Our Take: Pathways for Corporate and Business Climate Action

Written by Jay Tipton

I recently had a friend who owns a small business ask how his company could become “net zero.” This term was completely new to him – he had heard it before but didn’t fully grasp what it meant. He understood it was about sustainability, but beyond that, he wasn’t sure where to start. I explained the basics and gave him a few pointers. But it dawned on me that I am so deep in the climate finance space, constantly surrounded by experts who understand climate change, sustainability, and corporate action in detail, that I sometimes forget people outside of our space are still learning. That conversation prompted me to explore this topic in a comprehensive way, to provide a structured overview of corporate greenhouse gas (GHG) reduction efforts, the key players involved, and the broader impact of these actions on business and the planet.

I’m always beating the drum – climate change poses one of the most significant threats to our planet. The role of corporations and businesses in this crisis is undeniable, as they are responsible for a significant share of global emissions. However, they also have an opportunity to be part of the solution. By adopting sustainability strategies, companies can mitigate their environmental impact while also gaining financial and operational benefits.

This paper explores corporate GHG reduction efforts, the role of organizations in guiding emissions reduction strategies, and the overall performance of businesses in meeting climate targets. It looks at practical strategies, challenges, and opportunities companies face as they work towards a greener future.

The Role of Companies in Climate Change

Corporations are among the largest contributors to global GHG emissions, with industries such as energy, transportation, and manufacturing playing dominant roles. The burning of fossil fuels for energy, industrial production, and logistics accounts for a significant portion of global emissions. According to research, the top 100 companies alone are responsible for approximately 70% of global industrial GHG emissions[1]. This demonstrates the urgent need for corporate accountability and action.

For example, companies operating within the European Union have historically been involved in carbon-intensive projects, significantly impacting emissions levels[2]. Without urgent intervention, corporate emissions will continue to hinder global climate objectives, including those outlined in the Paris Agreement.

Beyond environmental consequences, corporate emissions have social and economic implications. High pollution levels exacerbate public health issues, such as respiratory diseases and cardiovascular problems, while climate-related disasters disrupt economies and displace communities[3]. Companies that fail to act may face reputational damage, regulatory penalties, and loss of investor confidence. Thus, integrating sustainability into corporate strategy is not just an environmental imperative but also a business necessity.

Importance of Reducing GHG Emissions

Reducing corporate emissions aligns with the Paris Agreement’s goal of limiting global warming to below 2°C, ideally aiming for 1.5°C. The business community plays a key role in meeting these objectives. Many companies are setting net-zero targets, which means balancing the amount of GHGs emitted with those removed from the atmosphere through reduction efforts and offsets.

Businesses that take proactive measures to mitigate their carbon footprint can significantly reduce climate-related risks. Extreme weather events, supply chain disruptions, and resource shortages are becoming more common, impacting industries worldwide. Companies that address these risks head-on can enhance resilience and avoid costly disruptions.

Additionally, sustainability efforts present business opportunities. The transition to a low-carbon economy fosters innovation in renewable energy, energy-efficient technologies, and sustainable products[4]. Companies that lead in these areas can gain a competitive advantage, attract environmentally conscious consumers, and secure long-term profitability. Investors are also increasingly prioritizing climate-conscious businesses, with sustainable investments reaching record levels in recent years[5].

Types of Emissions: Scope 1, 2, and 3

Understanding corporate emissions begins with distinguishing between Scope 1, 2, and 3 emissions[6]:

Scope 1: Direct emissions from company-owned or controlled sources, such as manufacturing plants, company vehicles, and on-site energy production. These are the emissions that companies have the most control over and can reduce through energy efficiency measures and cleaner technologies.

Scope 2: Indirect emissions from purchased electricity, steam, heating, and cooling. These emissions can be mitigated by sourcing renewable energy and increasing energy efficiency in company operations.

Scope 3: Indirect emissions from a company’s value chain, including supplier emissions, transportation, product use, and waste disposal. These are the most challenging to address, as they involve external partners and customers, requiring collaboration and incentivization.

Addressing all three scopes is important for comprehensive emissions reduction. Many companies initially focus on Scope 1 and 2 emissions because they are easier to control, but true sustainability efforts require tackling Scope 3 as well.

Organizations Assisting Companies in Emissions Reduction

Several organizations provide guidance and frameworks to help businesses measure, manage, and reduce their emissions.

The Science Based Targets initiative (SBTi) is one of the most recognized organizations in this space, helping companies set ambitious, science-backed emissions reduction targets[7]. SBTi helps corporate goals align with the latest climate science and the objectives of the Paris Agreement. Companies that commit to SBTi undergo a target-setting process and receive validation on their reduction pathways to ensure transparency and accountability. Companies looking to reduce their emissions must take specific steps to engage with organizations that provide guidance and accountability. Setting science-based targets through SBTi requires businesses to assess their current emissions levels, develop reduction targets in line with climate science, and submit these targets for validation. Once approved, companies must continuously report on their progress and adjust strategies as necessary.

Another essential organization is the Greenhouse Gas (GHG) Protocol, which establishes standardized methodologies for emissions accounting[8]. The GHG Protocol provides frameworks that companies can use to quantify and track their emissions across Scope 1, 2, and 3 categories. By following these standardized methods, companies can safeguard that their emissions reporting is credible and comparable across industries, regulators, and investors.

ClimatePartner also play a role in assisting businesses with carbon footprint calculations, emissions reduction strategies, and offsetting measures[9]. It provides tools and consulting services that enable companies to analyze their climate impact and implement tailored strategies to minimize emissions. Through ClimatePartner, businesses can also invest in certified offset projects to balance their remaining emissions.

These organizations serve as partners for businesses seeking to reduce their planet warming emissions. Through their respective frameworks, guidance, and accountability mechanisms, they enable companies to set, track, and achieve their climate goals in alignment with global best practices.

Strategies for Corporate Emissions Reduction

Companies can reduce GHG emissions through energy efficiency, renewable energy adoption, supply chain improvements, and product innovation. These strategies help businesses align with climate goals while improving operational efficiency and competitiveness.

Energy Efficiency Measures

Improving energy efficiency is one of the most cost-effective ways to lower emissions[10]. Businesses can upgrade to LED lighting, optimize HVAC systems, and use smart energy management tools to reduce electricity consumption. Industries with high energy use can implement process optimization and waste heat recovery systems to cut emissions and costs.

Transition to Renewable Energy

Switching to renewable energy sources, such as wind and solar, significantly reduces corporate carbon footprints[11]. Companies can invest in on-site solar panels, purchase renewable energy through power purchase agreements (PPAs), or support grid-scale renewable projects. Industry leaders like Google and IKEA are committed to sourcing 100% renewable energy, demonstrating the viability of large-scale transitions.

Supply Chain Engagement and Scope 3 Reduction

Scope 3 emissions – those from supply chains and product use – often make up the largest share of a company’s footprint[12]. Businesses can engage suppliers to adopt greener practices, shift to low-emission logistics, and require sustainability reporting. Companies like Unilever and Walmart incentivize suppliers to set climate targets and reduce emissions across their operations.

Innovation in Low-Carbon Products and Services

Developing sustainable products helps businesses reduce emissions while meeting consumer demand for greener alternatives[13]. Auto manufacturers are advancing electric vehicle (EV) technology, while companies in packaging and construction are using biodegradable materials and carbon-negative concrete to lower their environmental impact.

Corporate Performance in Emissions Reduction

While many companies have pledged to cut GHG emissions, progress remains mixed. Some businesses are on track to meet their climate commitments, while others struggle with implementation challenges. Understanding corporate performance in emissions reduction highlights both the successes and the obstacles companies face in achieving net-zero goals.

The SBTi has seen significant corporate participation, with over 10,000 companies committing to science-based emissions reductions[14]. However, not all are progressing as expected. A recent report in Nature found that after an analysis of 1,041 firms with emissions targets ending in 2020, only 9% openly failed while 31% saw their targets quietly disappear[15]. This indicates a troubling lack of transparency and accountability. Despite strong positive reactions to initial target announcements, the report found that there was little media coverage, investor response, or reputational impact when firms failed to meet those goals. Many companies fall short due to supply chain complexities, inadequate data, and the high cost of decarbonization.

Challenges in Meeting Reduction Targets

Businesses face several key challenges in reducing emissions, many of which stem from structural and systemic complexities. One of the most significant hurdles is Scope 3 emissions, which can account for up to 90% of a company’s total footprint[16]. These emissions come from the supply chain and are often outside a company’s direct control, making reductions difficult without deep supplier engagement and collaboration.

Financial and technological barriers also pose a major obstacle – shifting to renewable energy or adopting low-carbon manufacturing processes requires substantial upfront investment, which can be especially burdensome for small and medium-sized enterprises. Additionally, regulatory uncertainty across regions creates challenges for global firms, as inconsistent policies and shifting requirements complicate long-term emissions planning[17].

Finally, greenwashing concerns continue to undermine trust in corporate climate action. Some companies exaggerate or misrepresent their sustainability efforts, leading to reputational risks and increasing scrutiny from investors, regulators, and the public when actual emissions reductions don’t materialize[18]. These combined challenges underscore the importance of transparency, accountability, and credible action in corporate decarbonization efforts.

Success Stories and Best Practices

Despite the challenges, many companies have made meaningful progress in reducing their emissions and setting the standard for corporate climate leadership. Microsoft, for instance, has committed to becoming carbon-negative by 2030 and has invested significantly in carbon removal technologies to go beyond neutralizing its emissions[19]. Unilever has embedded climate goals into its core business strategy, requiring its suppliers to both report their emissions and transition to renewable energy sources – demonstrating how supply chain engagement can drive large-scale impact[20].

Similarly, Apple has made major strides in supply chain decarbonization, focusing on material recycling and renewable energy use, with a goal to reach net-zero emissions across its entire business by 2030[21].

These examples show that with strong leadership, clear accountability structures, and targeted financial investments, companies can overcome the barriers to decarbonization and improve the sustainability of their business practices.

The Role of Carbon Credits

Carbon credits have become an important tool for companies aiming to offset their GHG emissions. While they provide a pathway for businesses to balance their carbon footprint, their effectiveness depends on responsible implementation and transparency.

A carbon credit represents one metric ton of CO2 (or equivalent GHGs) reduced or removed from the atmosphere through certified projects such as reforestation, renewable energy, and carbon capture technologies[22]. Companies purchase these credits to offset emissions they cannot eliminate through direct reductions. Carbon credits function within cap-and-trade systems or voluntary carbon markets which enable businesses to contribute to broader decarbonization efforts[23].

To ensure credibility and environmental integrity, companies should treat carbon credits as a supplementary tool – not a substitute – for internal emissions reductions. The SBTi makes it clear that businesses must prioritize cutting emissions within their own operations and supply chains before turning to offsets. This means establishing a clear reduction plan rooted in measurable, science-based actions.

When companies do use carbon credits, it’s critical to invest in high-quality, verified credits. Reputable standards such as those with ICVCM eligibility ensure that offset projects deliver additional, permanent, and independently verified emissions reductions[24].

In addition, supporting nature-based and technological solutions – like afforestation, direct air capture, and renewable energy development – can help build long-term climate resilience while complementing internal decarbonization efforts. Responsible use of carbon credits can play a valuable role in a company’s broader sustainability strategy when deployed transparently and strategically.

SBTi’s Corporate Net-Zero Standard Version 2.0

It’s important to note that the organizations helping companies decarbonize are evolving their standards. None are more consequential than the SBTi, which recently released a major draft update to its Corporate Net-Zero Standard – a framework many stakeholders across the climate and business community have been closely tracking and contributing to.

In March 2025, SBTi released its Corporate Net-Zero Standard Version 2.0, which shifts from a focus solely on target-setting to a more robust, lifecycle-based framework that emphasizes actual implementation and progress[25]. It introduces a four-part accountability structure – initial ambition, performance assessment, progress reporting, and target renewal – safeguarding companies demonstrate real emissions reductions, not just pledges. The new standard also differentiates requirements based on company size and geography which makes the framework more accessible to smaller businesses in lower-income countries while maintaining high expectations for larger firms.

Key updates include a more flexible Scope 3 emissions framework that prioritizes action on the most material sources and allows companies to report on alternative metrics like supplier alignment and low-carbon revenue. For the first time, the standard incorporates clearer guidance on carbon dioxide removal (CDR) and formally recognizes the use of high-quality carbon credits in Beyond Value Chain Mitigation (BVCM). Companies can continue setting targets under existing criteria through 2026, with Version 2.0 becoming the primary framework starting in 2027. This evolution aims to strengthen accountability and accelerate credible corporate progress toward net-zero goals.

The SBTi is currently welcoming public feedback on Version 2.0 through a consultation open until June 1, 2025, inviting input from stakeholders across the sustainability ecosystem to help refine and strengthen the final standard[26].

Conclusion

Thinking back to my friend – the small business owner who first asked what “net zero” even meant – this entire landscape can seem overwhelming. But the good news is, there’s a clear path forward, even for smaller companies. SBTi offers simplified guidance specifically for small and medium-sized enterprises (SMEs) which helps them to set near-term science-based targets without needing to go through the full, resource-intensive validation process[27]. This makes climate action more accessible, even for those just starting out.

For a business like my friends, the first step could be using tools from ClimatePartner or following the GHG Protocol to understand his company’s emissions profile. From there, actions – like switching to renewable electricity, improving energy efficiency, or encouraging greener practices among suppliers – can go a long way. While he may not have the scale of a multinational, every step counts.

And ultimately, that’s the point – climate action doesn’t belong only to big corporations – it belongs to all of us. Whether you’re a global brand or a local business, the journey to net zero starts with a single, informed step.

The urgency for corporate climate action is clear. Businesses must act now to reduce GHG emissions and align with global climate goals. Companies that fail to do so face increasing financial, regulatory, and reputational risks, while those that lead on sustainability gain a competitive edge through cost savings, investor confidence, and stronger customer loyality.

Setting ambitious, science-based targets is essential, but real impact comes from action, transparency, and accountability. Businesses must integrate emissions reduction into their core operations, disclose progress openly using standardized frameworks like the GHG Protocol, and engage suppliers, investors, and policymakers in collective climate action.

At Gordian Knot Strategies, we specialize in climate finance and sustainability and are always happy to chat about this topic. Whether it’s setting science-based targets, navigating carbon markets, or building a decarbonization strategy, we provide the expertise to help businesses turn commitments into results. If you’re interested in learning more, our door is always open.