There’s a fascinating climate “trilemma” emerging in the global business world. As with economist Dani Rodrik’s global economy trilemma, in which "democracy, national sovereignty, and global economic integration are mutually incompatible. You can have two, but never all three at the same time," so there is now a climate trilemma appearing on the horizon.
This climate trilemma, as I see it, is that net-zero plans, science-based targets, and rising carbon emissions are mutually incompatible. We can have two, but never all three at the same time.
It may sound straightforward. But the bad news is, we’re stuck with the two carbon emissions pairs in the trilemma. To cut emissions out, we’ll need more science-based targets, and still more net-zero commitments.
Let’s start with the more straightforward pairs in the trilemma.
I saw evidence of them in the latest climate report from JUST Capital, which ranks American companies on stakeholder issues. It looked into America’s 1,000 largest companies by market capitalization and found strong evidence for two of the trilemma’s pairs.
First, it found that “companies with the most robust [climate] targets disclosed an actual reduction of emissions in the past year.” In other words: Net-zero commitment backed up by robust science-based targets results in a reduction in carbon emissions.
It also found that “companies with a general commitment to reducing emissions (e.g. reduce 50% by 2045) or Net-Zero climate commitments have, on average, increased their emissions.” In other words: Net-zero commitment minus science-based targets equals an increase in carbon emissions.
Interestingly, there is this last leg in the trilemma: Even when more companies do sign up for science-based climate targets, overall emissions in the global economy still increase when not enough companies have signed up for net-zero commitments, as research by Climate Impact Partners, which tracks corporate climate commitments globally, shows.
In 2022, JUST Capital found, science-based targets were the most popular type of new targets around the world, making up 42% of new commitments. But the number of Fortune Global 500 companies that made a significant climate commitment stagnated at around two-thirds last year, while global emissions reached an all-time high. In other words, science-based targets without (new) net-zero plans still equals more carbon emissions.
This gives us the key lesson from the climate trilemma: To reduce emissions, you need both widespread net-zero commitments among global companies and for those companies to back up their commitments with science-based targets. If either of those sides of the trilemma fail, the third, rising emissions, will pop up.
What does this mean for chief sustainability officers and CEOs? First, if you have a net-zero commitment but haven’t yet added short-term or science-based targets, it’s high time you do so. If not, increasing emissions from your operations is all but guaranteed. So is the likelihood that you’ll—rightly—be accused of greenwashing.
Second, cleaning up your own house isn’t enough. To contribute to decarbonization overall, you need to prod your competitors, your government, or your suppliers and customers to set similar commitments and targets. If not, you may compete on an unlevel playing field or contribute to spiraling global warming.
The climate trilemma is what it is. It’s up to all of us to deal with it effectively.
Speaking of which: Hate him or love him, but the billionaire founder of Tesla and SpaceX has arguably had a bigger impact on the automotive and space industry—and perhaps society itself—than anyone else alive today. But how green is Elon Musk, really? It’s a question I dive into in this Fortune magazine feature.
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Peter Vanham
Executive Editor, Fortune
peter.vanham@fortune.com
This edition of Impact Report was edited by Holly Ojalvo.
