Set Ambitious but Realistic Environmental Goals

In the years since the 2021 round of global climate negotiations, more than 2,600 companies have responded to alarms raised by scientists and policy makers by setting aggressive targets to reduce carbon emissions.1 Walmart aims to become powered by 100% renewable energy by 2035; Ikea has made a commitment to produce as much renewable energy as it consumes by 2030; General Electric aims to transform itself into a net-zero company by 2050; and American Electric Power plans to reduce its carbon emissions 80% by 2030, with a goal of net-zero emissions by 2045.2

These sustainability goals address demands from a broad array of stakeholders that companies disclose material risks and improve their environmental and social impacts. They also serve to focus the attention and resources that are required within organizations to drive social and environmental progress on the ground.

However, setting appropriately ambitious sustainability goals that can pull a steady line of progress through today’s uncertain business landscape is an exceedingly difficult task. Economic volatility, evolving stakeholder demands, scientific and technological developments, and variable sociopolitical pressures mean that the ground is constantly shifting under leaders’ feet.

Activist stakeholders in particular are watching company performance on these issues closely, demanding corporate transparency around goals and progress, and faulting companies that fail to follow through on their pledges. A 2022 study published by the nonprofit organizations NewClimate Institute and Carbon Market Watch identified 25 large corporations with net-zero commitments and rated 21 of them as having “low integrity” or worse because their plans would reduce emissions by only 40% on average, not the 100% implied by net zero.

Companies also provoke criticism for tiptoeing forward with too much hesitancy and leaping ahead too far too fast. Sustainability goals that are perceived by employees and other stakeholders as insufficiently ambitious can draw internal and public criticism and activist ire. And goals that are very ambitious could provoke resistance from stakeholders who prioritize short-term financial gains, view the technical challenges of complex issues like decarbonization as insurmountable, or are simply unprepared for or unwilling to change. For company leaders who are trying to mediate in the middle, it can feel impossible to get goals just right.

Climate goals must also take into account current business realities. Chief sustainability officers (CSOs) are focused on environmental and societal concerns but must square their goals in these areas with their companies’ dependence on problematic resources such as plastic, fossil fuels, and cheap labor, as well as with the company’s material issues, its purpose and strategic priorities, and the mindset of its leaders.

Our research, which included focus group discussions with leaders of corporate sustainability initiatives, found that in this atmosphere of both uncertainty and heightened scrutiny, many leaders are grappling with how far to go in setting environmental sustainability goals and what level of disclosure they should achieve. The more ambitious the goals, the stronger the creative tension between an envisioned future and the current reality.3 The role of leaders is to manage this tension carefully to inspire their people, engage them in action, and grow stakeholder trust.

The question at the heart of our research is how this tension can be managed, both intentionally and productively, to drive tangible progress and increase stakeholder trust over time. To do this, leaders must attend to where their company is now and what resources are available to them while also attending to stakeholder input about the social and ecological system of which they are a part. They must aim for integrity at every step in the process: meeting the goals they set for themselves, communicating proactively when they fail to do so, and helping lead systemic changes that supersede any one company’s ability when working alone.

No Clear Path to Net-Zero Goals

All of the companies in our focus group have publicly committed to reaching carbon neutrality or net zero by 2050. But in our discussions, leaders expressed serious doubts about whether they will be able to achieve their goals, especially those in industries that consume a great deal of industrial process heat, such as petrochemicals, steel, and cement.

Our participants expressed confidence that they could meet Scope 1 goals — that is, achieve net-zero emissions from sources that their organization directly owns or controls. Most also have what they feel are realistic plans to achieve Scope 2 goals, which cover emissions from the generation of electricity that they purchase (to power a fleet of electric vehicles, for example). These goals can be reached by improving energy conservation and shifting to sources of clean, renewable energy in competitive energy markets, or via power purchase agreements with developers of renewable energy projects.

Achieving Scope 3 goals is much more challenging across industries, and none of our participants had a predictable road map for doing so. Scope 3 goals include all other indirect emissions associated with an organization’s supply chain; its customers’ use of its goods or services, including disposal of packaging and products; and employee commuting. Achieving Scope 3 emissions reductions will require systemic changes at scale toward low-carbon fuels and electrification in transport and logistics.4 Changes like these will require new policies, new technologies, and new collaborations within industries and across sectors. To find a path forward on goals that are well beyond what they can achieve on their own and create systemic solutions, companies must reach far outside their own walls to partner with many kinds of stakeholders.

Based on the experiences and insights of the companies in our study, what follows is a developmental path for organizations that want to set and achieve increasingly ambitious goals and manage the creative tension of the journey in an intentional way.

Step 1: Engage stakeholders to determine the highest-priority areas for sustainability goals.

Leaders must start by answering two questions: “What are the most meaningful and material sustainability issues where setting goals will matter most?” and “Are there issues we should be working on that we are not?” It’s hard enough to achieve one big, hairy, audacious goal; it is folly to try and achieve 20. To make progress, companies must focus on a small number of issues.

Companies often center this process on external scanning and sensemaking, which are critical for staying abreast of society’s rapidly changing expectations of company actions and impacts. Public awareness of issues like climate change, racial justice, and public health can rise in response to crises and other events, during which stakeholders identify companies as focal points to take action and create change. This process will always be dynamic and noisy, and if sensemaking is not proactive enough, companies might miss the mark.

Therefore, companies can and should try to understand what issues are on the minds of external stakeholders (prospective employees, customers, investors, suppliers, and communities) as well as the shapeholders who influence business conditions, such as standards bodies, regulators, scientific experts, nonprofit advocacy groups, and policy makers. Proactive sensemaking happens through a variety of mechanisms, including direct meetings and regular interviews with stakeholders, permanent customer and stakeholder advisory councils, regular attendance of key industry and issue conferences and forums, and benchmark comparisons with competitors. Several of our focus group participants already use AI tools to distill public conversations about the company and industry, and this is a growing area of practice.

The problem is that this outside-in view does not converge easily with internal perspectives. It can result in an extensive wish list of actions that are hard enough to measure and report, let alone set meaningful goals for and drive progress toward. Narrowing priorities requires an inside-out view as well: clarity about the domain of purpose, mission, and values; a view of the business model and vision for its future; and strategic priorities that move the company closer to that imagined future. This means it’s crucial that leaders also listen to the concerns and priorities of internal stakeholders, particularly the employees who hold the keys to business success, and use that information as input to goal setting.

Boeing looked to its values and its mission statement — “to connect, protect, explore, and inspire the world through aerospace innovation” — as the foundation to identify six focus areas of sustainability where it has set goals: employee safety and well-being; global aerospace safety; diversity, equity and inclusion; innovation and clean technology; sustainable operations; and community engagement.

To arrive at these goals, leaders from the company’s sustainability office interviewed Boeing employees and also surveyed and conducted interviews with external stakeholders. These efforts uncovered a number of sustainability topics that connected back to the company’s overall strategy and future direction. Boeing leaders reviewed the stakeholder feedback, looked for common themes, and ultimately pruned the list down to a manageable number of priorities.

“Trying to be everything to everyone is not going to be successful. We deliberately zeroed in on six areas to drive alignment and focus that employees and external stakeholders can rally to support,” explained Jill Graftenreed, Boeing’s director of sustainable operations and reporting.

Finally, the company’s sustainability leaders needed to get leaders in other areas of the enterprise to take ownership of these priorities, so they engaged the appropriate internal functional leaders to identify one or two targets for each priority along with metrics to measure progress. This required additional consultation and benchmarking with external stakeholders, industry peers, and standard-setting bodies.

“It was important to us that we provided metrics that are meaningful and consistent with what others in the industry are also using,” Graftenreed said. “Stakeholders want to look across companies to compare how they are doing.”

Step 2: Develop an aspirational vision of success that is informed by the science of sustainability and stakeholder expectations.

Once they identify high-priority issues, sustainability leaders must generate a vision of the future they aspire to create, which can serve as a North Star for company efforts. For instance, a company’s climate vision might link to the scientifically driven vision to limit global warming to 1.5 degrees Celsius to avoid the most catastrophic impacts and allow for adaptation.

While many companies set goals by starting with their existing emissions footprint and calculating forward to arrive at carbon reduction goals that they believe they can reasonably achieve, aspirational companies flip this process around: They establish a vision that is aligned with scientific recommendations and stakeholder expectations and then figure out their company’s contribution to achieving that vision.

Salesforce anchored its climate goals externally to a single shared planetary vision of a just transition to a 1.5-degree Celsius future and then worked backward to align its Scope 1, 2, and 3 emissions goals accordingly. This translated into a companywide goal to reduce full value-chain annual emissions by 50% by 2030 and to nearly zero by 2040, using 2019 data as a baseline. In addition, Salesforce set location-based emissions targets that pushed beyond the IT industry’s standard practice of using carbon offsets and renewable energy credits from greener sites to compensate for more emissions-intensive locations.

Connecting a company’s contribution to a big shared vision involves building shared commitment through extensive conversations with employees, managers, and company leaders and with external stakeholders and shapeholders. And this work is never finished, given that stakeholder views on what is a legitimate aspiration can be dynamic and noisy. For instance, one company had set ambitious emissions goals two years earlier but then became aware that the SBTi (Science Based Targets initiative) had suddenly grown very influential. In following the SBTi agenda, the company decided to set more ambitious goals around its Scope 3 emissions. As the organization’s leader told us, “We set carbon-neutral goals, but what everyone wants now is net zero.”

The aspirational vision that a company sets at this stage might also need to be updated based on new scientific developments, new technological capabilities, or changes in key stakeholder concerns. Inditex, which owns seven brands, including fashion retailer Zara, started its sustainability journey in the early 2000s with its first multiyear sustainability plan. In 2013, the company published a biodiversity strategy that defined some basic principles and an aim “to embed a biodiversity agenda in our day-to-day business decisions.” Later, company leaders created a road map that included not only climate action but also critical sustainability issues such as impact on soil health, water quality and availability, and ecosystem protection and restoration. This commitment was further reinforced in July 2023, when Inditex announced the launch of new, specific targets that address external stakeholders’ expectations, including goals related to the promotion of preferred raw materials and biodiversity.

Inditex used standards set by organizations such as Textile Exchange to guide its 2030 goal to use only “preferred fibers” as textile raw materials in order to reduce the negative impact on the environment. The company also worked with environmental experts, third-sector organizations, unions, and nonprofits to analyze impacts on local communities of activities such as garment manufacturing or retail store operations. One of the results of this process was an ambitious target of protecting, restoring, regenerating, or otherwise improving biodiversity across 5 million hectares at locations throughout the world.

Step 3: Set midlevel goals to gain early traction on the high-level vision.

Next, leaders must set achievable goals that move the company from its current state (honestly and accurately assessed) toward the future vision developed in Step 2. In order to produce the desired outcomes, goals should not be too narrow, too ambitious, or too short-term — what some have called “goals gone wild.”5 Leaders must understand the business intimately enough to set goals that intentionally create productive tension between vision and current reality and move the company forward, beginning with a series of small, achievable steps and building up to larger goals over time. They must carefully consider the specificity, ambition, timing, and ethical implications of their goals, as well as the range of outcomes their intended goals might produce.

At pharmaceutical company Takeda, the CEO had set a high-level climate goal to reduce emissions by 30% by 2030 (from 2015 levels). Rich Wilner, head of business transformation and environmental sustainability, noticed that despite this goal, carbon reduction projects in the factories were not getting funded. He set out to connect the “top to the shop” by setting a goal at one plant to launch just one capital investment project that year aimed at reducing greenhouse gas (GHG) emissions. Beginning with this small goal helped that plant overcome the inertia of getting started on the journey, and the approach was quickly adopted across the network of plants.

Later, Wilner successfully advocated for important organizational changes to align behavior with the intent to reduce carbon emissions. This included changes to the company’s capital allocation process that would weight GHG-reducing projects favorably, along with the implementation of monitoring and forecasting tools that plant managers could easily use. The company further incentivized progress by incorporating the successful completion of carbon reduction projects into employees’ annual bonuses. These moves helped set up the next 10 projects for success and got Wilner’s division on track with corporate goals.

Step 4: Build momentum with willing stakeholders, and expand the goal horizon toward the vision.

Once the organization has gained traction on early goals, the work of sustainability leaders should shift to accelerating uptake inside the organization and gradually extending the goals toward the aspirational vision.

In his former role as sustainability manager at the Kroger grocery chain, Vontier’s senior global director of sustainability and ESG, Nate Streed, sought to build momentum around a high-level vision of zero manufacturing waste companywide, including three dozen food manufacturing facilities and thousands of retail stores across the country. Like Wilner, Streed started small, by visiting seven plants — whose pioneering leaders were early and willing adopters — to understand their waste production process. Although plant leaders initially kept him at arm’s length, they came to understand that he genuinely wanted to learn rather than just dictate solutions from corporate headquarters.

Streed encouraged plant leaders to experiment with new waste-reduction strategies by reframing waste as something that retains value and prompting questions to spur innovative thinking. One plant, for example, created dedicated bins for recyclable polypropylene straps and then got the vendor to color-code the straps for easier sorting. Another was able to provide coffee grounds and burlap sacks to a local landscape contractor in South Carolina.

Streed and his team harnessed the natural dynamic of collaborative competition among plant managers, encouraging them to share successful strategies and solutions while competing on plant-level metrics. Corporate leaders reinforced his efforts by making personal visits to celebrate the progress of these creative, locally tailored waste solutions. They also assured local leaders that they wouldn’t be punished for trying new things, even if the initial results negatively affected performance metrics.

From these seven early-adopter plants, Streed and his team were able to continue to build momentum toward zero waste, bringing more plants on board and identifying more waste-reduction innovations. Today, almost all of Kroger’s manufacturing plants operate as zero-waste facilities (with over 90% diversion), and in 2022 Kroger achieved 79% waste diversion companywide (including stores, warehouses, offices, and other facilities).6 This illustrates how a high-level corporate vision must be paired with on-the-ground measurement and continuous improvement and innovation efforts that expand progress toward the ultimate vision.

An organization that embraces both a vision for sustainability and an ethos of sustainability-oriented innovation sets its people up for serendipitous discovery. Researchers at Dow were working on designing minuscule hollow spheres to create a light-scattering pigment in paint. That plan fell apart when researchers discovered that a small amount of heat caused the spheres to collapse. But because innovators were thinking in terms of sustainability, they recognized that the spheres could be used in a different way. If a dark-colored paper were coated with the spheres, a thermal printer could burn away the coating to produce a printed page — an environmentally friendly alternative to coating thermal printer paper with toxic chemicals such as bisphenol A. Attuning to sustainability leads to serendipity and unexpected value.

Step 5: Scale efforts to lead systems change.

When companies identify systemic challenges that make Scope 3 and other value-chain goals difficult to achieve, there is an opportunity for leadership on a larger stage. This shift involves engaging with others in the industry, in cross-sector coalitions, and in policy debates to define collective goals and set the conditions for shared success.

Salesforce realized that achieving Scope 3 goals in particular could not happen without the wider engagement of the cloud computing industry. It began scaling up its efforts to the system level by taking action along three dimensions:

• It identified its core competency as delivering transformational software tools to businesses of all industries, sizes, and geographies, and articulated its customer value as helping them navigate successfully into the future. Clarifying the company’s purpose and the value it creates led Salesforce to the development of its Net Zero Cloud tool, which enables customers to track, report, and reduce emissions.
• It identified where the leverage points were for the company to influence impacts and the value chain across scopes 1, 2, and 3. For example, Salesforce notified all of its suppliers in 2020 that climate would be part of all new standard purchasing agreements. To do business with Salesforce, suppliers must prepare emissions reduction plans that disclose their Scope 1, 2, and 3 emissions and deliver all of their products and services on a carbon-neutral basis or pay for the cost of carbon.
• The company took a broader view of the systemic issues beyond its control and where it was well positioned to contribute. Salesforce led and joined consortia to promote more sustainable offices and data centers, greater adoption of high-quality renewable energy, carbon credits, sustainable aviation fuel, and nature-based solutions.

Former Salesforce CSO Patrick Flynn suggests asking, “Which of the very important things that need to be done are ones that we are uniquely suited to do or, at the most extreme, that will not happen unless we do it?” This provides a starting point for a focus area for action, along with a defensible story and strategy that can be explained to company employees and external stakeholders.

Maritime shipping is another sector in which sustainability solutions will depend on many organizations and stakeholders working in concert. It is both a hard-to-decarbonize sector (heavily reliant on petroleum-based fuel) and a significant contributor to many companies’ Scope 3 supply chain emissions. Maersk, one of the largest players in the industry, began setting goals in 2008 to reduce carbon emissions through fleet efficiency and the pursuit of alternative fuels, and it eventually set an ambitious 2040 net-zero target. Company leaders quickly realized, however, that they could not achieve these objectives alone. Alternative fuels require systems change — the creation of new supply chains and regulatory frameworks for lower-carbon fuels like methanol, green hydrogen, and ammonia.

As a result, Maersk has engaged the United Nations’ International Maritime Organization on carbon policy and joined alternative-fuels consortia with a wide range of partners, including green power provider Ørsted, ammonia fertilizer leader Yara, shipbuilders like Hyundai, Sumitomo for fuel supply chain provision, and a variety of financial institutions.7 Ultimately, creating supply corridors for ammonia or methanol will require engagement with ports and communities around the world along major shipping routes.

At Inditex, leaders saw that achieving the goal of having 25% of its textile materials produced by regenerative or organic farming practices was at odds with the industry reality that a mere 2% of all cotton grown worldwide is organic and the percentage grown using regenerative farming practices is even lower. Meeting its target will require its ongoing support of external projects and advocacy groups that work to meaningfully grow these practices. It has since joined Conservation International’s Regenerative Fund and donated 15 million euros ($15.9 million) to help scale up regenerative farming practices. It is also working with Action for Social Advancement, together with Laudes Foundation, IDH, and WWF India, to foster regenerative agriculture, restore ecosystems, and improve community well-being in a 300,000-hectare area in the Indian states of Madhya Pradesh and Odisha.

A number of strategies for action are available to companies that seek to promote systemic change.8 Business leaders have convening power to bring diverse stakeholders to the table, provided that they have demonstrated a sincere commitment to sustainability goals and have a track record of making progress on goals. They have economic power to put direct pressure on suppliers and to make demands of policy makers, given their critical role in providing jobs and creating a functioning economy and society. Leaders can use their power wisely to convene and fund new initiatives if they have earned credibility by implementing steps 1 through 4, and if stakeholders perceive that their motivation is to create societal as well as business benefit.

Ultimately, sustainability is a team sport. The challenge that company leaders face is to set provisional/achievable corporate goals that grow organizational capabilities to reach toward the needs of the planet and its people. Those needs are incredibly high right now. But company leaders don’t have to face them alone; an insular approach to managing sustainability goals will not create the future we want for business or life on planet Earth. Engage with the board, executives, and employees to manage the tension. Engage with the value chain and even competitors for joint problem-solving. Engage in the wider public policy debate to change the system and make goal setting and achievement more feasible for everyone. And help everyone understand that transformation is a journey — one that sometimes starts with a single capital expenditure project in a single factory and ultimately creates a better future for all.