recent years, corporate net zero commitments have become a defining feature of climate action in the private sector. Out of a sample of nearly 2,000 of the world’s largest companies from the highest-emitting sectors, more than half have now pledged to reach net zero greenhouse gas emissions by around mid-century (Figure 1). These commitments are widely cited by companies, investors, and policymakers as evidence that the private sector is taking climate change seriously. But have they actually changed corporate behaviour?
Figure 1 Share of Llrge companies from the highest-emitting sectors that have pledged to reach net zero emissions by around mid-century
Notes: The cumulative count and proportion of a sample of 1,972 large companies from the highest-emitting sectors announcing net zero targets or similar commitments.
The prominence of net zero commitments reflects developments in climate policy and science. The 2015 UN Paris Agreement established a stretch target of limiting global temperatures to 1.5°C above pre-industrial levels. Then, in 2018 the Intergovernmental Panel on Climate Change (IPCC) published a special report which concluded that limiting warming to 1.5°C would require global carbon dioxide emissions to fall to net zero by mid-century (IPCC 2018). Building on this, net zero has become an organising principle of climate governance, shaping national policy, investor expectations, and corporate disclosure frameworks.
Within corporate climate strategy, net zero commitments occupy a distinctive place. Unlike traditional environmental targets, which typically focus on operational improvements over relatively short horizons, net zero targets require firms to articulate pathways to deep decarbonisation over decades. This involves navigating technological uncertainty and changing regulation, as well as tackling emissions in firms’ value chains that lie beyond their direct control (i.e. Scope 3 emissions) (Fankhauser et al. 2022).
An optimistic view of net zero commitments, drawing on organisational theory, argues that ambitious long-term goals can drive change by focusing managerial attention and coordinating internal action. From this perspective, net zero targets may encourage firms to strengthen governance systems, strategic planning, and investment processes even before large emissions reductions become visible. A pessimistic view argues that such commitments are easy to adopt without near-term obligation, making them susceptible to intentional ‘greenwashing’ (misleading the public to believe that an entity is doing more to protect the environment than it is), or, at the very least, allowing firms to hedge technological and policy uncertainty by avoiding near-term action.
These contrasting views lead to an empirical question: do net zero targets change what firms actually do in the years immediately following adoption? Recent studies have approached related questions from different angles. Acharya et al. (2024) argue that corporate climate commitments can accelerate decarbonisation even when government policy is constrained, while Sastry et al. (2024) highlight the more limited effects of net zero commitments in banking.
In Dietz and Hastreiter (2026), we contribute new evidence for firms in the real economy, examining whether net zero targets are followed by observable changes in emissions and climate management practices among large firms from high-emitting sectors.
Measuring the impact on corporate climate action
Evaluating the impact of net zero targets on corporate climate action is not straightforward. One challenge is measurement. Corporate emissions data are often noisy and incomplete, particularly for indirect emissions occurring across supply chains and product use. Likewise, broad environmental, social, and governance (ESG) ratings may fail to capture the concrete organisational changes that accompany net zero commitments.
To address these challenges, we combine several complementary datasets. For emissions, we use both broad commercial emissions data from Trucost and sector-specific emissions intensity measures from the Transition Pathway Initiative (TPI). Importantly, the latter account for materially relevant Scope 3 emissions, are compiled consistently across companies, and use physical measures of output for normalisation rather than financial metrics, which often fluctuate for reasons unrelated to firms’ underlying carbon efficiency.
To measure organisational change, we draw on TPI’s Management Quality framework, which evaluates firms’ climate-related management practices across indicators such as board oversight, climate scenario analysis, internal carbon pricing, the integration of climate risks into corporate strategy, and emissions disclosure. We aggregate these indicators in several ways: through simple indicator counts, level scores, a difficulty-weighted score that places greater emphasis on more demanding practices, and thematic groupings based on the four pillars of the Task Force on Climate-related Financial Disclosures (governance, strategy, risk management, and metrics and targets).
A second challenge is identification. Firms do not randomly adopt net zero targets. Companies with stronger governance, lower emissions, or more advanced climate strategies may be more likely to adopt such commitments in the first place. Simply comparing adopters with non-adopters could therefore produce misleading conclusions. To address this, we exploit differences in the timing of adoption across firms. Specifically, we compare firms before and after adopting net zero targets with otherwise similar firms that have not yet adopted such commitments.
Evidence on emissions and climate management and governance
We obtain two main findings. First, we find weak evidence that adopting a net zero target leads to subsequent emissions reductions (Figure 2). Across three different emissions measures, firms adopting net zero targets appear to reduce emissions relative to similar non-adopters, but the estimates are imprecise and statistically insignificant. The data are therefore consistent with emissions declines, but we cannot rule out the possibility that there is no effect within our four-year post-adoption window.
Figure 2 Effect of net zero target announcements on absolute emissions and emissions intensities
Notes: This figure shows the dynamic effect of net zero target announcements on absolute emissions and emissions intensities, comparing net zero target adopters with similar not-yet-adopters. Pre-treatment estimates are shown in red and post-treatment estimates in blue. Error bars consistently include zero, indicating statistically insignificant effects.
Second, we find that while broad-based improvements in climate governance do not systematically follow net zero target announcements, adopters do appear to strengthen more demanding and forward-looking management practices. This is clearest to see when dividing management practices into the four thematic pillars of the Task Force on Climate-related Financial Disclosures framework (Figure 3). There is a significant and positive effect of net zero targets on the adoption of practices in strategy, such as undertaking climate scenario planning, disclosing internal carbon pricing, and disclosing the actions planned to meet a firm’s emissions targets. Interestingly, improvements in these strategic practices often begin in the year immediately before formal adoption. This suggests that announcing a net zero target is less a discrete trigger for organisational change than part of a broader repositioning already underway within firms.
Figure 3 Effect of net zero target announcements on management practices
Notes: This figure shows the dynamic effect of net zero target announcements on management practices grouped into governance, strategy, risk management, and metrics/targets themes. Within each theme, the unweighted average of practices implemented is calculated. Pre-treatment estimates are shown in red, post-treatment estimates in blue. Confidence intervals are set at 95%.
By contrast, there is no significant effect on practices in governance, risk management, and metrics/targets. Indeed, if anything the effect is negative, something we are able to explain by convergence between adopters and non-adopters: firms without net zero targets have increasingly caught up on basic climate management practices, including board oversight for climate issues, disclosing operational emissions, and publishing company climate policies. As these practices become standard expectations across firms, differences between adopters and non-adopters naturally narrow over time.
The same pattern does not hold for more demanding practices. Firms with net zero targets remain more likely to integrate climate risks into corporate strategy, conduct climate scenario analysis, and use internal carbon pricing. On these dimensions, non-adopters have not caught up.
Neither greenwashing nor gamechanger
These findings help adjudicate between the competing interpretations of corporate net zero targets. On the one hand, the evidence is inconsistent with a strong greenwashing interpretation. Firms adopting net zero targets do appear to strengthen more demanding governance and strategic management practices, and the estimated effects on emissions are generally negative rather than positive. On the other hand, the evidence is also inconsistent with the most optimistic version of the ‘bridgehead’ view, in which net zero commitments trigger rapid and broad-based organisational transformation. The effects we observe are selective, gradual, and often begin before the formal announcement of a target.
The most plausible interpretation is therefore more nuanced. Net zero targets appear less to create a strategic direction from scratch than to formalise and publicly lock in a transition process that is already emerging within firms with relatively strong climate governance. For these firms, the commitment may help coordinate internal action and reinforce strategic priorities – without, by itself, delivering immediate operational transformation.
For policymakers, investors, and standard-setters, the implications are important. Headline net zero pledges should not be treated as reliable indicators of near-term emissions performance. Greater attention should instead be paid to complementary management practices, such as interim targets or investment plans. At the same time, dismissing net zero commitments as purely symbolic would also be misleading. Net zero commitments matter, but they are not, on their own, a gamechanger.
Source : VOXeu
