Companies can earn a halo effect by announcing ambitious targets around climate adaptation and mitigation, but it can fade if those public pledges aren’t matched with good governance and accountability. Even companies failing to set goals publicly are at risk if they misjudge market concerns about climate threats or lack the right leadership.

“It's easier to do nothing than to go out there with risk and uncertainty,” said Bonita Stewart, board partner at Gradient Ventures, Google’s early-stage venture fund investing in the future of AI, told conference attendees. Without proactive accountability, many business leaders won’t act without external shocks like a lower stock price. “Most management teams are just thinking about the blocking and tackling and meeting their quarterly numbers.”

Yet thousands of companies around the world have committed to targets—often aligned with the Net-Zero Standard, Harvard Business School Professor George Serafeim pointed out during HBS’s “Accelerating Climate Solutions” conference on May 10. These commitments create new challenges in implementing efficiencies, procuring low carbon energy, and introducing product innovations. Products need to be recycled, reused, and refurbished, while supply chain emissions need to be reduced.

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“How can we make sure that resources are properly allocated to realize good organizational and economic outcomes, but also the intended climate outcomes?” Serafeim asked.

Investors and boards can step in to ensure corporate culture and systems focus on climate threats and deliver on public pledges, according to panelists.

Aligning CEO and management incentives with investors, management and boards can

motivate corporate leaders to focus on climate.

“Taking on ambitious climate sustainability goals involves three areas,” said activist investor Lauren Taylor Wolfe, cofounder and managing partner of Impactive Capital. She advises investors and board members to push management on all three: strategy, active committees and accountability.

Pressuring management to integrate climate issues across discussions around strategy can ensure the issue remains top of mind. Board committees have a role to play in oversight around climate commitments, both in attracting the right leadership talent and through audit and sustainability committees.

“If you have ambitious goals, you should have ambitious metrics,” said Stewart. These can be used for assessing CEO and other leader performance and compensation as well as assessing how a company is managing climate-related risks.

A company’s board and internal governance system may not be enough. A wary public is eager to shame brands that fall short. In February, a report that analyzed companies ranging from Volkswagen to KitKat maker Nestle including concluded that “major brands are exaggerating how ambitious their efforts to cut greenhouse gas emissions are—in effect misleading consumers, investors and governments,” according to the Associated Press.

What role should the state play?

HBS Professor Debora Spar emphasized the important role that governmental bodies must play to hold companies accountable.

“We’re not going to get global governance anytime soon,” Spar said. “This still where governments, for all of their flaws, are still the best thing we have … If you look at the history of corporate self-regulation, unfortunately, it’s not a very successful story.

“Ultimately, this world will start to change when the accountants get involved and we have standards, but then they still will need to get enforced,” Spar added. “And the only entities that can actually hold companies accountable are governmental bodies such as the SEC.”

Trust is an issue

To promote reporting credibility and a so-called “race to the top” for the planet, a group of organizations in 2015 launched Science Based Targets initiative (SBTi) that today has inspired more than 1,000 companies and financial institutions worldwide to set emissions reduction targets grounded in climate science. SBTi’s founders include CDP, the United Nations Global Compact, the World Resources Institute and World Wildlife Fund.

“I would wager net-zero companies really don't know how they're going to reach their goals,” said World Wildlife Fund CEO Carter Roberts. “Without independent monitoring and verification, not only are we wary, but employees are wary, and investors are wary. They want to know if the numbers are real.”

Roberts noted that even the best intentions and efforts on governance and accountability may not be enough without the right leadership given the complexity of climate threats.

“You need to attract that talent that can build bridges between sectors,” said Roberts. Those leaders create the framework to solve issues not just within a company but with stakeholders outside of it.

Said Roberts, “The gold in our work are people who can build bridges between the policy world, the world of science, the world of civil society, the world of finance, and the world of production.”