Following the announcement of post-2020 climate change targets by the United States and China this week, the business sustainability organization Carbon Disclosure Project has called on companies to develop long-term climate strategies in line with those of governments, who are in the process of developing and setting out their contributions to the 2015 global climate agreement.

The head of the Carbon Disclosure Project Paul Simpson said that the plans of most companies to reduce greenhouse gas emissions are too short-sighted, with average planning horizons only reaching to 2016/17.

Companies and investors should be taking note – these long-term targets send a clear policy signal to business that government is serious about taking action, removing in this regard obstacles for corporate progress. 

Paul Simpson also said that business targets need to be in line with the best available science. According to the Ingovernmental Panel on Climate Change, the international community will have to cut emissions to at least 80% below today’s levels by mid-century, and to net-zero after that in order to reach its goal of a maximum two degrees Celsius global average temperature rise.

Whilst companies may have lacked the guidance on how precisely to achieve the levels of reductions required by science, the project is working with the World Resources Institute, the World Wide Fund for Nature and the UN Global Compact on a methodology that will enable corporates to set bolder greenhouse gas targets. 

The initiative points out that even without new policy signals provided by governments, climate action is already bringing clear economic benefits and new opportunities. 

For example, the investments of leading companies recognized in Carbon Discolsure Project’s Climate Performance Leadership Index (CPLI) to reduce carbon output yield an average internal rate of return of 57% per project. 

As can be seen in the chart below, this index outperforms the Bloomberg World Index by 9.6%. - clear evidence that the most successful companies are likely to be the most sustainable ones.

Graph by Carbon Disclosure Project

Image: ds, Flickr