• Businesses are facing pressure to combat climate change, prompting scrutiny of how their sustainability efforts align with global targets
• Insights from Imperial College Business School reveal the complex factors contributing to why corporate sustainability efforts sit at odds with the Paris Agreement, urging a shift towards actionable strategies for a greener future
• The gap between corporate sustainability goals and actions underscores the need for greater transparency, accountability, and meaningful engagement to address climate change

Cast your mind back a decade… The year is 2015. World leaders gather in Paris and pledge to fight climate change, aiming to keep global warming in check. It’s a hopeful moment, a promise for a greener future. The Paris Agreement, a landmark international treaty, is developed with the aim to combat climate change by limiting global warming to well below 2 degrees Celsius above pre-industrial levels. 

Fast forward to today. Whilst the clock is still ticking on climate change, little progress has been made.

No matter their size or sector, businesses are under growing pressure to do more to help fight climate change. Aside from growing calls from government and international collectives, customers too are increasingly keen to ensure that the companies they support are actively contributing to a more sustainable world.

But, how can they know that the green-focused initiatives these companies put in place are actually having a tangible impact on the larger world?   

Despite the best of intentions, many seemingly green moves by industry can have unintended consequences, as coffee chain Starbucks knows only too well. In 2018, the company released a straw-less lid, as part of its much publicised sustainability drive. However the lids were found to contain more plastic than the old lid and straw combination.

The company didn’t dispute this, but pointed out that the new lid was made from polypropylene, a commonly-accepted recyclable plastic that “can be captured in recycling infrastructure.” However, critics were only too quick to point out that only 9% of the world’s plastic is recycled, so the company shouldn’t assume all the lids would be recycled.

Even a company as prominent as Amazon is not immune to scrutiny when it comes to tackling climate change. According to a study conducted by the New Climate Institute and Carbon Market Watch, many of the world’s biggest corporations, including Google, Amazon, Ikea, Apple, and Nestle, are falling far short of their own targets on addressing climate change. 

Corporate inaction: Falling short of sustainable goals

A recent study conducted by Imperial College Business School doubles down on this stark reality, finding that the emissions pathways of most companies sit at odds with the targets of the Paris Agreement, hindering the ability for countries to meet nationally-held climate goals.

Conducted by Dr Simone Cenci, from Imperial College Business School, alongside colleagues Mr Matteo Burato, Dr Marek Rei and Prof Maurizio Zollo at the Leonardo Centre on Business for Society at Imperial College Business School, the Department of Computing, the study highlights a critical gap between sustainability attempt and sustainability outcome. 

Not only that, but the study provides vital insights into what differentiates companies that are able to reduce their emissions to levels compatible with the targets of the Paris agreement to those which do not.

Corporate climate actions and, the researchers say, changes in corporate sustainability behaviour, are crucial to reducing the impact of human activities on long-term climate dynamics. But what are companies actually doing to lower their emissions? What behaviours are the most effective?

The researchers uncover the answers to these questions by providing a systematic framework for tracking companies’ climate actions. 

Decoding the sustainability gap: why is this happening?

Dr. Simone Cenci and his co-authors worked in collaboration with the GOLDEN foundation to conduct their analysis, using a database of more than 800,000 sustainability initiatives across 9,000 companies.

Focusing specifically on a subset of 1,900 companies operating in high-emitting sectors (Energy, Industrial, Materials, Utilities), they identified that sustainability misalignment stems from a complex interplay of factors:

1. The heterogeneity of sustainability behaviours highlights varying degrees of commitment and engagement across companies, with some leading the charge and others lagging behind
2. Differing prioritises, resource constraints, and levels of awareness regarding the urgency of addressing climate change can spur a lack of congruence
3. The influence of external factors such as regulatory environments, market pressures, and technological limitations

Furthermore, the approach to innovation and investment were also revealed to be vital for sustainability success. Companies which had managed to align their emission pathways with the targets of the Paris Agreement invested substantially more effort in the development of innovation capacities to meet energy goals.

In other, less aligned companies, the focus of sustainability efforts instead lay in operational risk-mitigating activities, such as the modification of existing assets and procedures. Whilst this was no doubt a safer route for the organisation, the results of their efforts held far less impact.

With such insights, industry can begin to make progress. For example, the researchers say the data can empowers investors and policymakers to play a crucial role. Investors can redirect capital towards companies with the most sustainable practices, while policymakers can design more targeted efforts that drive meaningful action.

How do we turn the tide towards a more sustainable future?

Transparency and accountability, the researchers suggest, are the way forward. As well as customers holding companies to account, the tracking of actions and outcomes can not only keep corporations honest, but enable them to better understand what works and what does not.

Professor Maurizio Zollo mentions that – “Beyond reporting standards and the introduction of mandatory compliance on impacts, we know which Sustainable Development Goals and types of activities companies over-invest and under-invest in. This is critical to adjusting climate strategies for companies, investors and policymakers.”

But an adjustment in mindset also needs to occur. There is evidence to suggest that those at the head of such companies might not be as motivated to green as their customers, or even some of their staff might want them to be. Research shows that people typically care less about the environment the older they get. It’s little wonder then that individuals like Greta Thunberg are making real waves in the fight against climate change, through bold activism, demanding that government, industry and society all do more.

Incentivising those leading organisations into more socially responsible behaviour is one method for pushing change. For instance, the University of Mannheim Business School research suggests that incorporating Environmental, Social, and Governance (ESG) metrics into executive compensation schemes leads to tangible improvements in CO2 emissions. This incentives companies to prioritise sustainability in their operations.   

But education too is vital. Here is where institutions such as business schools, which are charged with the responsibility of training future leaders, can play their part.

Programmes such as Imperial College Business School’s Executing Sustainability Strategies Executive Education programme, on which Maurizio Zollo teaches, are helping to reshape mindsets and business practices, particularly amongst those in the C-Suite and beyond.

An academic paper written for Research Policy by Nicholas Stern and Anna Valero lays out the reality of what’s at stake. Sustainability is ensuring that the opportunities for well-being offered by the current generation to the next generation are at least as good (if not better) as those which they had.

Perhaps, when we reach 2035 and look back, we’ll be better able to say we’re doing exactly that.

By, Gowri Ramesh

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