Redefining corporate climate action for systems transformation

I. Introduction

Corporate net-zero commitments have become the dominant framework for private sector climate action. They emerged roughly a decade ago as part of a broader effort to mobilize non-state actors to achieve climate goals. Today, the majority of the world’s largest companies set corporate emissions targets and align with increasingly detailed standards and methodologies. As of January 2026, more than 10,000 corporations have validated science-based targets (Science Based Targets, 2025). 

However, the proliferation of targets and plans has not translated into commensurate emissions reductions. Global emissions continue to rise year on year, and corporate emissions reductions often fall far short of stated targets (IEA, 2025a; Gelbart, 2025; UNEP, 2023). 

The limits of entity-level net-zero frameworks have become harder to ignore. These limits, however, do not necessarily reflect limited ambition or accountability; rather, they reflect a structural misalignment. Emissions trajectories are shaped by the systems within which firms are embedded, including energy, industrial processes, land use, transport, and waste processes. Entity-level target-setting and planning are inherently limited in their ability to shift the emissions trajectories of these underlying systems. 

To be clear, there are ways that companies can reduce emissions within their corporate boundaries, including through efficiency improvements, electrification, and strategic procurement (e.g., purchases of low-carbon electricity, low-emission fuels, and low-emission materials). But the majority of companies’ emissions are shaped by systems, technologies, and other determinants beyond their corporate control (Bricheaux, 2024; IEA, 2021). 

Corporate sustainability teams often experience this structural misalignment most acutely. Sustainability reports increasingly refer to ‘dependencies’: the exogenous factors, such as clean energy availability, low-carbon supply chains, and supportive policy environments, that are preconditions for meeting entity-level targets (WBCSD, 2025). In order to meet ambitious targets ahead of the underlying systems, sustainability teams often resort to accounting maneuvers or offsetting, which detach entity-level reporting from physical realities, or to corporate actions that reduce emissions on a company’s ledger without reducing actual physical emissions (New Climate Institute et al., 2025; NPR, 2022). A growing number of corporations have recently relaxed or retreated from their net-zero commitments (Winters, 2025; Clancy, 2024; SBTi, 2024). Several financial institutions have similarly rolled back their commitments, citing slower-than-expected progress in the real economy (Jessop & Furnace, 2025; Segal, 2025; Jessop, 2024).

These frustrations and the persistent misalignment between targets and real emissions reflect two conceptual flaws of corporate net-zero frameworks. 

First, the concept of ‘net zero’ refers to the balance between greenhouse gas emissions released into the atmosphere and greenhouse gas removals from it, such that the net addition to atmospheric concentrations is zero (United Nations, 2024). That global imperative requires decarbonizing the systems producing emissions, including energy, transport, industry, and land use, through technological diffusion, coordinated and sequenced infrastructure investments, and an enabling regulatory and financial architecture. Optimizing entity-level emissions inventories does not aggregate to systems transformation: entities cannot decarbonize if underlying systems do not, and systems cannot decarbonize without coordination and structural shifts.

Second, corporate net-zero frameworks do not reflect, and in fact distract from, the dramatically expanded, and continuously expanding, opportunity set for sectoral decarbonization. Over the past decade, the pace of technological advancement and affordability has exceeded projections, and clean energy generation, storage, efficiency, electrification, demand management, and flexibility now offer powerful pathways to decarbonization (IEA, 2025). Realizing those pathways, however, requires deploying these technologies across shared infrastructure and supply chains in a coordinated, integrated way, rather than through independent entity-level emissions minimization. In these optimized systems, emissions reductions are often a co-benefit of design choices oriented towards resilience, affordability, or value creation, and may not be easily attributable to specific, single entities within the system. Because net-zero frameworks are grounded in entity-level emissions ledgers, they do not incentivize these forms of systems contributions, even where they produce the deepest real-world decarbonization along with broader benefits.

These two points, elaborated below, lead to a clear conclusion about the limits of current corporate climate approaches. Today’s dominant corporate net-zero frameworks overlook, and often divert attention from, the imperatives and opportunities of systems transformation. Refining target-setting and emissions accounting methodologies will not overcome these limitations. Instead, both the imperative and the opportunity are to align guidance and frameworks for corporate climate action with how systems change occurs.  

II. Structural limitations of corporate net zero

The attempt to translate a planetary imperative into firm-level accounting targets has shaped how corporate climate action is defined, measured, and rewarded. That translation, however, rests on two flawed premises.

First, the framework relies on a mistaken aggregation logic. It assumes that global atmospheric net zero will emerge from the sum of individual entities reducing, offsetting, or neutralizing emissions within their own boundaries. Corporate alignment with net-zero pathways is therefore treated as inherently additive to global decarbonization. But atmospheric stabilization does not result from boundary-based accounting neutrality. It requires the structural transformation of energy, transport, industrial, building, and land-use systems at scale (IEA, 2025a; Jacobs et al.). Those systems change through coordinated shifts in infrastructure and technology, not through the independent optimization of entities within their boundaries. This is not to say corporate action cannot drive systems change; in some cases, it demonstrably has. For instance, anchor procurement has catalyzed renewable energy markets, industrial actors have initiated first-of-kind infrastructure investments, and technology companies have reshaped what grid flexibility makes possible (Clean Energy Buyers Association, 2025; BloombergNEF, 2024; Plautz et al., 2026). But current frameworks neither measure nor incentivize these contributions. They optimize instead for boundary-level accounting neutrality, which is structurally disconnected from the systems dynamics that determine emissions trajectories.

Second, the framework suggests the firm is the primary target for decarbonization. When system dependencies are acknowledged, they are treated as external constraints on entity-level decarbonization, rather than as the true target for coordinated transformation. Firms are encouraged to optimize what they can measure and control internally, while assuming that grids, materials supply chains, transport systems, and cities will decarbonize through parallel processes primarily shaped by regulation and policy. This framing misunderstands that systems decarbonize through coordinated action across shared infrastructure, investment planning, risk allocation, and technological integration. The most effective systems optimization results from the collaboration among firms, utilities, suppliers, and financiers, co-designing infrastructure, aggregating demand, sharing risk, and integrating complementary technologies. The most effective emissions reductions that result from optimized, integrated, flexible, and efficient systems may not translate into reportable reductions, attributable to distinct actors. 

The consequences of our misaligned frameworks have been profound. Enormous intellectual, financial, and organizational effort has gone into refining methodologies and reconciling emissions inventories for entity-level carbon accounting and reporting (Comello et al., 2023; Jacobs et al.). Increasingly, however, carbon ledgers diverge from physical reality (New Climate Institute et al., 2025). Corporate emissions can appear neutral on paper while the underlying systems remain structurally carbon-intensive (Trencher et al., 2024; Talman, 2023). Purchasing offsets or attributes results in claims of reductions or neutrality, even as absolute emissions and atmospheric concentrations continue to rise. Attempts to perfect the ledger by making accounting more granular, more accurate, or more comprehensive only reinforce the faulty logics of aggregation and entity-level primacy, diverting attention from the coordination and structural change required for systems transformation.

III. Moving from linear decarbonization to integrated systems

Achieving atmospheric net zero has always required decarbonizing the systems that produce and consume fossil fuels. What has changed in recent years is that rapid technological innovation and development are, in many cases, making decarbonized systems more economically compelling than their emissions-intensive alternatives.

Significant emissions reductions now occur as a consequence or co-benefit of systems becoming more efficient, integrated, flexible, and distributed (IEA, 2026; IEA, 2025b; IEA, 2022). Energy-intensive sectors are increasingly becoming system assets that can store energy, provide flexibility, and stabilize grids. Through vehicle-to-grid charging, demand response, and on-site storage, they can absorb electricity when it is abundant and provide flexibility and reliability to the grid when it is scarce (Octopus, 2025; Martucci, 2026; O’Dea, 2026; U.S. Department of Energy, n.d.). Digital control systems and virtual power plant architectures enable real‑time coordination across supply and demand, converting distributed resources into a flexible and valuable component of the power system (Utility Dive, 2025; U.S. Department of Energy, n.d.; Engel, 2024). These more integrated energy systems can reduce aggregate energy demand, lower system costs, defer investment, and create new commercial value streams while also delivering emissions reductions (IEA, 2026; Engel, 2024; Martucci, 2026). 

In many cases, optimized, integrated systems require coordination and structural alignment, for instance, because multiple actors must adopt the same technology, because technological diffusion relies on trunk infrastructure or certain policy reforms, or because of distributional asymmetries between who bears the costs versus who benefits. A systems-oriented approach makes these design considerations and trade-offs visible and tractable, and supports the collective engagement required to address them. 

This framing also clarifies the levers that are effective to align financial flows. When optimized systems reduce costs or create more value than their high-emitting baseline, finance naturally flows into the more compelling alternative. Indeed, renewable sources now account for more than 90% of all additional global power capacity because they are more cost-competitive than fossil-based alternatives. Similarly, coordination and other structural solutions to address risks (e.g., currency risk, offtake risk, technology risk, utilization risk, etc.) can make systems solutions financeable. Financial sector net-zero targets and commitments do not, on their own, make climate-aligned investments financeable. Nor does capital fail to flow because investors lack awareness of climate change or its long-term financial risks. The most constructive role that financial firms can play in systems transformation is to design structural and financial mechanisms, or to inform other reforms (e.g., risk ratings, prudential regulations, or other systemic constraints) to enable the financing of optimized systems within prudential risk-return parameters.  

IV. Redefining corporate climate leadership

Corporate climate leadership must be redefined, both to achieve meaningful climate outcomes and to enable firms to capture the value created by modern, integrated systems. Corporate climate action should not be assessed by whether a firm neutralizes its own emissions inventory. The relevant considerations should be:

1. How firms position themselves within decarbonized systems, including whether they optimize for efficiency, reliability, and value, and 

2. Whether and how firms help accelerate the transformation of those systems.

Within this framing, it is useful to distinguish between effective corporate climate alignment and corporate climate leadership. 

At a minimum, companies should understand the ways in which their products, processes, and procurement contribute to, or may be shaped by, systems decarbonization. No company can be climate aligned if they obstruct systems transformation or contribute to the lock-in of emissions-intensive infrastructure. Beyond that, firms should understand and align with the trajectory of decarbonized systems, optimizing through efficiency upgrades, procurement decisions, and integration of smart systems. Firms should not be passive offtakers of the systems in which they’re embedded; they should coordinate in ways that support, and do not distract from, broader systems transformation. 

Climate leadership can and should go further. Leaders can accelerate systems transformation by diagnosing and actively addressing the coordination failures, financing gaps, and diffusion barriers that slow transformation in specific sectors or geographies. Because these barriers cannot be resolved by any single firm, climate leaders would be those who engage with other system actors, including utilities, suppliers, financiers, cities, regulators, and peers, to advance collective problem-solving and coordinated solutions. 

In practice, corporate climate leadership may take several forms, depending on the barriers to transformation. These might include:

• Market creation: Acting as anchor demand for clean power, low-carbon materials, or flexible infrastructure (such as storage, demand response, or grid-balancing assets) to unlock scale and reduce costs for entire systems, in coordination with utilities, financiers, and other off-takers.

• System co-design: Co-designing integrated energy, infrastructure, and supply chain solutions with utilities, suppliers, and peers to improve system performance, resilience, reliability, and both societal and commercial value.

• Aggregation platforms: Participating in or sponsoring aggregation platforms that make distributed investments financeable at scale, lower transaction costs, or otherwise change market dynamics to meet investment or financing hurdles.

• Institutional reform: Working with regulators, utilities, and other policy makers to support regulatory, planning, and market reforms that enable system optimization and reduce structural barriers to decarbonization investments.

• Knowledge and risk sharing: Sharing risk, data, and learning with partners or publicly to accelerate technological diffusion and reduce uncertainty for other participants.

Leadership should be defined by effective contributions to overcoming system-level barriers to structural transformation, and by helping to make integrated, lower-cost, and more resilient systems possible at scale.

V. From entity-level action to systems contributions

The actions companies have already taken (efficiency improvements, electrification, strategic procurement, and disclosure) have played constructive roles and remain part of a systems approach. But frameworks that optimize for entity-level accounting neutrality, rather than systems contribution, create path dependence that limits what's possible and, increasingly, what's politically sustainable. When companies are asked to set and achieve decarbonization targets independent of the systems change required to meet them, those commitments become practically unachievable, commercially indefensible, and politically vulnerable. The recent retreat of major corporations from net-zero commitments reflects a range of these structural and political pressures.

Reorienting corporate climate action around systems transformation is not a rejection of prior efforts; it is the framework that allows corporate efforts to be credible and effective. It directs corporate activities toward the physical and economic drivers of emissions reductions; enables meaningful reductions as a co-benefit of systems that are more reliable, resilient, efficient, secure, and affordable; and allows for the clear identification of where institutional, regulatory, financial, or other mechanisms would be effective to address barriers to the transition. In this framing, corporations become participants, and in some cases leaders, in reshaping the systems that ultimately determine emissions outcomes, while generating broader societal benefits. This approach also situates corporate action alongside the complementary and sometimes decisive actions of public entities, international organizations, non-profits, and other institutions. This framing makes evident that climate action is not a policy-versus-market dichotomy but an intentional, pragmatic, and coordinated interaction between the two.  

VI. Further analysis and examples

There are many examples across sectors and geographies where corporate innovation and leadership have led to systems transformation, often creating corporate value, even if not reflected in firms’ net-zero accounting. In the coming months, we look forward to engaging with corporate leaders from diverse sectors to ground this conceptual reframing in practical examples and to explore the pragmatic implications, including how standards and guidance might evolve to better reflect the realities of systems transformation and support corporate action and leadership. As this reframing is a work in progress, we expect our own analysis and learning to evolve through engagement. We invite practitioners working on integrated, collaborative, or system-shaping approaches to climate action to get in touch and contribute to this ongoing conversation.

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