When it comes to corporate climate action, a single policy isn't enough

Policymakers consider the private sector to be an important influence on climate action. As investors continue to become more interested in effective climate strategies, they are expected to redirect capital toward companies with promising climate policies. Over time, more companies are publicly disclosing their climate policies, but limited research has explored the relationship between corporate climate policy and tangible improvements in company-wide greenhouse gas emissions.

In this study, Klaaßen and colleagues compile data on policy and emissions from the CDP dataset for more than 1,700 companies that disclosed their climate policies between 2010-2022. Some companies reported single climate policies, while others reported a range of policies addressing various areas, including emission targets, financial incentives, and monitoring standards. The data show that single climate policies show no clear association with reduced emissions, but companies with a comprehensive mix of policies show an average of more than 20% emission reductions over the studied time period.

These results suggest that individual corporate climate policies have limited value for policymakers and investors interested in supporting climate action. Instead, the data indicates that policy decisions and disclosure mandates should focus on bundles of complementary policies. The authors note that further research will be necessary to assess the effect of corporate policies compared to local governmental regulations, as well as the reliability of corporate reporting.

Ms Klaaßen adds: "Our study suggests that while individual corporate climate policies provide limited insight into companies' climate performance, a comprehensive policy mix shows a stronger association with lower absolute emissions. These findings highlight the value of comprehensive climate disclosures to help investors identify firms with credible emission reduction efforts, while also cautioning against relying solely on disclosure to redirect capital flows effectively."