As governments around the world reaffirm their commitments to reduce carbon emissions at the national level, numerous global corporations have recently issued their own carbon reduction pledges. Such corporate “Net-Zero Club by 20xx” commitments doubled in 2020 and show no sign of letting up in 2021.
It is readily seen why many firms perceive the decision to join the “Net-Zero Club” to be clear in terms of costs and benefits. With pressure from institutional investors, customers and other corporate stakeholders building, firms can claim the “green mantle” by publicly setting the goal of complete decarbonization by 20xx, say 2050. Management is effectively communicating to the public that the firm assumes the social responsibility of doing its part to address the global climate crisis. Yet, a mere pledge that comes due in the year 2050 is generally beyond the accountability horizon of current executives. The announcements made thus far also exhibit considerable variation in what exactly is being pledged because of latitude in measuring corporate carbon footprints and reporting progress towards the ultimate goal of full decarbonization. Unlike mandatory corporate disclosures, voluntary future-oriented disclosures are not subject to binding measurement and reporting standards. Membership in the “Net-Zero by 2050 Club” is thus virtually free, but lacks transparency as the public seeks to differentiate between firms in terms of their ambition to reduce emissions and the credibility of the stated ambitions. Here, we outline a measurement and reporting framework that would enhance the comparability and transparency of these corporate disclosures.