Science-Based Carbon Emissions Targets

59 Pages Posted: 19 Mar 2021 Last revised: 29 Mar 2021

See all articles by David Freiberg

David Freiberg

Harvard University - Business School (HBS)

Jody Grewal

Joseph L. Rotman School of Management - University of Toronto

George Serafeim

Harvard Business School

Date Written: March 28, 2021

Abstract

We examine the effect of voluntarily adopting a standard for setting science-based carbon emissions targets on target difficulty and investments to achieve those targets. We find that firms with a track record of setting and achieving ambitious carbon targets are more likely to set science-based targets. Firms are also more likely to set science-based targets if they perceive climate change-related risks and have carbon-intensive operations. Using a difference-in-differences research design that compares the science and non-science targets of a firm, we find that targets become more difficult when firms adopt the science-based standard for the target, consistent with the standard increasing target difficulty and inconsistent with firms relabeling their existing targets. The increase in target difficulty is accompanied by more investment in carbon-reduction projects and higher expected emissions and monetary savings from these projects. Given that the science-based standard is determined externally of the adopting organization, our results suggest that external standards for target setting could have both target and investment effects.

Keywords: climate change, environment, target setting, management control systems

Suggested Citation

Freiberg, David and Grewal, Jyothika and Serafeim, George, Science-Based Carbon Emissions Targets (March 28, 2021). Available at SSRN: https://ssrn.com/abstract=3804530 or http://dx.doi.org/10.2139/ssrn.3804530

David Freiberg

Harvard University - Business School (HBS) ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Jyothika Grewal (Contact Author)

Joseph L. Rotman School of Management - University of Toronto ( email )

105 St. George Street
Toronto, Ontario M5J 2Z6
Canada
6172060366 (Phone)

HOME PAGE: http://https://www.rotman.utoronto.ca/FacultyAndResearch/Faculty/FacultyBios/Grewal

George Serafeim

Harvard Business School ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.hbs.edu/faculty/Pages/profile.aspx?facId=15705

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