Business Sustainability Behaviour and Alignment with Climate Targets

Abstract Climate actions by the private sector are crucial to cutting global emissions and meeting the climate targets set by the Paris Agreement. In recent years, an increasing number of companies have pledged to help achieve those targets. However, the emissions pathways of most companies are still not aligned with these goals. To explain the root causes of this discrepancy between effort and outcome, we developed a new methodology to track the actions implemented by major public corporations to reduce their emissions. Our analysis shows that, compared to their peers, companies with emissions pathways aligned with climate targets prioritise actions focused on innovation and stakeholder engagement, such as investing in research and development, new products and fostering cooperation with other ecosystem players. Importantly, this differential behaviour can explain companies' alignment with climate goals. Overall, we provide a systematic framework to track companies' efforts to align their emissions with climate targets. Our approach can be used by investors and policymakers to redirect capital towards its most sustainable use and to design behaviourally founded policy interventions to align business emissions with climate targets.